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



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FORM 10-K/A


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|    |                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------
|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

OR

|      |                                                                                                                                                
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER: 000-29387

IPET HOLDINGS, INC.
(FORMERLY PETS.COM, INC.)

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 95-4730753                          
|(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER
IDENTIFICATION NO.)

C/O DIABLO MANAGEMENT GROUP
2000 CROW CANYON PLACE, SUITE 270
SAN RAMON, CA 94583
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (925)-807-0126

FORMER ADDRESS:
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK,
$0.00125 PAR VALUE PER SHARE

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 than the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [    ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/A or any amendment to
this Form 10-K/A. [    ]

There were 35,418,735 shares of the registrants Common Stock issued and
outstanding as of December 31, 2000 (assuming the conversion of 1,143,895
shares of outstanding non-voting Series A Preferred Stock into Common Stock).

DOCUMENTS INCORPORATED BY REFERENCE:

Definitive Proxy Statement pursuant to Schedule 14A of the Securities
Exchange Act of 1934 (#000-29387) dated and filed on December 28, 2000.

Registration Statement under the Securities Act of 1933 (#333-92433) dated
and filed on February 9, 2000.

This Annual Report on Form 10-K/A contains forward-looking statements
reflecting managements current forecast of certain aspects of our future. It
is based on current information which we have assessed but which by its nature
is dynamic and subject to rapid and even abrupt changes. Forward looking
statements include statements regarding future financial results from the sale
of assets and settlement of liabilities, dissolution proceedings, and
distribution of proceeds to stockholders. The forward-looking statements are
generally accompanied by words such as plan, estimate, expect, believe,
should, would, could, anticipate or other words that convey uncertainty
of future events or outcomes. Our actual results could differ materially from
those stated or implied by our forward-looking statements due to risks and
uncertainties associated with the wind down of our business. These risks are
described throughout this Annual Report on Form 10-K/A, which you should read
carefully. We would particularly refer you to the Risk Factors section under
Item 1 of this Report for an extended discussion of the risks confronting our
company. The forward-looking statements in this Annual Report on Form 10-K/A
should be considered in the context of these risk factors.





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TABLE OF CONTENTS



|              |                                                                                                |  |  |  |  |  |  | 
|------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | ITEM 1. BUSINESS.                                                                             
|              | ITEM 2. PROPERTIES.                                                                           
|              | ITEM 3. LEGAL PROCEEDINGS.                                                                    
|              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                  
|PART II      
|              | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.                
|              | ITEM 6. SELECTED FINANCIAL DATA.                                                              
|              | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|              | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.                          
|              | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                                          
|PART III     
|              | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                                  
|              | ITEM 11. EXECUTIVE COMPENSATION.                                                              
|              | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.                      
|              | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                                      
|PART IV      
|              | ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.                     
|SIGNATURES   
|EXHIBIT INDEX
|EXHIBIT 23.1 



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PART I




ITEM 1. BUSINESS.

COMPANY BACKGROUND

IPET Holdings, Inc., formerly Pets.com, Inc. (the Company), commenced
operations in February 1999 as an online retailer of pet products, integrating
product sales with expert information on pets and their care. On November 4,
2000, the Companys Board of Directors unanimously adopted a Plan of Complete
Liquidation and Dissolution of the Company. On January 16, 2001, our
stockholders approved the Plan of Complete Liquidation and Dissolution as well
as a proposal to change our name from Pets.com, Inc. to IPET Holdings, Inc. On
January 16, 2001, we filed with the Delaware Secretary of State an amendment to
our Certificate of Incorporation to effect the name change and a Certificate of
Dissolution which took effect on January 18, 2001. At the close of business on
January 18, 2001, we also closed our stock transfer books, discontinued
recording transfers of Common Stock, and our Common Stock was delisted from the
Nasdaq Stock Market. Thereafter, certificates representing our Common Stock
were no longer assignable or transferable on the books of the Company.
Accordingly, the proportionate interests of all of our stockholders are fixed
on the basis of their respective stock holdings at the close of business on
January 18, 2001, and any distributions made by the Company after this date
will be made solely to the stockholders of record at the close of business on
January 18, 2001.

In addition, all officers and directors of the Company resigned on January 16,
2001, effective immediately after the stockholder meeting. Richard G. Couch of
Diablo Management Group was retained by our former Board of Directors to act as
the sole Director and Chief Executive Officer, President, Chief Financial
Officer, Treasurer, and Secretary of the Company after this date. Diablo
Management Group currently handles all remaining affairs for IPET Holdings,
Inc., including the final disposition of our remaining assets and settlement of
outstanding creditor liabilities.

EMPLOYEES

Subsequent to the Special Meeting of Stockholders on January 16, 2001, all of
our employees resigned. We currently have no full-time employees, and engage
the services of Diablo Management Group on a part-time consulting basis to
handle the final disposition of our assets, settlement of our liabilities, our
dissolution and the distribution of remaining proceeds to our stockholders.

DISSOLUTION ACTIVITIES

As of December 31, 2001, we have vacated all facilities and terminated four of
our five building leases and are currently seeking to sublease our warehouse
facility in Union City, California. All of our inventory, furniture, computer
equipment, and warehouse equipment have been sold or otherwise disposed of. We
have also completed the sale of the Sock Puppet brand icon and most of our
domain names, trademarks and other intellectual property. The collection of our
receivables has been completed with the exception of $153,811 in royalty
payments due from Fun4All Corp. and $90,000 due from the sale of certain domain
names to an individual. Due to the uncertainty of collection, an allowance for
doubtful accounts in the amount of $243,811 has been provided for the combined
amount. We have settled the majority of our trade payables and we are working
with the remaining vendors to reduce our overall cash liabilities. There are a
number of tax filings that must be completed, with their related costs and
potential penalties and interest, to include up to $367,701 in business taxes
due to the City of San Francisco and approximately $8,000 in sales taxes due to
the State of Indiana.

On August 31, 2001, the Sole Director of the Company approved an initial return
of capital liquidating cash distribution to be paid out of net available assets
of $0.09 per share to the stockholders of record as of the Companys final
record date of January 18, 2001. On September 28, 2001, the Company paid this
first return of capital liquidating cash distribution to the stockholders of
record. The Company expects to make subsequent distributions, as appropriate,
during the course of the winding down period as non-cash assets are converted
to cash and liabilities are settled. At the conclusion of the calendar year,
each stockholder of record, other than corporations and certain other entities,
who had been paid $600 or more in liquidating proceeds during the year was
furnished with a U.S. Department of the Treasury, Internal Revenue Service,
Form 1099. Each stockholder should seek professional tax advice regarding the
treatment of the return of capital liquidating cash distribution on his or her
individual income tax returns. At this time it is unclear exactly when, how
large or if any subsequent distributions to the stockholders can be made. We
will need to gain release from our remaining creditors, resolve any tax
liabilities, complete the termination of our remaining building lease and
resolve all other potential liabilities have been resolved before we can
announce or make any further distributions to our stockholders.

SHARE REINSTATEMENT

On November 6, 2001, the Company discovered that U.S. Stock Transfer
Corporation, the Companys former transfer agent, had inadvertently cancelled
524,375 shares of the Companys common stock that U.S. Stock Transfer
Corporation was holding in escrow for PLDC, Inc. (f/k/a Petstore.com, Inc.). On
November 12, 2001, U.S. Stock reinstated these shares and the Companys number
of common shares and common share equivalents outstanding was revised from
34,216,705 to 34,741,080.

RISK FACTORS

This Annual Report on Form 10-K contains certain forward looking statements,
including statements concerning the Companys future

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financial results from the sale of assets and settlement of liabilities,
dissolution proceedings, and distribution of proceeds to stockholders. Some
remaining assets of the Company may be difficult for us to convert into cash,
and we can make no assurance that we will receive any material amounts in
respect of such assets. No assurance can be given that the amount to be
received in liquidation will equal or exceed the price or prices at which the
Common Stock traded prior to our dissolution. In addition, you should keep in
mind that the risks described below are not the only risks that we face. The
risks described below are the risks that we currently believe are material to
the Company. However, additional risks not presently known to us, or risks that
we currently believe are immaterial, may also impair our ability to distribute
proceeds to our stockholders. You should also refer to the other information
set forth in this Annual Report on Form 10-K, including the discussions set
forth in Managements Discussion and Analysis of Financial Condition and
Results of Operations and Business, as well as our financial statements and
the related notes.

Our business, financial condition or results could be adversely affected by any
of the following risks. If we are adversely affected by such risks, then the
proceeds we plan to distribute to our stockholders may be adversely affected.

STOCKHOLDERS MAY BE LIABLE TO CREDITORS OF THE COMPANY FOR UP TO AMOUNTS
RECEIVED FROM THE COMPANY IF THE COMPANYS RESERVES ARE INADEQUATE.

A Certificate of Dissolution was filed with the State of Delaware and became
effective as of January 18, 2001, dissolving the Company as of that date.
Pursuant to the Delaware General Corporation Law, the Company will continue to
exist for three years after the dissolution became effective or for such longer
period as the Delaware Court of Chancery shall direct, for the purpose of
prosecuting and defending suits against it and enabling the Company gradually
to close its business, to dispose of its property, to discharge its liabilities
and to distribute to its stockholders any remaining assets. Under the Delaware
General Corporation Law, in the event the Company fails to create an adequate
contingency reserve for payment of its expenses and liabilities during this
three-year period, each stockholder could be held liable for payment to the
Companys creditors for such stockholders pro rata share of amounts owed to
creditors in excess of the contingency reserve. The liability of any
stockholder would be limited, however, to the amounts previously received by
such stockholder from the Company (and from any liquidating trust or trusts).
Accordingly, in such event a stockholder could be required to return all
distributions previously made to such stockholder. In such event, a stockholder
could receive nothing from the Company under the Plan of Complete Liquidation
and Dissolution. Moreover, in the event a stockholder has paid taxes on amounts
previously received, a repayment of all or a portion of such amount could
result in a stockholder incurring a net tax cost if the stockholders repayment
of an amount previously distributed does not cause a commensurate reduction in
taxes payable. There can be no assurance that the contingency reserve
maintained by the Company will be adequate to cover any expenses and
liabilities.

SHARES OF OUR SERIES A PREFERRED STOCK WILL BE ENTITLED TO SHARE ON A PRO-RATA
BASIS IN ANY DISTRIBUTION OF FUNDS MADE TO HOLDERS OF OUR COMMON STOCK.

Pursuant to our Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock filed with the Secretary of State of
Delaware on July 6, 2000, the 1,143,895 outstanding shares of our Series A
Preferred Stock will be entitled to share on a pro-rata basis in the general
distribution of proceeds remaining from the sale of our assets to be made to
all Common stockholders, as if their shares of Series A Preferred Stock have
been converted to an equal number of shares of Common Stock.

SUCCESS OF THE PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION DEPENDS ON
QUALIFIED PERSONNEL TO EXECUTE IT.

The success of the Plan of Complete Liquidation and Dissolution depends in
large part upon our ability to retain the services of qualified personnel to
handle the sale of our remaining assets and settlement of remaining
liabilities. Although we have retained the services of Diablo Management Group
for this purpose, the retention of qualified personnel is particularly
difficult under the Companys current circumstances.

OUR STOCK TRANSFER BOOKS WERE CLOSED ON JANUARY 18, 2001, THE FINAL RECORD
DATE, AFTER WHICH ANY TRADES WILL NOT BE RECORDED BY THE COMPANY.

We closed our stock transfer books and discontinued recording transfers of
Common Stock at the close of business on January 18, 2001, the date of
effectiveness of the Certificate of Dissolution we filed with the Delaware
Secretary of State. Thereafter, certificates representing the Common Stock are
not assignable or transferable on our books except by will, interstate
succession or operation of law. The proportionate interests of all of our
stockholders was fixed on the basis of their respective stock holdings at the
close of business on the final record date of January 18, 2001, and any
distributions made by the Company will be made solely to the stockholders of
record at the close of business on the final record date, except as may be
necessary to reflect subsequent transfers recorded on our books as a result of
any assignments by will, interstate succession or operation of law. For any
other trades after the January 18, 2001 final record date, the seller and
purchaser of the stock will need to negotiate and rely on due-bill
contractual obligations between themselves with respect to the allocation of
stockholder proceeds arising from ownership of the shares.

OUR STOCK WAS DELISTED FROM THE NASDAQ STOCK MARKET ON JANUARY 18, 2001 AND IS
SIGNIFICANTLY LESS LIQUID THAN BEFORE.

Our stock was delisted from trading on the Nasdaq Stock Market on January 18,
2001 due to its filing of a Certificate of Dissolution with the State of
Delaware. After this delisting, the ability of stockholders to buy and sell our
shares has been materially impaired, and is

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limited primarily to over-the-counter quotation services, such as Pink Sheets,
that handle high-risk ventures and are not regulated by the Securities and
Exchange Commission.

AFTER THE COMPANYS WIND-DOWN THERE MAY BE NO ADDITIONAL CASH TO DISTRIBUTE TO
OUR STOCKHOLDERS AND IF THERE IS ADDITIONAL CASH TO DISTRIBUTE, THE TIMING OF
ANY SUCH FUTURE DISTRIBUTION IS UNCERTAIN.

There is currently no firm timetable for the distribution of proceeds to our
stockholders, because of contingencies inherent in winding up the Companys
business. The liquidation is expected to be concluded prior to the third
anniversary of the filing of the Certificate of Dissolution in Delaware by a
final liquidating distribution either directly to the stockholders or to a
liquidating trust. The proportionate interests of all of our stockholders was
fixed on the basis of their respective stock holdings at the close of business
on the final record date of January 18, 2001, and any future distributions made
by the Company will be made solely to stockholders of record on the close of
business on January 18, 2001, except to reflect permitted transfers. We are,
however, currently unable to predict the precise nature, amount or timing of
any future distribution to stockholders. The actual nature, amount and timing
of all distributions will be determined by our Board of Directors, in its sole
discretion, and will depend in part upon our ability to resolve our remaining
contingencies.

Uncertainties as to the precise net value of our non-cash assets and the
ultimate amount of our liabilities make it impracticable to predict the
aggregate net value ultimately distributable to stockholders. Claims,
liabilities and expenses from operations (including costs associated with
Diablo Management Groups efforts to sell our remaining assets and settle our
remaining liabilities, taxes, legal and accounting fees and miscellaneous
office expenses) will continue to be incurred. These expenses will reduce the
amount of cash available for ultimate distribution to stockholders. However, no
assurances can be given that available cash and amounts received on the sale of
assets will be adequate to provide for our obligations, liabilities, expenses
and claims and to make cash distributions to stockholders. If such available
cash and amounts received from the sale of assets are not adequate to provide
for our obligations, liabilities, expenses and claims, we may not be able to
distribute meaningful cash, or any cash, to our stockholders.

OUR INABILITY TO REACH CASH BREAK-EVEN AND OUR RESULTING DISSOLUTION COULD GIVE
RISE TO SECURITIES CLASS ACTION CLAIMS AGAINST US, WHICH COULD DEPLETE THE
PROCEEDS THAT ARE TO BE DISTRIBUTED TO STOCKHOLDERS.

Securities class action claims have been brought against companies in the past
where the market price of the companys securities has fallen due to an
inability of the company to achieve operational profitability. Any such
litigation could be very costly and divert our remaining resources from being
available for distribution to our stockholders. Any adverse determination in
this kind of litigation could also deplete our cash position, and reduce
proceeds that would otherwise be distributed to our stockholders.

THE PROCEEDS FROM THE SALE OF OUR ASSETS MAY BE LESS THAN ANTICIPATED.

Sales of our remaining assets will be made on such terms as are approved by the
Board of Directors and may be conducted by competitive bidding, public sales or
privately negotiated sales. The prices at which we will be able to sell these
assets will depend largely on factors beyond our control, including, without
limitation, the condition of financial markets, the availability of financing
to prospective purchasers of the assets, United States and foreign regulatory
approvals, public market perceptions, and limitations on transferability of
certain assets. Because some of our remaining assets, particularly intellectual
property assets, may decline in value over time, we may not be able to
consummate the sale of these assets in time to generate meaningful value. In
addition, we may not obtain as high a price for a particular asset as we might
secure if we were not in liquidation.

WE MAY BE UNABLE TO NEGOTIATE SETTLEMENTS WITH RESPECT TO OUR REMAINING
LIABILITIES.

We are currently in the process of negotiating settlements with respect to our
remaining obligations and liabilities which include without limitation building
and facilities leases and tax obligations. If we are unable to successfully
negotiate termination of these obligations, we will have fewer cash proceeds to
distribute to our stockholders.

WE WILL CONTINUE TO INCUR THE EXPENSE OF COMPLYING WITH PUBLIC COMPANY
REPORTING REQUIREMENTS.

We have an obligation to continue to comply with the applicable reporting
requirements of the Securities Exchange Act of 1934, as amended, even though
compliance with such reporting requirements is economically burdensome. In
order to curtail expenses, after filing our Certificate of Dissolution we
sought relief from the Securities and Exchange Commission from the reporting
requirements under the Exchange Act. Until such relief is granted we will
continue to make obligatory Exchange Act filings. We anticipate that even if
such relief is granted in the future, we will continue to file current reports
on Form 8-K to disclose material events relating to our liquidation and
dissolution along with any other reports that the Securities and Exchange
Commission may require.




ITEM 2. PROPERTIES.

We currently are headquartered in the offices of Diablo Management Group in
Danville, California. In addition, we had a lease for approximately 40,410
square feet of office space in San Francisco, California, which lease
terminated in January 2001. In connection with this lease we were obligated to
make and have made coverage payments through April 2001. We have a second lease
for

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approximately 143,232 square feet of warehouse space in Union City, California
and are working with the landlord to terminate the lease following completion
of required repairs to the property.




ITEM 3. LEGAL PROCEEDINGS.

In connection with a contractual dispute concerning the Companys sublease of
certain space in its Union City warehouse, on August 31, 2001 we have filed an
action against our landlord in the Superior Court of California for Alameda
County for breach of contract, specific performance and seeking declaratory
relief. The first amended complaint alleges that the landlord breached the
sublease by failing and refusing to remove a condition of default relating to
claimed repairs to the premises. The second amended complaint added additional
facts to support the allegations. The third amended complaint additionally
alleges that the landlord trespassed on the Companys space, and
constructively, or alternatively, partially evicted the Company by occupying
the Companys space without the Companys consent. National Distribution Agency
has not yet responded to this complaint; and, no trial date has been set. We
are prosecuting this action and intend to pursue the Companys rights in this
matter. The Company is also considering filing collection suits in connection
with the collection of $153,811 in royalty payments remaining due from Fun4All
Corp. and $90,000 remaining due from the sale of certain domain names to an
individual. Due to the uncertainty of collection, an allowance for doubtful
accounts in the amount of $243,811 has been provided for the combined amount.
In addition, it is possible that we may become a party to various legal
proceeding arising from the settlement of our outstanding liabilities.




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

No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 2000.
However, on January 16, 2001, we held a Special Meeting of Stockholders in
connection with the proposed Plan of Complete Liquidation and Dissolution of
the Company and an amendment to our Amended and Restated Certificate of
Incorporation to change the Companys name from Pets.com, Inc. to IPET
Holdings, Inc. There were present at the meeting, in person or represented by
proxy, the holders of 18,484,284 shares of our common stock, which represented
approximately 53.93% of the outstanding shares of common stock entitled to
vote. The matters voted on at the meeting and the votes cast were as follows:

1. Ratification and approval of the Plan of Complete Liquidation and
Dissolution of the Company. There were 18,317,744 shares of common stock voting
in favor, 154,902 shares of common stock voting against, 11,638 shares of
common stock abstaining and 0 broker non-votes.

2. Approval of an amendment to our Amended and Restated Certificate of
Incorporation to change the Companys name from Pets.com, Inc. to IPET
Holdings, Inc. There were 18,383,242 shares of common stock voting in favor,
76,925 shares of common stock voting against, 24,117 shares of common stock
abstaining and 0 broker non-votes.

Therefore, both proposals passed by the requisite majority of shares of voting
common stock outstanding.




PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)  Market Information and Dividends.

From February 11, 2000, the date of our initial public offering, to December
29, 2000, our common stock was traded on the Nasdaq Stock Market under the
symbol IPET. The following table sets forth, for the periods indicated, the
high and low sales prices per share of our common stock as reported on the
Nasdaq Stock Market:

|                                     |  |      |       |     |  |   |      | 
|------------------------------------ |  | ---- | ----- | --- |  | - | ---- | 
|YEAR ENDED 2000                      |  | HIGH |       | LOW
|                                     |  |      |       |    
|1st Quarter (from February 11, 2000) |  | $    | 14.00 |     |  | $ | 3.88 | 
|2nd Quarter                          |  | $    | 4.63  |     |  | $ | 1.88 | 
|3rd Quarter                          |  | $    | 2.44  |     |  | $ | 0.59 | 
|4th Quarter                          |  | $    | 0.81  |     |  | $ | 0.06 | 

On January 18, 2000, we issued and sold to one purchaser 1,378,000 unregistered
shares of Series C Preferred Stock in consideration of network media
advertising time valued at $11,024,400. Because the shares were issued to one
accredited investor, we relied on the exemption provided by Section 4(2) of the
Securities Act in issuing them. The shares issued in this transaction were
converted into 1,102,400 unregistered shares of our Common Stock in connection
with our initial public offering in February 2000.

On July 13, 2000, in connection with our acquisition of certain strategic
assets and partnerships of Petstore.com, Inc., we issued in exchange for
certain Petstore.com, Inc. assets and partnerships 5,243,752 unregistered
shares of our common stock, and we also issued and sold for $3 million a
combination of 1,143,895 unregistered shares of Series A Redeemable Preferred
Stock and 286,805 unregistered shares of common stock. Concurrently, we also
issued warrants exercisable for a total of 285,066 shares of our common stock
to a limited number of former Petstore.com, Inc. warrant holders and creditors.
Because these shares and warrants were issued to a

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limited number of third
parties, we relied on the exemption provided by Section 4(2) of the Securities
Act in issuing them.

On December 29, 2000, there were approximately 251 holders of record of our
common stock. This figure does not reflect more than 11,000 beneficial
stockholders whose shares are held in nominee names.

During the fiscal year we did not pay any dividends. Our intent prior to our
dissolution was to retain future earnings to finance the growth and development
of our business.

(b)  Use of Proceeds From Sale of Registered Securities

On February 16, 2000, we closed our initial public offering of Common Stock,
$0.00125 par value. The managing underwriters in the offering were Merrill
Lynch & Co., Bear Stearns & Co. Inc., Thomas Weisel Partners LLC, and Warburg
Dillon Read LLC (the Underwriters). The shares of Common Stock sold in the
offering were registered under the Securities Act of 1933, as amended (the
Act) on a Registration Statement on Form S-1 (the Registration Statement)
(Reg. No. 333-92433) that was declared effective by the SEC on February 11,
2000. The offering commenced on February 11, 2000 and ended on February 16,
2000, on which date 7,500,000 shares of Common Stock registered under the
Registration Statement were sold at a price of $11.00 per share. The aggregate
price of the offering amount registered and sold was $82,500,000. In connection
with the offering, we paid an aggregate of $5,775,000 in underwriting discounts
and commissions to the Underwriters and the aggregate proceeds to the Company
were approximately $75.3 million after deducting estimated offering expenses of
$1.4 million. We used the net proceeds primarily for working capital and
general corporate purposes, including marketing expenses to build brand
awareness, purchases of inventory, expansion of our sales and marketing
organization, development of our distribution capabilities, expansion of our
customer base, and expenses incurred in connection with our requisition of
certain assets and partnerships of PetStore.com, Inc. In addition,
approximately $1.4 million was paid to ten corporate officers in the form of
retention bonuses, and another $1.4 million was paid to such officers as
severance.




ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth our audited liquidating activities for the
period from November 5, 2000 through December 31, 2000. This information has
been derived from our audited financials statements and in the opinion of
management includes all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation of such information in accordance with
generally accepted accounting principles for a company in voluntary
liquidation.

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IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
STATEMENT OF LIQUIDATING ACTIVITIES (in thousands)
FOR THE PERIOD FROM NOVEMBER 5, 2000, THROUGH DECEMBER 31, 2000

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|                                                 |                                                                                                                     |                                  |         |             |        |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------- | ----------- | ------ | -
|                                                 |                                                                                                                     |                                  |         | December 31
|                                                 |                                                                                                                     |                                  |         | 2000       
|                                                 |                                                                                                                     |                                  |         |            
|SOURCES OF ADDITIONAL CASH:                      |                                                                                                                     |                                  |         |            
|                                                 | Recoveries from sales of fixed assets                                                                               |                                  | $       | 2,558       |       
|                                                 | Recoveries from sales of inventory                                                                                  |                                  |         | 703         |       
|                                                 | Recovery from lease buyout                                                                                          |                                  |         | 400         |       
|                                                 | License revenue and other                                                                                           |                                  |         | 113         |       
|                                                 | Earnings on cash and cash equivalents                                                                               |                                  |         | 21          |       
|                                                 |                                                                                                                     |                                  |         |            
|                                                 |                                                                                                                     | Total sources of additional cash |         |             | 3,795  |  
|                                                 |                                                                                                                     |                                  |         |            
|ADDITIONAL USES OF CASH                          |                                                                                                                     |                                  |         |            
|                                                 | Regular compensation during liquidation period                                                                      |                                  |         | (1,331      | )     
|                                                 | Retention bonuses, severance and other compensation incurred
as a result of liquidation and termination of services |                                  |         | (4,196      | )     
|                                                 | Leases not yet terminated on former operating facilities                                                            |                                  |         | (893        | )     
|                                                 | Settlement of advertising and cross-marketing agreement                                                             |                                  |         | (400        | )     
|                                                 | Outside services during liquidation period                                                                          |                                  |         | (278        | )     
|                                                 |                                                                                                                     |                                  |         |            
|                                                 |                                                                                                                     | Total uses of additional cash    |         |             | (7,098 | )
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|                                                
|OTHER INCOME AND EXPENSE:                        |                                                                                                                     |                                  |         |            
|                                                 | Net book value of fixed assets disposed                                                                             |                                  | $       | (18,867     | )     
|                                                 | Cost of inventories disposed                                                                                        |                                  |         | (4,812      | )     
|                                                 | Recovery of 5,243,752 common shares in exchange for
settlement of advertising and cross-marketing agreement         |                                  |         | (8,099      | )     
|                                                 | Write off of prepaid advertising                                                                                    |                                  |         | (6,991      | )     
|                                                 | Write off of investment in PetPlace.com, Inc.                                                                       |                                  |         | (3,510      | )     
|                                                 | Write off of investment in PetsPark.com, Ltd.                                                                       |                                  |         | (2,072      | )     
|                                                 | Write off of other prepaid expenses                                                                                 |                                  |         | (2,513      | )     
|                                                 | Reduction in accrual for liability to related party                                                                 |                                  |         | 695         |       
|                                                 | Accounts payable settlements, adjustments and other  net                                                           |                                  |         | 355         |       
|                                                 |                                                                                                                     |                                  |         |            
|                                                 |                                                                                                                     |                                  | (45,814 | )          
|                                                 |                                                                                                                     |                                  |         |            
|Decrease in net assets in liquidation            |                                                                                                                     |                                  | (49,117 | )          
|Net assets in liquidation at beginning of period |                                                                                                                     |                                  | 58,746  |            
|                                                 |                                                                                                                     |                                  |         |            
|Net assets in liquidation at end of period       |                                                                                                                     | $                                | 9,629   |            
|                                                 |                                                                                                                     |                                  |         |            

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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This discussion contains forward-looking statements. These statements relate to
future events or our future financial performance including, by way of example,
statements concerning the effective liquidation of the Companys assets, the
orderly wind down of the company, the settlement of all creditor and other
claims against the Company, or the distribution of any cash or other assets to
stockholders. In some cases, you can identify forward-looking statements by
terminology such as may, will, should, expect, plan, intend, anticipate,
believe, estimate, predict, potential or continue, the negative of such terms
or other comparable terminology. These statements are only predictions. Actual
events or results may differ materially. In evaluating these statements, you
should consider various factors, including the risks outlined in the Risk
Factors section our prospectus related to our initial public offering filed
with the Securities and Exchange Commission (SEC) on February 10, 2000 (File
No. 333-92433), and from time to time, in our periodic reports with the SEC.
These factors may cause our actual results to differ materially from any
forward-looking statement.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, the effective
liquidation of the Companys assets, the orderly wind down of the Company, the
settlement of all creditor and other claims against the Company, or the
distribution of any cash or other assets to stockholders levels of activity,
performance or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of the forward looking
statements after the date of this Annual Report on Form 10-K to conform such
statements to actual results or to changes in our expectations.

OVERVIEW

On November 4, 2000, the Board of Directors of the Company unanimously approved
the orderly wind down of its operations to include the layoff of approximately
255 of its 320 employees, which was completed on November 7, 2000, the closure
of its web site effective November 10, 2000, the ceasing of all sales
transactions effective November 10, 2000, the acceleration of the lapse of the
Companys repurchase right with regard to the common stock held by employees of
the Company as of November 7, 2000, and undertaking efforts to sell the
majority of its assets, including inventory, distribution center equipment,
URLs, content and its Sock Puppet brand icon and other intellectual property.
The Board of Directors decision was reached after no viable offers to acquire
or fund capital into the Company were received. The decision came after a
lengthy and exhaustive effort to both raise capital, dating back to early
summer, or more recently, to sell the Company outright. Merrill Lynch was
engaged to assist the Company in its efforts and assisted in contacting more
than 50 domestic and international strategic and financial prospects on its
behalf. The Company worked to examine all options. In the end, however, the
result of these efforts was insufficient as no party was prepared to provide
capital or acquire the Company. In fact, out of the more than 50 prospects
contacted, fewer than 8 were prepared to visit the Company. The Company
concluded that the orderly wind down of the Company was the course of action
that most likely would offer the highest return to stockholders and that to
continue the operation of the business would reduce the assets and cash that
may ultimately be returned to the stockholders. The Company may not be able
to find qualified buyers for its assets at prices necessary to generate cash to
satisfy its current and future obligations. Furthermore, because many of the
Companys assets, particularly its intellectual property, will decline in value
over time, the Company may not be able to consummate the sale of these assets
in time to generate meaningful value. In addition, the Company may not be able
to negotiate the orderly wind down of its obligations to creditors. These
include, without limitation, long term contractual payment and performance
obligations associated with the Companys building and facilities leases,
business agreements with third parties, and agreements with vendors and
shipping services. As a result of these and other risks, the Company may not
be able to generate meaningful cash, or any cash, which could be returned to
its stockholders, and the timing of any distribution is uncertain at this time.

RESULTS OF OPERATIONS

Based upon the Boards approval of a plan of liquidation, the Company changed
its basis of accounting for periods subsequent to November 4, 2000, from the
going concern to the liquidation basis. Therefore, this report will treat the
operations of the Company during the period from January 1, 2000 through
November 4, 2000 as a going concern and after November 4, 2000 as a company in
liquidation.

GOING CONCERN

The audited Statements of Operations and Accumulated Deficit for the periods
from January 1, 2000 through November 4, 2000 and the 12 months ending December
31, 1999 are in Item 8. This audited information has been derived from our
audited financial statements and in the opinion of management, includes all
adjustments, consisting of normal recurring adjustments necessary for a fair
presentation of such information in accordance with generally accepted
accounting principles.

Net Sales
Net sales consist of product sales, magazine advertising sales, licensing
revenues and charges to customers for outbound shipping and handling and are
net of allowances for product returns, promotional discounts and coupons. We
recognize product and shipping revenues when the related product is shipped.
We recognize magazine advertising revenue when editions in which the
advertising appears are
distributed. Net sales for the going concern period of 2000 were $28.6
million, a 395% increase over net sales for the period ending December 31,
1999. The increase in net sales was a result of the increase in our customer
base, the increase in our repeat orders as a

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percentage of total orders and a
reduction in coupons issued and redeemed.

Cost of Sales and Gross Margin
Cost of sales consists primarily of the costs of products sold to customers and
outbound and inbound shipping costs. Gross Margins improved from a negative
132% in 1999 to a negative 28% for the period ending November 4, 2000. The
negative gross margin improvement was primarily attributable to a decrease in
our shipping costs as our second distribution center in Indianapolis reached
its full load of U.S. shipping by the end of the second quarter 2000.

Marketing and Sales
Marketing and Sales expenses consist primarily of advertising and promotional
expenditures, distribution expenses, supplies, payroll and related expenses for
personnel engaged in marketing, merchandising, business development and
customer service and distribution expenses.

Product Development
Product development expenses consist primarily of payroll and related expenses
for development, design, production, finance, human resources, executive and
administrative personnel, corporate facility expenses, professional services
expenses, travel and other general corporate expenses.

LIQUIDATING PERIOD

On November 4, 2000, after no acceptable offers to acquire the Company or
offers of investment capital in our operations were received prior to November
7, 2000, our Board of Directors unanimously approved the orderly wind down of
our operations, including the layoff of approximately 255 of 320 employees,
which was completed on November 7, 2000, the closure of our Web store effective
November 10, 2000, the ceasing of all sales transactions effective November 10,
2000, and authorizing management to immediately commence efforts to sell the
majority of our assets, including inventory, distribution center equipment,
URLs, content, the Sock Puppet brand icon and our other intellectual property,
terminate commercial agreements and relationships, exit our commercial
obligations, and generally wind down our business and operations. The Board
determined that immediate sale of such assets was the best way to preserve
stockholder value since any delay in their sale was likely to diminish the
liquidation value of such assets. The Board of Directors decision was reached
after no viable offers to acquire or fund capital into the Company were
received.

DISSOLUTION

On January 16, 2001, our stockholders approved the Plan of Complete Liquidation
and Dissolution as well as a proposal to change our name from Pets.com, Inc. to
IPET Holdings, Inc. On January 16, 2001, we filed with the Delaware Secretary
of State an amendment to our Certificate of Incorporation to effect the name
change and we filed a Certificate of Dissolution that took effect on January
18, 2001. At the close of business on January 18, 2001, we closed our stock
transfer books, discontinued recording transfers of Common Stock, and our
Common Stock was delisted from the Nasdaq Stock Market. Thereafter,
certificates representing our Common Stock were no longer assignable or
transferable on the books of the Company. Accordingly, the proportionate
interests of all of our stockholders are fixed on the basis of their respective
stock holdings at the close of business on January 18, 2001, and any
distributions made by the Company after this date will be made solely to the
stockholders of record at the close of business on January 18, 2001.

In addition, all officers and directors of the Company resigned on January 16,
2001, effective immediately after the stockholder meeting. Richard G. Couch of
Diablo Management Group was retained by our former Board of Directors to act as
the sole Director and Chief Executive Officer, President, Chief Financial
Officer, Treasurer, and Secretary for the Company after this date. Diablo
Management Group currently handles all remaining affairs for IPET Holdings,
Inc., including the final disposition of our remaining assets and settlement of
outstanding liabilities.

The audited Statement of Liquidating Activities for the year ended December 31,
2000 is at Item 8. This audited information has been derived from our audited
financial statements and in the opinion of management, includes all
adjustments, consisting of normal recurring adjustments necessary for a fair
presentation of such information in accordance with generally accepted
accounting principles for a company in voluntary liquidation.

ACTIVITIES WHILE IN LIQUIDATION

In order to complete the liquidation process, new management conducted an
updated and comprehensive analysis of the Companys potential asset recoveries
and prepared a detailed settlement schedule of all claims, obligations and
expenses owing to the Companys creditors. During 2001, IPET Holdings (i)
negotiated the release of certificates of deposit, in the aggregate amount of
$1,466,000, that had been securing stand-by letters of credit furnished as
collateral for leases and a credit card processing arrangement; (ii) collected
receivables from the sale of inventory, fixtures, equipment, lease termination
residual, URL domain names and other intangible assets in the amount of
$1,215,000; (iii) collected $125,000 for the assignment to Hakan Enterprises,
Inc. of all of its rights in and to the Sock Puppet brand icon; (iv) settled
trade accounts payable to vendors, net of settlement concessions and
recoveries, in the amount of $1,559,000; (v) terminated and paid the remaining
33 employees an amount of $762,000; (vi) paid liability insurance for directors
and officers in the amount of $783,000; and, (vii) arranged for completion of
the operating and liquidation-period accounting and stockholder
reporting in order to be in compliance with various regulatory agency
requirements. During 2001, successful creditor negotiations resulted in the
reduction of our accounts payable obligation for the years 2000 and 2001 by
approximately $839,000.

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As of December 31, 2001, the collection of our receivables has been completed
with the exception of $153,811 in royalty payments due from Fun4All Corp. and
$90,000 due from the sale of certain domain names to an individual. We have
settled our trade payables but continue to receive apparently inadvertent
invoices from former suppliers who have released their claims against us. We
are working to resolve all such apparently inadvertent invoices. There are a
number of tax filings that must be completed, with their related costs and
potential penalties and interest, to include up to $367,701 in business taxes
due to the City of San Francisco and approximately $8,000 in sales taxes due to
the State of Indiana.

On August 31, 2001, the sole director of the Company approved an initial cash
distribution to be paid from net available assets in the amount of $0.09 per
share to stockholders of record holding an aggregate of 34,741,080 shares of
the Companys common stock on the January 18, 2001 final record date. The
Company distributed the cash payments to the stockholders of record on
September 28, 2001. The Company expects to make subsequent distributions, as
appropriate, during the course of the wind-down period as non-cash assets are
converted to cash and liabilities are settled. However, there can be no
assurance that the Company will be able to complete the Plan of Complete
Liquidation and Dissolution as originally contemplated, settle with its
creditors, successfully terminate its one remaining lease, pay its professional
advisors and other ongoing costs, or otherwise execute the Plan of Complete
Liquidation and Dissolution. If it is unable to successfully reach settlements
with all of its creditors or terminate the remaining operating lease, the
Company may be forced to seek protection from creditors under federal
bankruptcy law or may become subject to an involuntary bankruptcy proceeding.
In such event, further distributions to the Companys stockholders may depend
upon the completion of all such proceedings, one or more rulings by a
bankruptcy trustee and/or further court proceedings.

UNION CITY LEASE

In July 1999, the Company established a distribution center in Union City,
California, and leased a warehouse comprised of approximately 143,000 square
feet for a period of five years. The Union City warehouse lease calls for
minimum monthly rent payments of approximately $60,000 through August 4, 2004,
plus annual base-rent increases of up to 6%. As of December 31, 2000, the
remaining minimum lease payments totaling $2,791,000 have not been recorded as
a liability on the Companys statement of net assets in liquidation because of
the uncertainty of the amount which will ultimately be due. Since assuming
management of the Company on January 12, 2001, Diablo Management Group engaged
qualified professionals to aggressively market the warehouse and has been
actively negotiating with the landlord, National Distribution Agency, Inc.
regarding relief from the terms of the lease.

In connection with a contractual dispute concerning the Companys sublease of
certain space in its Union City warehouse, on August 31, 2001, the Company
filed a complaint against its landlord, National Distribution Agency, in the
Superior Court of California for Alameda County for breach of contract,
specific performance and seeking declaratory relief. The first amended
complaint alleges that the landlord breached the sublease by failing and
refusing to remove a condition of default relating to claimed repairs to the
premises. The second amended complaint added additional facts to support the
allegations. The third amended complaint additionally alleges that the
landlord trespassed on the Companys space, and constructively, or
alternatively, partially evicted the Company by occupying the Companys space
without the Companys consent. National Distribution Agency has not yet
responded to this complaint; and, no trial date has been set. We are
prosecuting this action and intend to pursue the Companys rights in this
matter.

If the Company were to determine that its inability to successfully terminate
the Union City lease was reasonably likely to result in a judgment that would
compromise the Companys ability to successfully complete its Plan of Complete
Liquidation and Dissolution, the Company might be forced to seek protection
from the landlord, National Distribution Agency, under federal bankruptcy law
in order to statutorily limit National Distribution Agencys claims so that all
then remaining creditors could share more fairly in the Companys remaining
assets.

DELISTED STOCK

On January 16, 2001, the stockholders of the Company approved the Plan of
Complete Liquidation and Dissolution of the Company and changed the corporate
name from Pets.com, Inc., to IPET Holdings, Inc. On January 18, 2001, the
company closed its stock transfer books, discontinued recording transfers of
Common stock and the Companys common stock was delisted from the Nasdaq Stock
Market. Since the close of trading on January 18, 2001, the certificates
representing the Common Stock of the Company have not been assignable or
transferable on the books of the company and any distributions made by the
Company will be made solely to the stockholders of record as of such final
record date. The Company expects that its common stock will ultimately be
deregistered under Rule 12g-4 of the Securities Exchange Act of 1934 in
connection with the Companys execution of the Plan of Complete Liquidation and
Dissolution.

PUBLIC COMPANY REPORTING REQUIREMENTS

We have an obligation to continue to comply with the applicable reporting
requirements of the Securities Exchange Act of 1934, as amended, even though
compliance with such reporting requirements is economically burdensome. In
order to curtail expenses, after filing our Certificate of Dissolution we
sought relief from the Securities and Exchange Commission from the reporting
requirements under the Exchange Act. Until such relief is granted we will
continue to make obligatory Exchange Act filings. We anticipate that even if
such relief is granted in the future, we will continue to file current reports
on Form 8-K to disclose material events relating to our
liquidation and dissolution along with any other reports that the Securities
and Exchange Commission may require.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company currently invests its cash reserves in certificates of deposit and
checking accounts with leading commercial banks. The market risk of such
instruments is minimal, as the principal has not been placed at risk.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEPENDENT AUDITORS REPORT FOR LIQUIDATING AND OPERATING PERIODS

To the Board of Directors and Stockholders of IPET Holdings, Inc. (formerly
Pets.com, Inc.)

We have audited the statement of net assets in liquidation as of December 31,
2000, and the related statement of changes in net assets in liquidation for
the period from November 5, 2000, to December 31, 2000. In addition, we have
audited the balance sheet of IPET Holdings, Inc. (formerly Pets.com, Inc.) as
of November 4, 2000, and the related statements of operations and accumulated
deficit, changes in stockholders equity and cash flows for the period from
January 1, 2000, to November 4, 2000. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of IPET Holdings, Inc. (formerly Pets.com, Inc.) as of December 31,
1999, were audited by other auditors whose report dated January 14, 2000,
expressed an unqualified opinion on those financial statements.
Except as discussed in the following paragraph, we conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

As described in Note 3 to the financial statements, we did not observe the
taking of the physical inventories as of November 4, 2000 (stated at
$4,812,000), because that date preceded our engagement date as auditors for
the Company. We were unable to satisfy ourselves about inventory quantities
by means of other alternative generally accepted auditing procedures.

As described in Note 2 to the financial statements, the stockholders of IPET
Holdings, Inc. (formerly Pets.com, Inc.) approved a plan of liquidation on
November 7, 2000, effective November 4, 2000, and the Company commenced
liquidation shortly thereafter. As a result, the Company has changed its
basis of accounting for periods subsequent to November 4, 2000, from the going
concern basis to the liquidation basis.

In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to observe the physical
inventories taken as of November 4, 2000, the financial statements referred to
above present fairly, in all material respects, the financial position of IPET
Holdings, Inc. (formerly Pets.com, Inc.) as of November 4, 2000, the results
of its operations and its cash flows for the period then ended and its net
assets in liquidation as of December 31, 2000, and the changes in its net
assets in liquidation for the period from November 5, 2000, to December 31,
2000, in conformity with accounting principles generally accepted in the
United States of America on the basis described in the preceding paragraph.

January 31, 2002
/s/ Stempek Associates

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FINANCIAL STATEMENTS DURING LIQUIDATING PERIOD

IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31, 2000
(In thousands, except shares outstanding and per share data)

---

|                                                                 |                                                             |   |            |       | 
|---------------------------------------------------------------- | ----------------------------------------------------------- | - | ---------- | ----- | 
|                                                                 |                                                             |   | 2000      
|                                                                 |                                                             |   |           
|ASSETS                                                           |                                                             |   |            |      
|                                                                 | Cash and cash equivalents                                   |   | $          | 9,714 | 
|                                                                 | Certificates of deposit securing standby letters of credit  |   |            | 1,466 | 
|                                                                 | Receivable from sale of inventories, fixed assets and other |   |            | 1,215 | 
|                                                                 | Deposits held by landlord                                   |   |            | 100   | 
|                                                                 |                                                             |   |            |      
|Total Assets                                                     |                                                             | $ | 12,495     |      
|                                                                 |                                                             |   |            |      
|LIABILITIES                                                      |                                                             |   |            |      
|                                                                 | Payable to suppliers and other creditors                    |   | $          | 2,104 | 
|                                                                 | Accrued compensation for former employees                   |   |            | 762   | 
|                                                                 |                                                             |   |            |      
|                                                                 | Total Liabilities                                           |   |            | 2,866 | 
|                                                                 |                                                             |   |            |      
|NET ASSETS IN LIQUIDATION                                        |                                                             | $ | 9,629      |      
|                                                                 |                                                             |   |            |      
|Number of common shares and common share
equivalents outstanding |                                                             |   | 35,418,735 |      
|                                                                 |                                                             |   |            |      
|Net assets in liquidation per share                              |                                                             | $ | 0.27       |      
|                                                                 |                                                             |   |            |      

See accompanying notes.

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IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
STATEMENT OF LIQUIDATING ACTIVITIES (in thousands)
FOR THE PERIOD FROM NOVEMBER 5, 2000, THROUGH DECEMBER 31, 2000

---

|                                                 |                                                                                                                     |                                  |         |             |        |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------- | ----------- | ------ | -
|                                                 |                                                                                                                     |                                  |         | December 31
|                                                 |                                                                                                                     |                                  |         | 2000       
|                                                 |                                                                                                                     |                                  |         |            
|SOURCES OF ADDITIONAL CASH:                      |                                                                                                                     |                                  |         |            
|                                                 | Recoveries from sales of fixed assets                                                                               |                                  | $       | 2,558       |       
|                                                 | Recoveries from sales of inventory                                                                                  |                                  |         | 703         |       
|                                                 | Recovery from lease buyout                                                                                          |                                  |         | 400         |       
|                                                 | License revenue and other                                                                                           |                                  |         | 113         |       
|                                                 | Earnings on cash and cash equivalents                                                                               |                                  |         | 21          |       
|                                                 |                                                                                                                     |                                  |         |            
|                                                 |                                                                                                                     | Total sources of additional cash |         |             | 3,795  |  
|                                                 |                                                                                                                     |                                  |         |            
|ADDITIONAL USES OF CASH                          |                                                                                                                     |                                  |         |            
|                                                 | Regular compensation during liquidation period                                                                      |                                  |         | (1,331      | )     
|                                                 | Retention bonuses, severance and other compensation incurred
as a result of liquidation and termination of services |                                  |         | (4,196      | )     
|                                                 | Leases not yet terminated on former operating facilities                                                            |                                  |         | (893        | )     
|                                                 | Settlement of advertising and cross-marketing agreement                                                             |                                  |         | (400        | )     
|                                                 | Outside services during liquidation period                                                                          |                                  |         | (278        | )     
|                                                 |                                                                                                                     |                                  |         |            
|                                                 |                                                                                                                     | Total uses of additional cash    |         |             | (7,098 | )
|                                                
|                                                
|                                                
|                                                
|OTHER INCOME AND EXPENSE:                        |                                                                                                                     |                                  |         |            
|                                                 | Net book value of fixed assets disposed                                                                             |                                  | $       | (18,867     | )     
|                                                 | Cost of inventories disposed                                                                                        |                                  |         | (4,812      | )     
|                                                 | Recovery of 5,243,752 common shares in exchange for
settlement of advertising and cross-marketing agreement         |                                  |         | (8,099      | )     
|                                                 | Write off of prepaid advertising                                                                                    |                                  |         | (6,991      | )     
|                                                 | Write off of investment in PetPlace.com, Inc.                                                                       |                                  |         | (3,585      | )     
|                                                 | Write off of investment in PetsPark.com, Ltd.                                                                       |                                  |         | (2,073      | )     
|                                                 | Write off of other prepaid expenses                                                                                 |                                  |         | (2,513      | )     
|                                                 | Reduction in accrual for liability to related party                                                                 |                                  |         | 695         |       
|                                                 | Accounts payable settlements, adjustments and other  net                                                           |                                  |         | 431         |       
|                                                 |                                                                                                                     |                                  |         |            
|                                                 |                                                                                                                     |                                  | (45,814 | )          
|                                                 |                                                                                                                     |                                  |         |            
|Decrease in net assets in liquidation            |                                                                                                                     |                                  | (49,117 | )          
|Net assets in liquidation at beginning of period |                                                                                                                     |                                  | 58,746  |            
|                                                 |                                                                                                                     |                                  |         |            
|Net assets in liquidation at end of period       |                                                                                                                     | $                                | 9,629   |            
|                                                 |                                                                                                                     |                                  |         |            

See accompanying notes.

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NOTES TO FINANCIAL STATEMENTS FOR LIQUIDATING PERIOD
DECEMBER 31, 2000

1. BASIS OF PRESENTATION

Liquidation Basis of Accounting

The accompanying financial statements of IPET Holdings, Inc., formerly
Pets.com, Inc., (the Company), have been prepared in conformity with
generally accepted accounting principles for a company in voluntary
liquidation.

As a result of approval on November 4, 2000, by the stockholders and board of
directors of a Plan of Complete Liquidation and Dissolution, the accompanying
financial statements have been prepared in conformity with generally accepted
accounting principles for a company in voluntary liquidation in order to
provide more relevant information as of December 31, 2000, and for the
liquidation period November 5 through December 31, 2000.

The liquidation basis of accounting requires that assets and liabilities be
stated at estimated fair value. The Company established the carrying values
of its assets and liabilities, as reflected in the statements of net assets in
liquidation as of December 31, 2000, based upon having given reasonable
consideration to all information available at the time such values were
established. Subsequent to establishing such carrying values, management has
continued to investigate and analyze prior and current transactions.
Accordingly, the statement of net assets in liquidation as of December 31,
2000, reflects assets and liabilities based upon their estimated fair values
and estimated settlement amounts as of that date. Changes in the estimated
liquidation value of assets and liabilities subsequent to December 31, 2000,
will be recognized in the period in which such refinements are known.

2. BACKGROUND AND SUMMARY OF SIGNIFICANT DEVELOPMENTS

On November 4, 2000, the board of directors of IPET Holdings, Inc. (formerly
Pets.com, Inc. (the Company)) adopted a Plan of Complete Liquidation and
Dissolution and orderly winding down and cessation of the Companys operations
and liquidation of the Companys assets and settlement of the Companys
liabilities. Until November 4, 2000, the Company was engaged in the sale,
over the Internet, of pet products, services, and information primarily in the
United States.

The Company was incorporated in the state of California on October 7, 1998 and
began its commercial operations on February 17, 1999 with the acquisition of
certain assets and Internet domain names. For purposes of disclosure, the
Company elected to use February 17, 1999 as the inception date for reporting,
as no activities were undertaken and no costs were incurred prior to that
date.

In December 1999, the board of directors authorized the Company to proceed
with an initial public offering (the IPO) of its common stock. The IPO,
which raised approximately $75 million of new capital, was completed on
February 11, 2000. The board of directors also authorized the reincorporation
of the Company in the state of Delaware.

Subsequent to its initial public offering, the Company significantly enhanced
its sales, customer service, information technology and administrative
activities. In order to accommodate anticipated additional sales volume, the
Company augmented its operating capacity by leasing several buildings and
developing state-of-the-art administrative and warehouse facilities in the San
Francisco Bay Area and warehouse facilities in Indianapolis, Indiana. In
addition, the Company acquired certain strategic assets and entered into
certain advertising and co-marketing agreements designed to increase its
public image and exposure through major media channels.

The enhanced marketing and sales efforts and augmented capacity resulted in
greater shipments in the second and third quarters of 2000 as compared with
1999. However, projected profitability was dependent upon achieving even
greater volumes and wider market acceptance than could reasonably be
anticipated to occur in the near term. Additionally, in order to achieve
these greater volumes, there would have been required substantial infusions of
new capital, which the Company was unable to obtain. From its inception until
November 4, 2000, the Company had a negative gross margin from sales and,
after selling, general and administrative expenses, had incurred an
accumulated deficit of $156.3 million.

The Company and its advisors worked to examine all options for additional
financing. They contacted more than 50 domestic and international strategic and
financial prospects. However, no party was prepared to acquire the Company.
In addition, there resulted no reasonable expectations of attracting any party
willing to provide sufficient capital to sustain promotional activities at a
level deemed necessary by management to generate a positive gross margin and
allow the Company to potentially become profitable thereby continuing as a
going concern. As a result, the Companys management and board of directors
concluded that an orderly winding down would be the course of action most
likely to offer the highest return to shareholders; and, that to continue the
operation of the business would most likely reduce the assets and cash that
might otherwise be returned to the stockholders.

Events Subsequent to Decision to Liquidate

On November 7, 2000, approximately 255 of the Companys 320 employees were
terminated and subsequently paid $2.8 million in severance and other
compensation. Senior management who received their regular salaries in
addition to retention bonuses approved by the board of directors in the amount
of $1.4 million, and certain other personnel remained to conduct winding-down
activities. This reduction in force significantly affected information
technology, financial management and accounting. By November 10, 2000, the

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Companys website was closed such that sales transactions could no longer be
conducted.

Because, in the opinion of the Companys management, many of the assets,
particularly its intellectual property, would decline in value over time,
concerted efforts to sell the majority of the Companys assets, including
inventory, distribution center equipment, URLs, website content, the Sock
Puppet brand icon and other intellectual property, were undertaken
expeditiously. Settlements of the Companys outstanding operating liabilities,
commitments with creditors and long-term contractual payment and performance
obligations associated with the Companys buildings and facilities leases,
business agreements with third parties and agreements with vendors and shipping
services were aggressively pursued. As a result of the previously mentioned
reduction in force, administrative matters, including liquidation accounting
and preparations for the Companys affairs to be taken over by a qualified
outside management firm, did not receive the same amount of support.

Pursuant to the Companys Plan of Complete Liquidation and Dissolution,
substantially all of its remaining assets are to be sold and, after payment of
all claims, obligations and expenses owing to the Companys creditors, the
remainder, if any, will be distributed to the holders of common stock on a pro
rata basis.

Events Subsequent to December 31, 2000

On January 12, 2001, the Company engaged the services of Diablo Management
Group, a professional liquidation management firm. Mr. Richard G. Couch, its
Chairman and Chief Executive Officer, was elected as sole director of the
Companys board of directors and appointed as the Companys Chief Executive
Officer, President, Chief Financial Officer, Secretary and Treasurer to take
over from the Companys senior management team and complete the liquidation
process. The Company s name was changed to IPET Holdings, Inc., and
management of the Company was assumed by Diablo Management Group.

In order to complete the liquidation process, new management conducted an
updated and comprehensive analysis of the Companys potential asset recoveries
and prepared a detailed settlement schedule of all claims, obligations and
expenses owing to the Companys creditors. In addition, negotiations were
pursued in earnest to terminate the lease for the Companys warehouse facility
in Union City, California.

Pursuant to a Certificate of Designation of Rights, Preferences and Privileges
of Series A Preferred Stock filed with the Secretary of State of Delaware on
June 6, 2000, upon liquidation or dissolution, holders of shares of Series A
Preferred Stock are entitled to receive $0.00125 per share before any
distribution of funds is made to holders of Common Stock. Series A
stockholders are also entitled to receive accrued but unpaid dividends declared
by the board of directors on Common Stock. No such dividends have ever been
declared. After such initial payment has been made to Series A Preferred
stockholders, they will also share on a pro-rata basis in the general
distribution of proceeds remaining from the sale of assets to be made to all
Common stockholders, as if their shares of Series A Preferred Stock have been
converted to an equal number of shares of Common Stock.

On August 31, 2001, the sole director of the Company approved an initial cash
distribution to be paid from net available assets in the amount of $0.09 per
share to stockholders of record holding 34,741,080 shares as of the Companys
final record date of January 18, 2001. The Company distributed cash payments
in the amount of $3,126,697 to stockholders of record, which included the
initial payment to the Series A Preferred stockholders, on September 28, 2001.
The Company expects to make subsequent distributions, as appropriate, during
the course of the wind-down period as non-cash assets are converted to cash and
liabilities are settled.

Status of Liquidation Process

As of January 31, 2002, substantially all of the Companys assets have been
sold. Further, the Company has consummated transactions with substantially all
of its trade creditors and taxing authorities and terminated all capital and
operating leases except for the warehouse facility in Union City, California.
Other than the Union City warehouse lease, the Company believes that it has
negotiated reasonable settlement amounts with all of its remaining trade and
general creditors.

However, there can be no assurance that the Company will be able to complete
the orderly winding down as originally contemplated, settle with its creditors
and pay for the amounts estimated in its plan of orderly winding down or
successfully terminate its one remaining lease. If it is unable to
successfully reach settlements with all of its creditors or terminate the
remaining operating lease, the Company may be forced to seek protection from
creditors under federal bankruptcy law or may become subject to an involuntary
bankruptcy proceeding. In such event, further distributions to the Companys
stockholders may depend upon completion of all such proceedings, one or more
rulings by a bankruptcy trustee and/or further court proceedings.

Delisted Stock

On January 16, 2001, the stockholders of the Company approved a Plan of
Complete Liquidation and Dissolution of the Company and changed the corporate
name from Pets.com, Inc., to IPET Holdings, Inc. On January 18, 2001, the
Company cancelled 677,655 shares of common stock, closed its stock transfer
books, discontinued recording transfers of common stock and the Companys
common stock was delisted from the Nasdaq National Stock Market. Since the
close of trading on January 18, 2001, the certificates representing the common
stock of the Company have not been assignable or transferable on the books of
the Company and all distributions made by the Company either have been or will
be (if applicable) made solely to the stockholders of record as of such date.
The Company expects that

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its common stock will ultimately be deregistered under Rule 12g-4 of the
Securities Exchange Act of 1934 in connection with the Companys execution of
its Plan of Complete Liquidation and Dissolution.



|3. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------

Fiscal Year

The Companys fiscal year begins on January 1 and ends on December 31 of each
year.

Use Of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles under the liquidation basis of accounting requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements, disclosures of contingent assets and liabilities
and accompanying footnote disclosures at the date of the financial statements.
Significant estimates have been made relative to the valuation of all assets
and liabilities of the Company, including among others, estimates of the
recovery value of assets, sales returns and settlement of trade payables and
long-term lease commitments. Such estimates have been developed pursuant to
the provisions of the plan for orderly shutdown. Actual results may differ
from amounts estimated.



|4. |  | CONTINGENCIES
|-- |  | -------------

Union City Lease

In July, 2000, the Company established a distribution center in Union City,
California, and leased a warehouse comprised of approximately 143,000 square
feet for a period of five years. The Union City warehouse lease calls for
minimum monthly rent payments in the approximate amount of $60,000 through
August 4, 2004, plus annual adjustments of up to 6%. As of December 31, 2000,
the remaining minimum lease payments totaling $2,791,000 have not been recorded
as a liability on the Companys statement of net assets in liquidation because
of the uncertainty of the amount which would ultimately be due. Since assuming
management of the Company on January 12, 2001, DMG engaged qualified
professionals to aggressively market the warehouse and has been actively
negotiating with the landlord, National Distribution Agency, Inc. regarding
relief from the terms of the lease.

In connection with a contractual dispute concerning the Companys sublease of
certain space in its Union City warehouse, on August 31, 2001 the Company filed
a complaint against its landlord, National Distribution Agency, Inc., in the
Superior Court of California for Alameda County for breach of contract,
specific performance and seeking declaratory relief. The third amended
complaint additionally alleges that the landlord trespassed on the Companys
space, and constructively, or alternatively, partially evicted the Company by
occupying the Companys space without the Companys consent. National
Distribution Agency, Inc. has not yet responded to this complaint; and, no
trial date has been set.

If the Company were to determine that its inability to successfully terminate
the Union City lease was reasonably likely to result in a judgment that would
compromise the Companys ability to successfully complete its Plan for Complete
Liquidation and Dissolution, the Company might be forced to seek protection
from the landlord under federal bankruptcy law in order to statutorily limit
the landlords claims so that all then remaining creditors could share more
fairly in the Companys remaining assets. In any event, the Company believes
that any payments to the landlord will be for substantially less than the
present value of the lease payments that might otherwise be owing through the
term of the lease



|5. |  | RELATED PARTY TRANSACTIONS
|-- |  | --------------------------

During 2000, the Company made payments of $991,273 to Amazon.com, Inc., a
stockholder, for advertising services. The Company paid $986,285 in 2000 to
a common stockholder for legal services.

In conjunction with the sale of its Series A preferred stock, the Company
entered into an agreement with a stockholder, which allows for certain
reciprocal advertising, promotional and customer acquisition activities for an
initial term of 18 months. Under the agreement, both the Company and the
stockholder will reimburse each other in equal amounts for customers acquired
as a result of the marketing agreement. Under this marketing agreement, the
Company incurred customer acquisition expenses of $255,000, all of which are
outstanding as of December 31, 1999. In addition, the contract allows for
unspecified informal consulting and advisory services to be provided to the
Company by the stockholder.

In connection with the above mentioned sale of Series A preferred stock, the
Company issued 275,863 Series A preferred shares with a total consideration of
$400,001 to a founder in exchange for certain internet domain names.

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FINANCIAL STATEMENTS DURING OPERATING PERIOD

IPET HOLDINGS, INC.
(FORMERLY PETS.COM, INC.)
BALANCE SHEETS (in thousands)
NOVEMBER 4, 2000 (end of operating period) and DECEMBER 31, 1999

---

|                                     |                                           |                           |        |            |        |             |        |        |        | 
|------------------------------------ | ----------------------------------------- | ------------------------- | ------ | ---------- | ------ | ----------- | ------ | ------ | ------ | 
|                                     |                                           |                           |        | November 4 |        | December 31
|                                     |                                           |                           |        | 2000       |        | 1999       
|                                     |                                           |                           |        |            |        |            
|ASSETS                               |                                           |                           |        |            |        |             |        |       
|Current Assets:                      |                                           |                           |        |            |        |             |        |       
|                                     | Cash and cash equivalents                 |                           | $      | 18,652     |        |             | $      | 30,196 |       
|                                     | Inventories                               |                           |        | 4,812      |        |             |        | 6,756  |       
|                                     | Prepaid advertising expenses              |                           |        | 15,090     |        |             |        | 7,223  |       
|                                     | Other prepaid expenses and current assets |                           |        | 2,513      |        |             |        | 999    |       
|                                     |                                           |                           |        |            |        |             |        |       
|                                     |                                           | Total Current Assets      |        |            | 41,067 |             |        |        | 45,174 | 
|Fixed Assets                         |                                           |                           |        |            |        |             |        |       
|                                     | Computers, software, furniture, and other |                           |        | 24,098     |        |             |        | 12,324 |       
|                                     | Accumulated depreciation and amortization |                           |        | (5,231     | )      |             |        | (997   | )     
|                                     |                                           |                           |        |            |        |             |        |       
|                                     |                                           | Fixed Assets  net        |        |            | 18,867 |             |        |        | 11,327 | 
|Other Assets:                        |                                           |                           |        |            |        |             |        |       
|                                     | Certificates of deposit                   |                           |        | 1,007      |        |             |        | 845    |       
|                                     | Intangible assets, net                    |                           |        | 305        |        |             |        | 399    |       
|                                     | Investments and other assets              |                           |        | 5,850      |        |             |        | 2,565  |       
|                                     |                                           |                           |        |            |        |             |        |       
|Total Assets                         |                                           | $                         | 67,096 |            |        | $           | 60,310 |       
|                                     |                                           |                           |        |            |        |             |        |       
|                                    
|                                    
|                                    
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY |                                           |                           |        |            |        |             |        |       
|Current Liabilities:                 |                                           |                           |        |            |        |             |        |       
|                                     | Accounts payable                          |                           | $      | 3,178      |        |             | $      | 6,563  |       
|                                     | Accrued expenses                          |                           |        | 2,930      |        |             |        | 2,137  |       
|                                     | Payable to related parties                |                           |        | 1,210      |        |             |        | 370    |       
|                                     | Capital lease obligations                 |                           |        | 257        |        |             |        | 16     |       
|                                     |                                           |                           |        |            |        |             |        |       
|                                     |                                           | Total Current
Liabilities |        |            | 7,575  |             |        |        | 9,086  | 
|                                     |                                           |                           |        |            |        |             |        |       
|Capital lease obligations            |                                           |                           | 775    |            |        |             | 104    |       
|                                     |                                           |                           |        |            |        |             |        |       
|Total Liabilities                    |                                           | $                         | 8,350  |            |        | $           | 9,190  |       

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IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
BALANCE SHEETS (in thousands)

---

|                                           |                                                        |                                                              |        |            |        |             |        |         |        | 
|------------------------------------------ | ------------------------------------------------------ | ------------------------------------------------------------ | ------ | ---------- | ------ | ----------- | ------ | ------- | ------ | 
|                                           |                                                        |                                                              |        | November 4 |        | December 31
|                                           |                                                        |                                                              |        | 2000       |        | 1999       
|                                           |                                                        |                                                              |        |            |        |            
|Stockholders Equity:                      |                                                        |                                                              |        |            |        |             |        |        
|                                           | Convertible preferred stock, $.00125 par value         |                                                              |        |            |        |             |        |         |       
|                                           | Authorized shares  17,941,862                         |                                                              |        |            |        |             |        |         |       
|                                           | Series A preferred stock, designated 5,781,862 shares  |                                                              |        |            |        |             |        |         |       
|                                           |                                                        | Issued and outstanding shares                               |        |            |        |             |        |         |        | 
|                                           |                                                        | 2000, 1,143,895; 1999, 5,781,862                             |        |            |        |             |        |         |        | 
|                                           |                                                        | (aggregate liquidation preference; 1999, $10,480)            |        | $          | 1      |             |        | $       | 7      | 
|                                           | Series B preferred stock, designated 11,120,000 shares |                                                              |        |            |        |             |        |         |       
|                                           |                                                        | Issued
and outstanding shares  2000, none; 1999, 10,518,678 |        |            |        |             |        |         |        | 
|                                           |                                                        | (aggregate liquidation preference; 1999, $99,270)            |        |            |        |             |        |         | 13     | 
|                                           | Common stock, $.00125 par value                        |                                                              |        |            |        |             |        |         |       
|                                           |                                                        | Authorized shares  2000, 150,000,000;                       |        |            |        |             |        |         |        | 
|                                           |                                                        | 1999, 28,800,000                                             |        |            |        |             |        |         |        | 
|                                           |                                                        | Issued and outstanding shares                               |        |            |        |             |        |         |        | 
|                                           |                                                        | 2000, 35,517,066; 1999, 4,641,797                            |        |            | 43     |             |        |         | 6      | 
|                                           | Additional paid-in capital                             |                                                              |        | 225,170    |        |             |        | 128,442 |       
|                                           | Accumulated deficit                                    |                                                              |        | (156,282   | )      |             |        | (61,778 | )     
|                                           | Stockholder note receivable                            |                                                              |        |            |        |             |        | (188    | )     
|                                           | Deferred stock-based compensation                      |                                                              |        | (10,186    | )      |             |        | (15,382 | )     
|                                           |                                                        |                                                              |        |            |        |             |        |        
|                                           |                                                        | Total Shareholders Equity                                   |        |            | 58,746 |             |        |         | 51,120 | 
|                                           |                                                        |                                                              |        |            |        |             |        |        
|Total Liabilities and Shareholders Equity |                                                        | $                                                            | 67,096 |            |        | $           | 60,310 |        
|                                           |                                                        |                                                              |        |            |        |             |        |        

See accompanying notes.

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IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(in thousands, except share data)
PERIODS FROM JANUARY 1 TO NOVEMBER 4, 2000 (operating period) and
FEBRUARY 17, 1999 (inception) TO DECEMBER 31, 1999

---

|                                                                                         |                                          |   |              |        |               |   |           |        | 
|---------------------------------------------------------------------------------------- | ---------------------------------------- | - | ------------ | ------ | ------------- | - | --------- | ------ | 
|                                                                                         |                                          |   | Period Ended |        | Period Ended 
|                                                                                         |                                          |   | Nov. 4, 2000 |        | Dec. 31, 1999
|                                                                                         |                                          |   |              |        |              
|Net sales                                                                                |                                          | $ | 28,648       |        |               | $ | 5,787     |       
|Cost of sales                                                                            |                                          |   | 36,741       |        |               |   | 13,412    |       
|                                                                                         |                                          |   |              |        |               |   |           |       
|Gross margin                                                                             |                                          |   | (8,093       | )      |               |   | (7,625    | )     
|Operating expenses:                                                                      |                                          |   |              |        |               |   |           |       
|                                                                                         | Marketing and sales                      |   |              | 66,479 |               |   |           | 42,491 | 
|                                                                                         | Product development                      |   |              | 7,967  |               |   |           | 6,481  | 
|                                                                                         | General and administrative               |   |              | 10,136 |               |   |           | 4,254  | 
|                                                                                         | Amortization of stock-based compensation |   |              | 3,515  |               |   |           | 2,118  | 
|                                                                                         |                                          |   |              |        |               |   |           |       
|Total operating expenses                                                                 |                                          |   | 88,097       |        |               |   | 55,344    |       
|                                                                                         |                                          |   |              |        |               |   |           |       
|Operating loss                                                                           |                                          |   | (96,190      | )      |               |   | (62,969   | )     
|Interest income, net                                                                     |                                          |   | 1,686        |        |               |   | 1,191     |       
|                                                                                         |                                          |   |              |        |               |   |           |       
|Net loss                                                                                 |                                          |   | (94,504      | )      |               |   | (61,778   | )     
|Accumulated deficit  beginning of period                                                |                                          |   | (61,778      | )      |               |   |          |       
|                                                                                         |                                          |   |              |        |               |   |           |       
|Accumulated deficit  end of period                                                      |                                          | $ | (156,282     | )      |               | $ | (61,778   | )     
|                                                                                         |                                          |   |              |        |               |   |           |       
|Basic and diluted net loss per share                                                     |                                          | $ | (3.45        | )      |               | $ | (42.42    | )     
|                                                                                         |                                          |   |              |        |               |   |           |       
|Weighted average shares outstanding used to
compute basic and diluted net loss per share |                                          |   | 27,390,050   |        |               |   | 1,456,489 |       
|                                                                                         |                                          |   |              |        |               |   |           |       

See accompanying notes.

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IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
Statement of Changes in Stockholders Equity (in thousands, except share data)
Period From February 17, 1999 (inception) to November 4, 2000 (end of operating period)

---

|                                                                                             |  |                   |           |          |  |        |   |        |  |  |            |  |  |   |    | 
|-------------------------------------------------------------------------------------------- |  | ----------------- | --------- | -------- |  | ------ | - | ------ |  |  | ---------- |  |  | - | -- | 
|                                                                                             |  | CONVERTIBLE STOCK
|                                                                                             |  |                  
|                                                                                             |  | SERIES A          |           | SERIES B
|                                                                                             |  |                   |           |         
|1999                                                                                         |  | SHARES            |           | AMOUNT   |  | SHARES |   | AMOUNT
|                                                                                             |  |                   |           |          |  |        |   |       
|Initial issuance of common shares
to founders in exchange for
cash and intellectual property |  |                   |          |          |  | $      |  |        |  |  |           |  |  | $ |   | 
|Issuance of restricted shares
to employees                                                   |  |                   |          |          |  |        |  |        |  |  |           |  |  |   |   | 
|Issuance of restricted shares to
to consultants for services                                 |  |                   |          |          |  |        |  |        |  |  |           |  |  |   |   | 
|Issuance of Series A preferred stock,
net of offering costs of $59                           |  |                   | 5,781,862 |          |  |        | 7 |        |  |  |           |  |  |   |   | 
|Issuance of Series B preferred stock,
net of offering costs of $53                           |  |                   |          |          |  |        |  |        |  |  | 10,518,678 |  |  |   | 13 | 
|Exercise of common stock options                                                             |  |                   |          |          |  |        |  |        |  |  |           |  |  |   |   | 
|Issuance of restricted shares
for asset purchase                                             |  |                   |          |          |  |        |  |        |  |  |           |  |  |   |   | 
|Compensation related to issuance of stock
options and restricted common stock                |  |                   |          |          |  |        |  |        |  |  |           |  |  |   |   | 
|Amortization of stock-based compensation                                                     |  |                   |           |          |  |        |   |        |  |  |            |  |  |   |    | 
|Net loss and comprehensive loss                                                              |  |                   |          |          |  |        |  |        |  |  |           |  |  |   |   | 
|                                                                                             |  |                   |           |          |  |        |   |        |  |  |            |  |  |   |    | 
|Balance at December 31, 1999                                                                 |  |                   | 5,781,862 |          |  | $      | 7 |        |  |  | 10,518,678 |  |  | $ | 13 | 
|                                                                                             |  |                   |           |          |  |        |   |        |  |  |            |  |  |   |    | 

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IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
Statement of Changes in Stockholders Equity (in thousands, except share data)
Period From February 17, 1999 (inception) to November 4, 2000 (end of operating period)

---

|                                                                                             |  |                   |   |              |  |        |   |        |  |  |           |  |  |   |   | 
|-------------------------------------------------------------------------------------------- |  | ----------------- | - | ------------ |  | ------ | - | ------ |  |  | --------- |  |  | - | - | 
|                                                                                             |  | CONVERTIBLE STOCK
|                                                                                             |  |                  
|                                                                                             |  | SERIES C          |   | COMMON STOCK
|                                                                                             |  |                   |   |             
|1999                                                                                         |  | SHARES            |   | AMOUNT       |  | SHARES |   | AMOUNT
|                                                                                             |  |                   |   |              |  |        |   |       
|Initial issuance of common shares
to founders in exchange for
cash and intellectual property |  |                   |   |              |  | $      |  |        |  |  | 1,449,470 |  |  | $ | 2 | 
|Issuance of restricted shares
to employees                                                   |  |                   |  |              |  |        |  |        |  |  | 925,618   |  |  |   | 1 | 
|Issuance of restricted shares to
to consultants for services                                 |  |                   |  |              |  |        |  |        |  |  | 4,000     |  |  |   |  | 
|Issuance of Series A preferred stock,
net of offering costs of $59                           |  |                   |  |              |  |        |  |        |  |  |          |  |  |   |  | 
|Issuance of Series B preferred stock,
net of offering costs of $53                           |  |                   |  |              |  |        |  |        |  |  |          |  |  |   |  | 
|Exercise of common stock options                                                             |  |                   |  |              |  |        |  |        |  |  | 2,222,709 |  |  |   | 3 | 
|Issuance of restricted shares
for asset purchase                                             |  |                   |  |              |  |        |  |        |  |  | 40,000    |  |  |   |  | 
|Compensation related to issuance of stock
options and restricted common stock                |  |                   |  |              |  |        |  |        |  |  |          |  |  |   |  | 
|Amortization of stock-based compensation                                                     |  |                   |   |              |  |        |   |        |  |  |           |  |  |   |   | 
|Net loss and comprehensive loss                                                              |  |                   |  |              |  |        |  |        |  |  |          |  |  |   |  | 
|                                                                                             |  |                   |   |              |  |        |   |        |  |  |           |  |  |   |   | 
|Balance at December 31, 1999                                                                 |  |                   |  |              |  |        |  |        |  |  | 4,641,797 |  |  | $ | 6 | 
|                                                                                             |  |                   |   |              |  |        |   |        |  |  |           |  |  |   |   | 

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##### Table of Contents



IPET HOLDINGS, INC.
(FORMERLY PETS.COM, INC.)
Statement of Changes in Stockholders Equity (in thousands, except share data)
Period From February 17, 1999 (inception) to November 4, 2000 (end of operating period)

---

|                                                                                             |  |            |         |             |  |        |         |          |  |   |      |  
|-------------------------------------------------------------------------------------------- |  | ---------- | ------- | ----------- |  | ------ | ------- | -------- |  | - | ---- | -
|                                                                                             |  | ADDITIONAL |         |             |  |        |         | DUE FROM
|                                                                                             |  | PAID IN    |         | ACCUMULATED |  | SHARE-
|1999                                                                                         |  | CAPITAL    |         | DEFICIT     |  | HOLDER
|                                                                                             |  |            |         |             |  |       
|Initial issuance of common shares
to founders in exchange for
cash and intellectual property |  | $          | 16      |             |  | $      |        |          |  | $ |     |  
|Issuance of restricted shares
to employees                                                   |  |            | 11      |             |  |        |        |          |  |   |      |  
|Issuance of restricted shares to
to consultants for services                                 |  |            | 1       |             |  |        |        |          |  |   |      |  
|Issuance of Series A preferred stock,
net of offering costs of $59                           |  |            | 10,414  |             |  |        |        |          |  |   |      |  
|Issuance of Series B preferred stock,
net of offering costs of $53                           |  |            | 99,203  |             |  |        |        |          |  |   |      |  
|Exercise of common stock options                                                             |  |            | 973     |             |  |        |        |          |  |   | (188 | )
|Issuance of restricted shares
for asset purchase                                             |  |            | 324     |             |  |        |        |          |  |   |      |  
|Compensation related to issuance of stock
options and restricted common stock                |  |            | 17,500  |             |  |        |        |          |  |   |      |  
|Amortization of stock-based compensation                                                     |  |            |         |             |  |        |         |          |  |   |      |  
|Net loss and comprehensive loss                                                              |  |            |        |             |  |        | (61,778 | )        |  |   |      |  
|                                                                                             |  |            |         |             |  |        |         |          |  |   |      |  
|Balance at December 31, 1999                                                                 |  | $          | 128,442 |             |  | $      | (61,778 | )        |  | $ | (188 | )
|                                                                                             |  |            |         |             |  |        |         |          |  |   |      |  

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IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
Statement of Changes in Stockholders Equity (in thousands, except share data)
Period From February 17, 1999 (inception) to November 4, 2000 (end of operating period)

---

|                                                                                             |  |              |         |               |  |   |         |  
|-------------------------------------------------------------------------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | -
|                                                                                             |  | DEFERRED     |         | TOTAL        
|                                                                                             |  | STOCK-BASED  |         | STOCKHOLDERS'
|1999                                                                                         |  | COMPENSATION |         | EQUITY       
|                                                                                             |  |              |         |              
|Initial issuance of common shares
to founders in exchange for
cash and intellectual property |  | $            |        |               |  | $ | 18      |  
|Issuance of restricted shares
to employees                                                   |  |              |         |               |  |   | 12      |  
|Issuance of restricted shares to
to consultants for services                                 |  |              |         |               |  |   | 1       |  
|Issuance of Series A preferred stock,
net of offering costs of $59                           |  |              |         |               |  |   | 10,421  |  
|Issuance of Series B preferred stock,
net of offering costs of $53                           |  |              |         |               |  |   | 99,216  |  
|Exercise of common stock options                                                             |  |              |         |               |  |   | 788     |  
|Issuance of restricted shares
for asset purchase                                             |  |              |         |               |  |   | 324     |  
|Compensation related to issuance of stock
options and restricted common stock                |  |              | (17,500 | )             |  |   |        |  
|Amortization of stock-based compensation                                                     |  |              | 2,118   |               |  |   | 2,118   |  
|Net loss and comprehensive loss                                                              |  |              |         |               |  |   | (61,778 | )
|                                                                                             |  |              |         |               |  |   |         |  
|Balance at December 31, 1999                                                                 |  | $            | (15,382 | )             |  | $ | 51,120  |  
|                                                                                             |  |              |         |               |  |   |         |  

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##### Table of Contents



IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
Statement of Changes in Stockholders Equity (in thousands, except share data)
Period From February 17, 1999 (inception) to November 4, 2000 (end of operating period)

---

|                                                                                                                                                                 |  |                   |            |          |  |        |    |        |  |  |             |   |  |   |     |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | -------- |  | ------ | -- | ------ |  |  | ----------- | - |  | - | --- | -
|                                                                                                                                                                 |  | CONVERTIBLE STOCK
|                                                                                                                                                                 |  |                  
|                                                                                                                                                                 |  | SERIES A          |            | SERIES B
|                                                                                                                                                                 |  |                   |            |         
|2000                                                                                                                                                             |  | SHARES            |            | AMOUNT   |  | SHARES |    | AMOUNT
|                                                                                                                                                                 |  |                   |            |          |  |        |    |       
|Balance at December 31, 1999                                                                                                                                     |  |                   | 5,781,862  |          |  | $      | 7  |        |  |  | 10,518,678  |   |  | $ | 13  |  
|Issuance of Series C preferred stock for
media rights and joint marketing and
content development agreements                                                     |  |                   |           |          |  |        |   |        |  |  |            |   |  |   |    |  
|Issuance of common stock for cash
including conversion of Series A, B and
Series C convertible preferred  net
of offering and transaction costs
of $1.5 million |  |                   | (5,781,862 | )        |  |        | (7 | )      |  |  | (10,518,678 | ) |  |   | (13 | )
|Issuance of common stock for media
rights, joint marketing agreement and
certain other assets                                                                    |  |                   |            |          |  |        |    |        |  |  |            |   |  |   |    |  
|Issuance of Series A preferred stock                                                                                                                             |  |                   | 1,143,895  |          |  |        | 1  |        |  |  |             |   |  |   |     |  
|Exercise of common stock options                                                                                                                                 |  |                   |            |          |  |        |    |        |  |  |             |   |  |   |     |  
|Cancellations, repurchases and other                                                                                                                             |  |                   |           |          |  |        |   |        |  |  |            |   |  |   |    |  
|Compensation related to issuance of stock
options and restricted common stock                                                                                    |  |                   |           |          |  |        |   |        |  |  |            |   |  |   |    |  
|Amortization of stock-based compensation                                                                                                                         |  |                   |            |          |  |        |    |        |  |  |             |   |  |   |     |  
|Net loss and comprehensive loss                                                                                                                                  |  |                   |           |          |  |        |   |        |  |  |            |   |  |   |    |  
|                                                                                                                                                                 |  |                   |            |          |  |        |    |        |  |  |             |   |  |   |     |  
|Balance at November 4, 2000                                                                                                                                      |  |                   | 1,143,895  |          |  | $      | 1  |        |  |  |            |   |  | $ |    |  
|                                                                                                                                                                 |  |                   |            |          |  |        |    |        |  |  |             |   |  |   |     |  

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##### Table of Contents



IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
Statement of Changes in Stockholders Equity (in thousands, except share data)
Period From February 17, 1999 (inception) to November 4, 2000 (end of operating period)

---

|                                                                                                                                                                 |  |                   |            |              |  |        |    |        |  |  |            |   |  |   |    |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ------------ |  | ------ | -- | ------ |  |  | ---------- | - |  | - | -- | -
|                                                                                                                                                                 |  | CONVERTIBLE STOCK
|                                                                                                                                                                 |  |                  
|                                                                                                                                                                 |  | SERIES C          |            | COMMON STOCK
|                                                                                                                                                                 |  |                   |            |             
|2000                                                                                                                                                             |  | SHARES            |            | AMOUNT       |  | SHARES |    | AMOUNT
|                                                                                                                                                                 |  |                   |            |              |  |        |    |       
|Balance at December 31, 1999                                                                                                                                     |  |                   |           |              |  | $      |   |        |  |  | 4,641,797  |   |  | $ | 6  |  
|Issuance of common stock for media
rights and joint marketing and content
development agreements                                                                 |  |                   | 1,102,400  |              |  |        | 1  |        |  |  |           |   |  |   |   |  
|Issuance of common stock for cash
including conversion of Series A, B and
Series C convertible preferred  net
of offering and transaction costs
of $1.5 million |  |                   | (1,102,400 | )            |  |        | (1 | )      |  |  | 24,902,940 |   |  |   | 32 |  
|Issuance of common stock for media
rights, joint marketing agreement and
certain other assets                                                                    |  |                   |            |              |  |        |    |        |  |  | 5,243,752  |   |  |   | 6  |  
|Issuance of Series A preferred stock                                                                                                                             |  |                   |            |              |  |        |    |        |  |  |            |   |  |   |    |  
|Exercise of common stock options                                                                                                                                 |  |                   |            |              |  |        |    |        |  |  | 1,585,200  |   |  |   |    |  
|Cancellations, repurchases and other                                                                                                                             |  |                   |            |              |  |        |    |        |  |  | (856,623   | ) |  |   | (1 | )
|Compensation related to issuance of stock
options and restricted common stock                                                                                    |  |                   |            |              |  |        |    |        |  |  |           |   |  |   |   |  
|Amortization of stock-based compensation                                                                                                                         |  |                   |            |              |  |        |    |        |  |  |            |   |  |   |    |  
|Net loss and comprehensive loss                                                                                                                                  |  |                   |            |              |  |        |    |        |  |  |           |   |  |   |   |  
|                                                                                                                                                                 |  |                   |            |              |  |        |    |        |  |  |            |   |  |   |    |  
|Balance at November 4, 2000                                                                                                                                      |  |                   |           |              |  |        |   |        |  |  | 35,517,066 |   |  | $ | 43 |  
|                                                                                                                                                                 |  |                   |            |              |  |        |    |        |  |  |            |   |  |   |    |  

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##### Table of Contents



IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
Statement of Changes in Stockholders Equity (in thousands, except share data)
Period From February 17, 1999 (inception) to November 4, 2000 (end of operating period)

---

|                                                                                                                                                                 |  |            |         |             |  |        |          |          |  |   |      |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ------- | ----------- |  | ------ | -------- | -------- |  | - | ---- | -
|                                                                                                                                                                 |  | ADDITIONAL |         |             |  |        |          | DUE FROM
|                                                                                                                                                                 |  | PAID IN    |         | ACCUMULATED |  | SHARE-
|2000                                                                                                                                                             |  | CAPITAL    |         | DEFICIT     |  | HOLDER
|                                                                                                                                                                 |  |            |         |             |  |       
|Balance at December 31, 1999                                                                                                                                     |  | $          | 128,442 |             |  | $      | (61,778  | )        |  | $ | (188 | )
|Issuance of Series C preferred stock for
media rights and joint marketing and
content development agreements                                                     |  |            | 9,967   |             |  |        |          |          |  |   |      |  
|Issuance of common stock for cash
including conversion of Series A, B and
Series C convertible preferred  net
of offering and transaction costs
of $1.5 million |  |            | 75,206  |             |  |        |          |          |  |   |      |  
|Issuance of common stock for media
rights, joint marketing agreement and
certain other assets                                                                    |  |            | 9,562   |             |  |        |          |          |  |   |      |  
|Issuance of Series A preferred stock                                                                                                                             |  |            | 3,000   |             |  |        |          |          |  |   |      |  
|Exercise of common stock options                                                                                                                                 |  |            | 1,037   |             |  |        |          |          |  |   |      |  
|Cancellations, repurchases and other                                                                                                                             |  |            | (2,868  | )           |  |        |          |          |  |   | 188  |  
|Compensation related to issuance of stock
options and restricted common stock                                                                                    |  |            | 824     |             |  |        |          |          |  |   |      |  
|Amortization of stock-based compensation                                                                                                                         |  |            |         |             |  |        |          |          |  |   |      |  
|Net loss and comprehensive loss                                                                                                                                  |  |            |        |             |  |        | (94,504  | )        |  |   |      |  
|                                                                                                                                                                 |  |            |         |             |  |        |          |          |  |   |      |  
|Balance at November 4, 2000                                                                                                                                      |  | $          | 225,170 |             |  | $      | (156,282 | )        |  | $ |     |  
|                                                                                                                                                                 |  |            |         |             |  |        |          |          |  |   |      |  

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##### Table of Contents



IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
Statement of Changes in Stockholders Equity (in thousands, except share data)
Period From February 17, 1999 (inception) to November 4, 2000 (end of operating period)

---

|                                                                                                                                                                 |  |              |         |               |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | -
|                                                                                                                                                                 |  | DEFERRED     |         | TOTAL        
|                                                                                                                                                                 |  | STOCK-BASED  |         | STOCKHOLDERS'
|2000                                                                                                                                                             |  | COMPENSATION |         | EQUITY       
|                                                                                                                                                                 |  |              |         |              
|Balance at December 31, 1999                                                                                                                                     |  | $            | (15,382 | )             |  | $ | 51,120  |  
|Issuance of Series C preferred stock for
media rights and joint marketing and
content development agreements                                                     |  |              |         |               |  |   | 9,968   |  
|Issuance of common stock for cash
including conversion of Series A, B and
Series C convertible preferred  net
of offering and transaction costs
of $1.5 million |  |              |         |               |  |   | 75,217  |  
|Issuance of common stock for media
rights, joint marketing agreement and
certain other assets                                                                    |  |              |         |               |  |   | 9,569   |  
|Issuance of Series A preferred stock                                                                                                                             |  |              |         |               |  |   | 3,000   |  
|Exercise of common stock options                                                                                                                                 |  |              |         |               |  |   | 1,037   |  
|Cancellations, repurchases and other                                                                                                                             |  |              | 2,505   |               |  |   | (176    | )
|Compensation related to issuance of
stock options and restricted common stock                                                                                    |  |              | (824    | )             |  |   |        |  
|Amortization of stock-based compensation                                                                                                                         |  |              | 3,515   |               |  |   | 3,515   |  
|Net loss and comprehensive loss                                                                                                                                  |  |              |         |               |  |   | (94,504 | )
|                                                                                                                                                                 |  |              |         |               |  |   |         |  
|Balance at November 4, 2000                                                                                                                                      |  | $            | (10,186 | )             |  | $ | 58,746  |  
|                                                                                                                                                                 |  |              |         |               |  |   |         |  

See accompanying notes.

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IPET HOLDINGS, INC.

(FORMERLY PETS.COM, INC.)
STATEMENTS OF CASH FLOWS (in thousands)
PERIODS FROM JANUARY 1, 2000 TO NOVEMBER 4, 2000 (end of operating period) and
FEBRUARY 17, 1999 (inception) TO DECEMBER 31, 1999

---

|                                                                            |                                                             |   |                  |       |                   |   |         |        |  
|--------------------------------------------------------------------------- | ----------------------------------------------------------- | - | ---------------- | ----- | ----------------- | - | ------- | ------ | -
|                                                                            |                                                             |   | Period Ended     |       | Period Ended     
|                                                                            |                                                             |   | November 4, 2000 |       | December 31, 1999
|                                                                            |                                                             |   |                  |       |                  
|OPERATING ACTIVITIES:                                                       |                                                             |   |                  |       |                   |   |         |       
|Net loss                                                                    |                                                             | $ | (94,504          | )     |                   | $ | (61,778 | )     
|Adjustments to reconcile net loss to
net cash used in operating activities: |                                                             |   |                  |       |                   |   |         |       
|                                                                            | Depreciation and amortization                               |   |                  | 4,348 |                   |   |         | 997    |  
|                                                                            | Deferred stock-based compensation                           |   |                  | 3,515 |                   |   |         | 2,118  |  
|                                                                            | Amortization of prepaid advertising
acquired for stock      |   |                  | 6,103 |                   |   |         |       |  
|                                                                            | Common and preferred stock
issued for intellectual property |   |                  |      |                   |   |         | 416    |  
|                                                                            | Common stock issued for services                            |   |                  |      |                   |   |         | 1      |  
|                                                                            | Gain on fixed asset disposition                             |   |                  | (19   | )                 |   |         |       |  
|                                                                            | Changes in operating assets and liabilities                 |   |                  | 5,150 |                   |   |         | (7,083 | )
|                                                                            |                                                             |   |                  |       |                   |   |         |       
|Net cash used in operating activities                                       |                                                             |   | (75,407          | )     |                   |   | (65,329 | )     
|INVESTING ACTIVITIES:                                                       |                                                             |   |                  |       |                   |   |         |       
|Purchase of fixed assets                                                    |                                                             |   | (10,523          | )     |                   |   | (12,263 | )     
|Investment in PetPlace.com, Inc.                                            |                                                             |   | (1,500           | )     |                   |   | (2,085  | )     
|Investment in PetsPark.com, Ltd.                                            |                                                             |   | (1,923           | )     |                   |   | (150    | )     
|                                                                            |                                                             |   |                  |       |                   |   |         |       
|Net cash used in investing activities                                       |                                                             |   | (13,946          | )     |                   |   | (14,498 | )     
|FINANCING ACTIVITIES:                                                       |                                                             |   |                  |       |                   |   |         |       
|Net proceeds from issuance of common stock                                  |                                                             |   | 75,217           |       |                   |   | 14      |       
|Stock options exercised, shares repurchased,
cancelled and other  net      |                                                             |   | (168             | )     |                   |   | 788     |       
|Proceeds from issuance of convertible notes payable                         |                                                             |   |                 |       |                   |   | 7,385   |       
|Net proceeds from issuance of Series A preferred stock                      |                                                             |   | 3,000            |       |                   |   | 10,021  |       
|Net proceeds from issuance of Series B preferred stock                      |                                                             |   |                 |       |                   |   | 91,831  |       
|Repayments on capital leases                                                |                                                             |   | (240             | )     |                   |   | (16     | )     
|                                                                            |                                                             |   |                  |       |                   |   |         |       
|Net cash provided by financing activities                                   |                                                             |   | 77,809           |       |                   |   | 110,023 |       
|                                                                            |                                                             |   |                  |       |                   |   |         |       
|Net (decrease) increase in cash and cash equivalents                        |                                                             |   | (11,544          | )     |                   |   | 30,196  |       
|Cash and equivalents at beginning of period                                 |                                                             |   | 30,196           |       |                   |   |        |       
|                                                                            |                                                             |   |                  |       |                   |   |         |       
|Cash and equivalents at end of period                                       |                                                             | $ | 18,652           |       |                   | $ | 30,196  |       
|                                                                            |                                                             |   |                  |       |                   |   |         |       

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|                                                                              |       |   |                  |       |                   |   |        |        |  
|----------------------------------------------------------------------------- | ----- | - | ---------------- | ----- | ----------------- | - | ------ | ------ | -
|                                                                              |       |   | Period Ended     |       | Period Ended     
|                                                                              |       |   | November 4, 2000 |       | December 31, 1999
|                                                                              |       |   |                  |       |                  
|SUPPLEMENTAL DISCLOSURE OF CHANGES IN
OPERATING ASSETS AND LIABILITIES        |       |   |                  |       |                   |   |        |       
|Inventories                                                                   |       | $ | 1,944            |       |                   | $ | (6,756 | )     
|Prepaid advertising expenses                                                  |       |   | 6,496            |       |                   |   | (7,223 | )     
|Other prepaid expenses and current assets                                     |       |   | (1,514           | )     |                   |   | (999   | )     
|Certificates of deposit                                                       |       |   | (162             | )     |                   |   | (845   | )     
|Other assets                                                                  |       |   | 138              |       |                   |   | (330   | )     
|Accounts payable, accrued expenses and other                                  |       |   | (2,592           | )     |                   |   | 8,700  |       
|Payable to related parties                                                    |       |   | 840              |       |                   |   | 370    |       
|                                                                              |       |   |                  |       |                   |   |        |       
|                                                                              | Total |   | $                | 5,150 |                   |   | $      | (7,083 | )
|                                                                              |       |   |                  |       |                   |   |        |       
|SUPPLEMENTAL DISCLOSURE OF NON CASHINVESTING AND FINANCING ACTIVITIES         |       |   |                  |       |                   |   |        |       
|Property and equipment acquired under capital lease
obligations               |       | $ | 1,152            |       |                   | $ | 136    |       
|                                                                              |       |   |                  |       |                   |   |        |       
|Common stock issued for notes receivable                                      |       | $ |                 |       |                   | $ | 188    |       
|                                                                              |       |   |                  |       |                   |   |        |       
|Issue of Series A preferred stock for rights to certain
Internet domain names |       | $ |                 |       |                   | $ | 400    |       
|                                                                              |       |   |                  |       |                   |   |        |       
|Conversion of convertible notes payable to convertible
preferred stock        |       | $ |                 |       |                   | $ | 7,385  |       
|                                                                              |       |   |                  |       |                   |   |        |       
|Issuance of common stock for assets                                           |       | $ | 19,537           |       |                   | $ | 324    |       
|                                                                              |       |   |                  |       |                   |   |        |       
|Interest expense                                                              |       | $ | 174              |       |                   | $ |       |       
|                                                                              |       |   |                  |       |                   |   |        |       

See accompanying notes.

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##### Table of Contents



NOTES TO FINANCIAL STATEMENTS FOR OPERATING PERIOD
NOVEMBER 4, 2000



|1. |  | BASIS OF PRESENTATION
|-- |  | ---------------------

Going Concern Presentation

The accompanying financial statements of IPET Holdings, Inc. (formerly
Pets.com, Inc. (The Company)) as of November 4, 2000, and the period then
ended have been prepared in conformity with generally accepted accounting
principles for a going concern. These financial statements include all
adjustments which, in the opinion of management, are necessary for fair
presentation of the financial position, results of operations and cash flows as
of November 4, 2000, and the period then ended in conformity with generally
accepted accounting principles for a going concern. This presentation is
consistent with unaudited financial statements issued during its operating
periods for each of the quarters ended March 31, June 30 and September 30,
2000, and the periods then ended, and allows comprehensive and comparative
disclosure regarding the Companys assets, liabilities, income and expenses
during its operating period in the year 2000.

On November 4, 2000, the board of directors of the Company approved an orderly
winding down and cessation of the Companys operations and liquidation of the
Companys assets and settlement of the Companys liabilities (see Note 2). The
accompanying financial statements do not include any adjustments to reflect the
effects on the recoverability and classification of assets or the amounts and
classification of liabilities due to the Companys decision to cease operations
as a going concern as of November 4, 2000 (see Note 2). In addition, certain
information and footnote disclosures related to the Companys stock plans
normally included in financial statements prepared in conformity with generally
accepted accounting principles for a going concern have been condensed or
omitted. The Company believes the disclosures in the financial statements are
adequate to make the information presented not misleading (see Note 2).

Accordingly, these financial statements should be read in conjunction with the
Companys audited financial statements, prepared in conformity with the
liquidation basis of accounting, for the liquidation period from November 4,
2000, the date the board of directors of the Company approved an orderly
winding down and cessation of the Companys operations, through December 31,
2000, wherein those adjustments which reflect the effects on the recoverability
and classification of assets or the amounts and classification of liabilities
due to the Companys decision to cease operations and enter into voluntary
liquidation have been recorded.



|2. |  | DECISION TO LIQUIDATE AND CEASE OPERATING ACTIVITIES
|-- |  | ----------------------------------------------------

On November 4, 2000, after exhaustive efforts which included the engagement of
Merrill Lynch to assist the Company to both raise capital or sell the Company
outright, the board of directors unanimously approved a plan for liquidation of
the Companys assets and settlement of the Companys liabilities which would
result in an orderly winding down of the Company as soon as practicable. From
its inception until that time, the Company had a negative gross margin from
sales and, after selling, general and administrative expenses, had incurred an
accumulated deficit of $156.3 million.

The Company and its advisors worked to examine all options for additional
financing. They contacted more than 50 domestic and international strategic and
financial prospects. However, no party was prepared to acquire the Company.
In addition, there resulted no reasonable expectations of attracting any party
willing to provide sufficient capital to sustain promotional activities at a
level deemed necessary by management to generate a positive gross margin and
allow the Company to potentially become profitable thereby continuing as a
going concern. As a result, the Companys management and board of directors
concluded that an orderly winding down would be the course of action most
likely to offer the highest return to shareholders; and, that to continue the
operation of the business would reduce the assets and cash that might otherwise
be returned to the shareholders.

On November 7, 2000, approximately 255 of the Companys 320 employees were
terminated and subsequently paid $2.8 million in severance and other
compensation. Senior management who received their regular salaries in
addition to retention bonuses approved by the board of directors in the amount
of $1.4 million, and certain other personnel remained to conduct winding-down
activities. This reduction in force significantly affected information
technology, financial management and accounting. By November 10, 2000, the
Companys website was closed and sales transactions could no longer be
conducted.

Because, in the opinion of the Companys management, many of the assets,
particularly its intellectual property, would decline in value over time,
concerted efforts to sell the majority of the Companys assets, including
inventory, distribution center equipment, URLs, website content, the Sock
Puppet brand icon and other intellectual property, were undertaken
expeditiously. Settlements of the Companys outstanding operating liabilities,
commitments with creditors and long-term contractual payment and performance
obligations associated with the Companys buildings and facilities leases,
business agreements with third parties and agreements with vendors and shipping
services were aggressively pursued. As a result of the previously mentioned
reduction in force, administrative matters, including liquidation accounting
and preparations for the Companys affairs to be taken over by a qualified
outside management firm, did not receive the same degree of support.

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|3. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------

DESCRIPTION OF BUSINESS

Pets.com, Inc. (the Company) was incorporated in the state of California on
October 7, 1998 and began its commercial operations on February 17, 1999 with
the acquisition of certain assets and Internet domain names. For purposes of
disclosure, the Company elected to use February 17, 1999 as the inception date
for reporting, as no activities were undertaken and no costs were incurred
prior to that date. Until November 4, 2000, the Company was engaged in the
sale, over the Internet, of pet products, services, and information primarily
in the United States.

In December 1999, the board of directors authorized the Company to proceed with
an initial public offering (the IPO) of its common stock. The IPO, which
raised approximately $75 million of new capital, was completed on February 11,
2000. The board of directors also authorized the reincorporation of the
Company in the state of Delaware.

FISCAL YEAR

The Companys fiscal year begins on January 1 and ends on December 31 of each
year.

ACQUISITIONS

The business combination has been accounted for under the purchase method of
accounting. The Company includes the results of operations of the acquired
business from the acquisition date. Net assets of the company acquired were
recorded at their fair value at the acquisition date.

USE OF ESTIMATES

Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements. Actual
results could differ from those estimates.

REVENUE RECOGNITION

Revenues on product sales, net of discounts, coupons and allowances, are
recognized upon shipment of the related goods. Outbound shipping and handling
fees are included in net sales upon shipment. The Company provides for an
estimated allowance for sales returns in the period of sale.

PRODUCT AND WEBSITE DEVELOPMENT

Product development expenses consist primarily of payroll and related expenses
for website development, systems personnel, consultants, and other website
costs. As the Company believed that its website was subject to continual and
substantial change, expenditures relating to product and website development
were expensed as incurred.

ADVERTISING

The Company includes advertising expenses in marketing and sales in the
accompanying statements of operations. Advertising costs are expensed as
incurred. Advertising expense was $37,081,000 for the period from January 1
through November 4, 2000, and $26,934,000 for the period February 17, 1999
(inception) to December 31, 1999.

MARKETING AGREEMENTS

The Company entered into various advertising, marketing and co-marketing
agreements that provide for certain advertising, reciprocal advertising,
promotional and customer acquisition activities for terms generally not in
excess of 12 months.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents. The Companys
cash equivalents consist mainly of money market funds.

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INVENTORIES

Inventory amounts are stated at the lower of cost (using the first-in,
first-out method) or market. Inventory quantities are determined by a
perpetual inventory system that is adjusted periodically based upon physical
counts. No inventory counts were made subsequent to November 4, 2000 due to
the decision of the board of directors to approve an orderly winding down and
cessation of the Companys operations and liquidation of the Companys assets
and settlement of the Companys liabilities (see Note 2). Therefore, the
Companys auditors, who were initially engaged subsequent to November 4, 2000,
did not have an opportunity to apply alternative audit procedures to the
inventory quantities reported as of November 4, 2000 such as observing test
counts as of a date subsequent to November 4, 2000 and reviewing intervening
transactions at or near November 4, 2000 in order to reconcile the subsequent
count to the quantities reported as of November 4, 2000.

CERTIFICATES OF DEPOSIT

The certificates of deposit are restricted and secure letters of credit related
to the Companys lease agreement (see Note 6). The carrying amount approximates
fair value.

FIXED ASSETS

Fixed assets are stated at cost less accumulated depreciation. Depreciation is
provided using the straight-line method over the estimated useful lives of the
related assets, which range from three to seven years.

The Company capitalizes certain internal use software costs in accordance with
Statement of Position 98-1 Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. Capitalized internal use software
costs with an expected useful life in excess of one year are amortized on a
straight-line basis over their estimated useful lives. Internal use software
costs, which are subject to continual and substantial change, are expensed as
incurred.

FULFILLMENT EXPENSES

The Company includes fulfillment expenses in marketing and sales in the
accompanying statements of operations.

SHIPPING EXPENSES

The Company includes shipping expenses in cost of sales in the accompanying
statements of operations.

INTANGIBLE ASSETS

Intangible assets, consisting primarily of website design and customer lists
acquired, are recorded at cost. Amortization is provided using the
straight-line method over the estimated 3-year useful lives of the related
intangible assets.

LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.

Recoverability of assets is measured by comparison of the carrying amount of
the asset to net future cash flows expected to be generated from the asset. No
impairment has been recognized in the accompanying financial statements.

NET LOSS PER SHARE

Net loss per share is computed using the weighted-average number of shares of
common stock outstanding less the number of shares subject to repurchase.
Shares associated with stock options, warrants and the convertible preferred
stock are not included in the calculation of diluted net loss per share because
they are antidilutive. At November 4, 2000, there were no unvested or
restricted common shares that are subject to repurchase and no stock options
that were excluded from the computation of diluted net loss per share. At
December 31, 1999, there were 3,152,327 unvested or restricted common shares
that are subject to repurchase and 983,400 stock options that were excluded
from the computation of diluted net loss per share. If the Company had
reported net income, the calculation of these per share amounts would have
included the dilutive effect of these common stock equivalents using the
treasury stock method.

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CONCENTRATION OF CREDIT RISK

The Company is subject to concentrations of credit risk from its cash
investments. The Companys credit risk is managed through monitoring the
stability of the financial institutions utilized and diversification of its
financial resources.

The Companys financial instruments consist of cash and cash equivalents. The
fair value of all financial instruments approximates the carrying amount based
on the current rate offered to the Company for similar instruments.

STOCK-BASED COMPENSATION

The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB No. 25), and related
interpretations, in accounting for its employee stock options rather than the
alternative fair value accounting allowed by Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). APB
No. 25 provides that the compensation expense relative to the Companys
employee stock options is measured based on the intrinsic value of the stock
option. The pro forma impact of applying the fair value method of SFAS No. 123
has not been determined.

INCOME TAXES

The Company accounts for income taxes under the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to be recovered. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amounts
expected to be realized.

COMPREHENSIVE INCOME

The Company adopted SFAS No. 130, Reporting Comprehensive Income, which
requires that all items that are recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The items of
other comprehensive income that are typically required to be displayed are
foreign currency items, minimum pension liability adjustments, and unrealized
gains and losses on certain investments in debt and equity securities. There
were no items of other comprehensive income in the periods ended November 4,
2000, and December 31, 1999.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designed as
part of a hedge transaction and, if it is, the type of hedge transaction. The
Company does not expect that the adoption of SFAS No. 133 will have a material
impact on its financial statements because the Company does not currently hold
any derivative instruments.



|4. |  | ACQUISITIONS
|-- |  | ------------

PetPlace.com, Inc.

In November 1999, the Company purchased 2,150,537 shares of Series A
convertible preferred stock of PetPlace.com, Inc., representing a 10% ownership
interest, for consideration of approximately $2.0 million. In accordance with
requirements of the acquisition agreement, the Company purchased an additional
1,612,903 shares of Series A convertible stock for approximately $1.5 million
in March 2000 concurrent with the launch of the website of PetPlace.com, Inc.
The Company also entered into an exclusive cross marketing agreement with
PetPlace.com, Inc. The 3-year agreement called for Pets.com to be the
exclusive pet retail company for PetPlace.com and for PetPlace.com to be the
exclusive online veterinary service provider associated with Pets.com This
investment has been accounted for on the cost basis.

PetsPark.com, Ltd.

In December 1999, the Company advanced $150,000 to PetsPark.com, Ltd., a
company organized under the laws of England, as part of a financing arrangement
wherein the Company could eventually acquire up to 46% of the total outstanding
shares of PetsPark.com, Ltd., for a total consideration of $11.5 million, to be
paid in cash of $4.5 million and obligations under a business agreement for a
pre-paid license and marketing support to be provided by the Company valued at
$7.0 million. By May 2000, the $150,000 advance had been converted to Series A
preferred stock and the Company had made additional installments of $1.85
million for Series B preferred stock for a total cash investment of $2.0
million. The marketing support agreement, which had a term of up to three
years, provided for the Company to license its trademark and logo to
PetsPark.com, Ltd. for use in the United Kingdom; and, for certain
PetsPark.com, Ltd.,

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founders to receive options, subject to vesting provisions, to purchase a total
of 6,000 shares of the Companys common stock. This investment has been
accounted for on the cost basis.

Coolpetstuff.com

In December 1999, the Company acquired the website and certain intangible
assets from Coolpetstuff.com for $399,000, consisting of $75,000 in cash and
40,000 shares of common stock. Common stock issued in the acquisition was
subject to an escrow agreement that allowed for 3,334 shares per quarter for 12
quarters, to be released to the seller.

In January 2000, the Company entered into an agreement with an affiliate of The
Walt Disney Company, to perform joint marketing, content development and other
promotional activities. In addition, another affiliate of The Walt Disney
Company purchased 1,102,400 shares of Series C convertible preferred stock,
valued at approximately $10 million, in exchange for certain media rights on
ABC, Inc.

Petstore.com, Inc.

In July 2000, the Company acquired certain strategic assets and partnerships of
Petstore.com, Inc. As part of the all-stock acquisition, the Company issued
5,243,752 shares of its common stock in exchange for the Petstore.com brand,
website and content, existing customer base, live fish business, Flying Fish
Express, strategic supplier agreements, and all URLs, trademarks and
intellectual property of Petstore.com, Inc., valued at $10.3 million.

The unaudited pro forma results of operations assuming consummation of the
acquisition as of January 1, 2000, are as follows:

|                                     |  |      |          |  
|------------------------------------ |  | ---- | -------- | -
|(In thousands)                       |  | 2000
|                                     |  |     
|Revenues                             |  | $    | 33,033   |  
|Net loss                             |  | $    | (130,063 | )
|Basic and diluted net loss per share |  | $    | (4.75    | )

Also related to the above acquisition of Petstore.com, Inc., the Company
received a $3.0 million cash investment from Discovery.com, Inc., in exchange
for 1,143,895 shares of redeemable, non-voting, non-convertible Series A
preferred stock.

In connection with the Petstore.com, Inc. acquisition, the Company entered into
an Amended and Restated Marketing and Promotion Agreement dated June 8, 2000
which established a strategic marketing relationship with Safeway, Inc. The
Safeway agreement had a term of 24 months during which Safeway agreed to
promote the Pets.com brand through various in-store programs and other means,
and the Company agreed to carry Safeways SELECT pet food line on the Companys
website. The Company also entered into a Tenancy and Promotion Agreement dated
June 12, 2000 with Discovery.com, Inc., which included off-line media promotion
of the Pets.com brand on the Discovery family of television networks, including
Discovery Channel, TLC, Animal Planet, Travel Channel and Discovery Health
Channel.



|5. |  | FIXED ASSETS
|-- |  | ------------

Fixed assets as of November 4, 2000, and December 31, 1999 consists of the
following:

|                                               |  |   |        |   |      |   |        |   | 
|---------------------------------------------- |  | - | ------ | - | ---- | - | ------ | - | 
|                                               |  |   | 2000   |   | 1999
|                                               |  |   |        |   |     
|(In thousands)                                 |  |   |        |   |      |   |        |  
|Computers and equipment                        |  | $ | 6,966  |   |      | $ | 5,100  |  
|Purchased software                             |  |   | 3,386  |   |      |   | 2,557  |  
|Furniture and fixtures                         |  |   | 977    |   |      |   | 432    |  
|Warehouse and distribution equipment           |  |   | 7,676  |   |      |   | 2,365  |  
|Leasehold improvements                         |  |   | 5,093  |   |      |   | 1,870  |  
|                                               |  |   |        |   |      |   |        |  
|                                               |  |   | 24,098 |   |      |   | 12,324 |  
|Less accumulated depreciation and amortization |  |   | (5,231 | ) |      |   | (997   | )
|                                               |  |   |        |   |      |   |        |  

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| |                    |  |      |        |      |  |   |        | 
| | ------------------ |  | ---- | ------ | ---- |  | - | ------ | 
| |                    |  | 2000 |        | 1999
| |                    |  |      |        |     
| | Fixed assets  net |  | $    | 18,867 |      |  | $ | 11,327 | 
| |                    |  |      |        |      |  |   |       

Depreciation and amortization expense of property and equipment totaled
$4,348,000 for the period ended November 4, 2000, and $997,000 for the year
ended December 31, 1999.



|6. |  | LEASE COMMITMENTS
|-- |  | -----------------

The Company leases equipment under noncancelable lease agreements that are
accounted for as capital leases. Included in property and equipment are assets
under capital lease arrangements aggregating approximately $1,152,000 as of
November 4, 2000, and $136,000 as of December 31, 1999. Accumulated
amortization of the assets under capital leases was approximately $135,000 as
of November 4, 2000, and $4,000 as of December 31, 1999. The related equipment
secures the capital leases; and, the Company is required to maintain liability
and property damage insurance under the terms of the agreement.

The Company leased its office and warehouse facilities under various operating
leases that call for fixed rental payments through 2011. The lease
arrangements require letters of credit, secured by certificates of deposit,
having a maximum requirement of up to $1,450,000 in the event the Company
defaults on any of its lease payments. Provided the Company is not in
default, the letters of credit shall be reduced over the terms of the leases.
Total rent expense under operating leases for the period ended November 4,
2000, approximated $2,550,000 and $482,000 for the year ended December 31,
1999.

Future minimum commitments under capital lease and operating leases at November
4, 2000 are as follows:

|                                        |            |   |         |     |           |   |        |       | 
|--------------------------------------- | ---------- | - | ------- | --- | --------- | - | ------ | ----- | 
|                                        |            |   | CAPITAL |     | OPERATING
|                                        |            |   | LEASES  |     | LEASES   
|                                        |            |   |         |     |          
|(In thousands)                          |            |   |         |     |           |   |        |      
|                                        | 2001       |   | $       | 335 |           |   | $      | 4,696 | 
|                                        | 2002       |   |         | 218 |           |   |        | 3,934 | 
|                                        | 2003       |   |         | 188 |           |   |        | 3,879 | 
|                                        | 2004       |   |         | 183 |           |   |        | 3,666 | 
|                                        | 2005       |   |         | 171 |           |   |        | 1,873 | 
|                                        | Thereafter |   |         |    |           |   |        | 7,698 | 
|                                        |            |   |         |     |           |   |        |      
|Total minimum lease payments            |            |   | 1,095   |     |           | $ | 25,746 |      
|                                        |            |   |         |     |           |   |        |      
|Less amount representing interest       |            |   | (63     | )   |           |   |        |      
|                                        |            |   |         |     |           |   |        |      
|Present value of minimum lease payments |            |   | 1,032   |     |           |   |        |      
|Less current obligations                |            |   | 257     |     |           |   |        |      
|                                        |            |   |         |     |           |   |        |      
|Long-term obligations                   |            | $ | 775     |     |           |   |        |      
|                                        |            |   |         |     |           |   |        |      



|7. |  | INCOME TAXES
|-- |  | ------------

There has been no provision for U.S. federal, U.S. state or foreign income
taxes for any period as the Company has incurred operating losses in all
periods and for all jurisdictions.

The following is a reconciliation of the statutory federal income tax rate to
the Companys effective income tax rate:

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|                                        |  |  |     |   
|--------------------------------------- |  |  | --- | --
|Statutory federal income tax benefit    |  |  | (34 | )%
|State income tax benefit                |  |  | (6  | )%
|Valuation allowance                     |  |  | 38  | % 
|Non-deductible stock-based compensation |  |  | 2   | % 
|                                        |  |  |     |   
|Income tax provision                    |  |  |    | % 
|                                        |  |  |     |   

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Companys deferred tax assets as of November 4, 2000, and December 31,
1999 consists of the following:

|                          |                                  |      |         |        |  |   |         |        | 
|------------------------- | -------------------------------- | ---- | ------- | ------ |  | - | ------- | ------ | 
|(In thousands)            |                                  | 2000 |         | 1999  
|                          |                                  |      |         |       
|Deferred tax assets:      |                                  |      |         |        |  |   |         |       
|                          | Net operating loss carryforwards |      | $       | 62,493 |  |   | $       | 22,475 | 
|                          | Other temporary differences      |      |         | 3,765  |  |   |         | 1,354  | 
|                          |                                  |      |         |        |  |   |         |       
|Total deferred tax assets |                                  |      | 66,258  |        |  |   | 23,829  |       
|Less valuation allowance  |                                  |      | (66,258 | )      |  |   | (23,829 | )     
|                          |                                  |      |         |        |  |   |         |       
|Net deferred tax assets   |                                  | $    |        |        |  | $ |        |       
|                          |                                  |      |         |        |  |   |         |       

Net deferred tax assets have been fully offset by a valuation allowance due to
a lack of operating history combined with risks and uncertainties surrounding
the Companys ability to generate future taxable income. The valuation
allowance increased by $66,258,000 for the period from January 1 through
November 4, 2000 and $23,829,000 for the period from February 17, 1999
(inception) to December 31, 1999.

As of November 4, 2000, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $156,231,000, $56,187,000 of which
expires in the year 2019 and $100,044,000 in the year 2020. The Company also
had net operating loss carryforwards as of November 4, 2000, for state income
tax purposes of approximately $156,231,000, $56,187,000 of which expires in the
year 2007 and $100,044,000 in the year 2008.

Utilization of the Companys net operating loss may be subject to substantial
annual limitation due to the ownership change limitations provided by Section
382 of the Internal Revenue Code and similar state provisions. Such an annual
limitation could result in the expiration of the net operating loss before
utilization.

8. STOCKHOLDERS EQUITY

CONVERTIBLE PREFERRED STOCK

In April 1999, the Company issued 5,781,862 shares of Series A preferred stock
in a private placement offering in exchange for cash proceeds of $10,079,624
and rights to certain internet domain names valued at $400,001.

In connection with the issuance of the Series A preferred stock, the Articles
of Incorporation were amended to increase the total authorized number of common
shares from the original 8,000,000 to 20,000,000, and to authorize a series of
preferred stock consisting of 6,000,000 shares.

In June 1999, the Company issued 5,298,014 shares of Series B preferred stock
in a private placement offering in exchange for cash proceeds of $50,000,003.
In connection with the issuance of the Series B preferred stock, the Articles
of Incorporation were amended to increase the total authorized number of common
shares to 24,000,000 and preferred shares to 11,301,862.

In November 1999, the Company issued 2,848,774 additional shares of Series B
convertible preferred stock and notes payable totaling $7,384,705, in a private
placement offering in exchange for cash proceeds of $34,270,000. The notes
payable were conditionally convertible, depending on the structure of the
second closing of the Series B offering.

In connection with the issuance of additional Series B convertible preferred
stock, the Articles of Incorporation were amended to increase the total
authorized number of common shares to 28,800,000, and authorized preferred
stock to 17,941,862 shares, including authorization of 1,040,000 Series B-1
preferred non-voting shares.

In December 1999, the Company completed the second closing of the November 1999
Series B convertible preferred stock private placement offering. In conjunction
with the closing, 1,589,405 shares of Series B convertible preferred stock were
issued in exchange for $15,000,008. An additional 782,486 shares of Series B
convertible preferred stock were issued in connection with the conversion of
the

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convertible notes payable issued at the initial closing.

The Companys Series B-1 preferred stock had substantially the same rights as
the Series A and B preferred stock, except that it was non-voting.

On January 7, 2000 the Companys board of directors amended its articles of
incorporation to increase the total number of authorized preferred stock shares
to 18,101,862, to designate 1,200,000 shares of preferred stock as Series C and
to eliminate the previously authorized Series B1 preferred stock.

On January 15, 2000, the Company entered into an agreement with an affiliate of
The Walt Disney Company, to perform joint marketing, content development and
other promotional activities. In addition, another affiliate of The Walt
Disney Company purchased 1,102,400 shares of Series C convertible preferred
stock, valued at approximately $11 million, in exchange for media rights on
ABC, Inc.

On January 19, 2000 the companys board of directors authorized, concurrent
with the Companys reincorporation in Delaware, a .8 for 1 reverse stock split.
All share and per share amounts in the accompanying financial statements have
been retroactively adjusted to reflect this split.

In December 1999, the board of directors authorized the Company to proceed with
an initial public offering of its common stock. The IPO was completed on
February 11, 2000. All of the then outstanding 24,902,940 shares of preferred
stock were automatically converted into common stock upon the closing of the
IPO.

On July 13, 2000, the Company acquired certain strategic assets and
partnerships of Petstore.com, Inc., an online retailer of pet products and
services. As part of the transaction, Discovery, Inc., agreed to acquire
1,143,895 shares of Series A preferred stock Pets.com stock for $3 million in
cash. The acquisition is accounted for as a purchase (see Note 4).

COMMON STOCK

On February 17, 1999, the Company issued 1,288,470 common shares, for total
consideration of $16,106 to a founder in exchange for certain tangible and
intangible assets. In connection with subsequent upgrades to the Companys
website, these costs were recorded to general and administrative expense in the
accompanying statement of operations.

Under certain conditions, 40,000 shares of common stock issued to the Companys
founders are subject to repurchase at the greater of the price originally paid
or the fair market value of the stock at the time of repurchase. The repurchase
provisions expire at the earlier of 36 months from the issuance date of the
common stock or an initial public offering of the Company.

On February 11, 2000, the Company completed its initial public offering of
7,500,000 shares of common stock resulting in approximately $75.2 million in
net proceeds. In connection with the closing of the offering, all of the
outstanding convertible preferred stock was converted into 17,402,940 shares of
common stock for an aggregate of 24,902,940 common shares issued.

On July 13, 2000, the Company acquired certain strategic assets and
partnerships of Petstore.com, Inc., an online retailer of pet products and
services. As part of the transaction, the Company issued 5,243,752 shares of
common stock in exchange for media rights, joint marketing and certain other
assets valued at approximately $9.6 million. The acquisition is accounted for
as a purchase (see Note 4).

STOCKHOLDER NOTE RECEIVABLE

In September 1999, the board of directors approved issuance of 200,000 shares
of common stock to a key officer in exchange for a promissory note receivable
in the amount of $187,500. The note, which was recorded as a reduction of
stockholders equity in the balance sheet at December 31, 1999, carried
interest at the rate of 6.08% and was due November 22, 2003. During 2000, the
promissory note was cancelled and the 200,000 shares of common stock were
returned to the Company.

DEFERRED STOCK-BASED COMPENSATION

During the period from January 1 to November 4, 2000, the Company recorded
deferred compensation expense of $824,000. During the period from February 17,
1999 (inception) to December 31,1999, the Company recorded deferred
compensation expense of $17,500,000. These deferred compensation amounts, net
of reductions for cancellations and expirations of $2,505,000 in the period
ended November 4, 2000, are being amortized, and recognized as operating
expense, using the straight-line method, over the vesting periods of the
underlying stock options, which are generally four years. Recognition of
deferred compensation expense amounted to $3,515,000 for the period ended
November 4, 2000 and $2,118,000 for the period ended December 31, 1999.



|9. |  | STOCK OPTION PLANS
|-- |  | ------------------

1999 STOCK PLAN

Under the terms of the 1999 Stock Plan (the Stock Plan), the board of
directors could grant incentive and nonqualified stock options to employees,
officers, directors, agents, consultants, and independent contractors of the
Company. In connection with the introduction of

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the Stock Plan, 2,829,734 shares of common stock were reserved for future
issuance. During 1999, the Company increased the number of shares reserved for
issuance under such plan to 5,815,327 shares, plus an evergreen provision which
allows for an increase in the authorized number of shares on the first day of
each of the fiscal years from 2001 to 2009, equal to the lesser of (i) 800,000
shares, (ii) 3% of the Companys outstanding common stock on the last day of
the preceding fiscal year, or (iii) a lesser number of shares as determined by
the board of directors.

Generally, the Company grants stock options with exercise prices equal to the
fair market value of the common stock on the date of grant, as determined by
the Companys board of directors. Options generally vest over a four-year
period and expire ten years from the date of grant. The 1999 stock plan also
contains a restricted stock purchase feature which provides the employee the
opportunity to exercise their options immediately and vest over the original
vesting period as set out in their stock option award. If the employee
terminates before vesting, the Company may repurchase the unvested options at
the original strike price.

2000 NON-STATUTORY STOCK OPTION PLAN

Under the terms of the 2000 Non-Statutory Stock Option Plan (the NSO Plan),
the board of directors could grant nonqualified stock options to employees,
officers, directors, agents, consultants, and independent contractors of the
Company. In connection with the introduction of the NSO Plan, 1,500,000 shares
of common stock were reserved for future issuance.

Generally, the Company granted stock options with exercise prices equal to the
fair market value of the common stock on the date of grant, as determined by
the Companys board of directors. Options expire ten years from date of grant.



|10. |  | 2000 EMPLOYEE STOCK PURCHASE PLAN
|--- |  | ---------------------------------

In December 1999, the Company established the 2000 Employee Stock Purchase Plan
(the Employee Plan), which became effective upon completion of the IPO. A
total number of 400,000 shares had been reserved for issuance under the
Employee Plan. The Employee Plan also contained an evergreen provision which
allowed for an annual increase in the authorized number of shares on the first
day of each fiscal year from 2001 to 2010, equal to the lesser of (i) 240,000
shares, (ii) 1% of the Companys outstanding common stock on the last day of
the preceding fiscal year, or (iii) a lesser number of shares as determined by
the board of directors.



|11. |  | DEFINED CONTRIBUTION PLAN
|--- |  | -------------------------

In October 1999, the Company adopted a defined contribution retirement plan
under Section 401(k) of the Internal Revenue Code (the 401(k) Plan), which
covered substantially all employees. Eligible employees could contribute
amounts to the plan, via payroll withholding, subject to certain limitations.
Under the 401(k) Plan, employees could elect to reduce their current
compensation by up to the statutorily prescribed annual limit ($10,500 in 2000
and $10,000 in 1999) and to have the amount of such reduction contributed to
the 401(k) Plan. The 401(k) Plan permitted, but did not require, additional
matching contributions to the 401(k) Plan by the Company on behalf of all
participants in the plan. No such contributions were ever made by the Company.



|12. |  | RELATED-PARTY TRANSACTIONS
|--- |  | --------------------------

During 2000, the Company made payments of $991,273 to Amazon.com, Inc., a
stockholder, for advertising services. The Company paid $986,285 in 2000 to a
common stockholder for legal services.

In conjunction with the sale of its Series A preferred stock, the Company
entered into an agreement with a stockholder, which allows for certain
reciprocal advertising, promotional and customer acquisition activities for an
initial term of 18 months. Under the agreement, both the Company and the
stockholder will reimburse each other in equal amounts for customers acquired
as a result of the marketing agreement. Under this marketing agreement, the
Company incurred customer acquisition expenses of $255,000, all of which are
outstanding as of December 31, 1999. In addition, the contract allows for
unspecified informal consulting and advisory services to be provided to the
Company by the stockholder.

In connection with the above mentioned sale of Series A preferred stock, the
Company issued 275,863 Series A preferred shares with a total consideration of
$400,001 to a founder in exchange for certain internet domain names.




PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Our executive officers and directors and their ages as of December 31, 2000
were as follows:

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|                     |  |     |    |          |  |                                                                |  |               
|-------------------- |  | --- | -- | -------- |  | -------------------------------------------------------------- |  | --------------
|                     |  |     |    |          |  |                                                                |  | DIRECTOR OR   
|NAME                 |  | AGE |    | POSITION |  | OFFICER SINCE                                                 
|                     |  |     |    |          |  |                                                               
|Julia L. Wainwright  |  |     | 43 |          |  | Chief Executive Officer and Chairman
of the Board of Directors |  | March 1999    
|Christopher E. Deyo  |  |     | 41 |          |  | President                                                      |  | April 1999    
|Paul G. Manca        |  |     | 42 |          |  | Chief Financial Officer                                        |  | September 1999
|Matthew Gee          |  |     | 40 |          |  | Senior Vice President of
Merchandising                         |  | August 2000   
|Ralph E. Lewis       |  |     | 54 |          |  | Vice President of Distribution and
Logistics                   |  | November 1999 
|Kathryn C. Ringewald |  |     | 40 |          |  | Vice President of Human Resources                              |  | April 1999    
|John B. Balousek(1)  |  |     | 55 |          |  | Director                                                       |  | October 1999  
|Mark Britto(2)       |  |     | 36 |          |  | Director                                                       |  | January 2000  
|David Chichester(1)  |  |     | 55 |          |  | Director                                                       |  | June 2000     
|Michela English      |  |     | 51 |          |  | Director                                                       |  | July 2000     
|John R. Hummer(1)(2) |  |     | 52 |          |  | Director                                                       |  | April 1999    



---

|(1) |  | Member of Audit Committee       
|--- |  | --------------------------------
|   
|   
|   
|   
|(2) |  | Member of Compensation Committee

Julia L. Wainwright served as Chief Executive Officer and a director of the
Company from March 1999 until January 2001. From March 1998 to February 1999,
she served as Chief Executive Officer of Reel.com, Inc. From May 1997 to
February 1998, Ms. Wainwright was on a sabbatical researching e-commerce
opportunities. From December 1996 to April 1997, she served as Chief Executive
Officer of Berkeley Systems, Inc., as President from August 1995 to November
1996 and as Vice President of Sales and Marketing from January 1995 to August
1995. From June 1994 to December 1994, she served as Vice President of
Marketing of Mindscape, Inc. From October 1993 to June 1994, she was a partner
in Corporate Development Partners, a private venture capital firm. From August
1991 to October 1993, she served as Vice President of International for
Spinnaker Software, Inc. From October 1988 to August 1991, she worked for Power
Up Software, Inc. in several positions, finishing as Vice President of
International. From January 1982 to October 1988, she served in various
management positions at Software Publishing, Inc. and from January 1980 to
December 1982, she worked in brand management at The Clorox Company. Ms.
Wainwright holds a B.S. from Purdue University.

Christopher E. Deyo served as President of the Company from April 1999 until
January 2001. From July 1998 to March 1999, he served as President of Reel.com,
Inc. He served as General Manager of Berkeley Systems, Inc. from March 1997 to
June 1998 and as Vice President of Marketing from September 1996 to February
1997. From May 1995 to August 1996, Mr. Deyo served as Vice President of
Marketing of Microprose, Inc. From September 1987 to August 1994, he worked for
Kransco Group Companies in several positions, finishing as Vice President of
Marketing. Mr. Deyo co-founded The Video Edge, Inc. where he served in various
capacities from May 1986 to August 1987. From August 1983 to April 1986, he
worked in brand management at The Procter & Gamble Company. Mr. Deyo holds an
M.B.A. and a B.S. from Syracuse University.

Paul G. Manca served as Chief Financial Officer of the Company from September
1999 until January 2001. From May 1995 to September 1999, he served as Chef
Financial Officer of CellNet Data Systems, Inc. From February 1987 to May 1995,
he worked for BZW/Barclays, an investment bank, finishing as Managing Director
and Group Head of the Communications Group within Corporate Finance. From June
1980 to February 1987, Mr. Manca served in various positions in the corporate
finance group of CIBC, finishing as a vice president. Mr. Manca holds a B.A.
from the University of California at Berkeley and an M.B.A. in Finance from
Golden Gate University.

Matthew Gee served as Senior Vice President of Merchandising of the Company
from August 2000 until January 2001. Prior to joining the Company, Mr. Gee held
various positions at Canned Food Grocery Outlets, finishing as Vice President
of Purchasing. Prior to joining Grocery Outlets in March 1995, Mr. Gee held
several positions with Lucky Stores, including positions in Store Management
and as Director of Grocery Sales and Marketing. Mr. Gee was with Lucky Stores
from June 1981 until March 1995. Mr. Gee holds a B.S. from the University of
San Francisco.

Ralph E. Lewis served as Vice President of Distribution and Logistics of the
Company from November 1999 until January 2001. From January 1998 to October
1999, he served as Vice President of Operations for Office Depot, Inc. From
June 1995 to December 1997, he served as Vice President and General Manager of
Softworld Services, Inc. and from June 1992 to May 1995, as General Manager of
NeoData Services, Inc. From January 1992 to May 1992, Mr. Lewis served as a
consultant to Egghead Discount Software, Inc. From August 1986 to May 1992, Mr.
Lewis served as Vice President of Distribution for Egghead Discount Software
Inc., from June 1981 to July 1986, as Divisional Vice President of Operations
for Pay N Save Corporation and from April 1977 to May 1981, as Operations
Manager of Distribution for Save On Drugs, Inc. Mr. Lewis holds a B.S. from the
University of Dayton.

Kathryn C. Ringewald served as our Vice President of Human Resources from April
1999 until January 2001. >From June 1997 to April 1999, she served as
Director of Human Resources of Form Factor, Inc. From August 1996 to May 1997,
she served as Director of Human Resources of Berkeley Systems, Incorporated,
and from June 1995 to August 1996, as Vice President of Human Resources of
Crystal Dynamics, Inc. From February 1994 to May 1995, Ms. Ringewald worked as
a Director of Talent for Lucas Arts Entertainment Company and from October 1992
to February 1994, as a human resources consultant to various industries. From
January 1990 to October 1992, she worked as a Human Resources Manager for
Symantec Corporation and from June 1985 to January 1990, she served in various
capacities at Apple Computer, Inc. Ms. Ringewald holds a B.A. from Dominican
College.

John B. Balousek served as a director of the Company from October 1999 until
January 2001. Mr. Balousek, a founder of PhotoAlley,

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Inc., served as its
Executive Vice President from July 1998 to March 1999. He served as Chairman
and Chief Executive Officer of True
North Technologies, Inc. from March 1996 to June 1996. From March 1979 to
February 1996, Mr. Balousek worked for Foote, Cone & Belding Communications,
Inc. and served as its President and Chief Operating Officer from February 1991
to March 1996. He served as a director of Foote, Cone & Belding from May 1989
to May 1994, and then served as a director of True North Communications, Inc.,
a newly-created holding company of Foote, Cone & Belding, from June 1994 to
February 1997. Mr. Balousek is also a director of Micron Electronics, Inc.,
Geoworks Corporation, FreeShop.com, Inc., Transilluminant Corporation,
Worldwide Magnifi, Inc., and EDBH, Inc. He holds a M.S. from Northwestern
University and a B.A. from Creighton University.

Mark J. Britto served as one of our directors from January 2000 until January
2001. Mr. Britto serves as Vice President of Strategic Alliances of Amazon.com
and oversees Amazon.coms Business and Corporate Development Departments as
well as its Fraud Management Division. Mr. Britto joined Amazon.com in June
1999 in connection with the acquisition by Amazon.com of Accept.com Financial
Services Corporation, a company co-founded by Mr. Britto in October 1998, where
he served as Vice President of Risk Management. Prior to that, from October
1994 through October 1998, Mr. Britto served as Executive Vice President of
Credit Policy at FirstUSA, a subsidiary of Bank One Corporation; and from
October 1991 until October 1994 he served as Senior Vice President of Risk
Management at NationsBank Corp. He holds a B.S. in Industrial Engineering and
Operations Research and an M.S. from the University of California at Berkeley.

David Chichester served as a director of the Company from June 2000 until
January 2001. Mr. Chichester has most recently served as executive vice
president and chief financial officer of Hecklers Entertainment Inc., a leading
broadband entertainment network. Prior to that, until October 1998 he served as
a Director, Executive Vice President, and Chief Financial Officer of Red Roof
Inns, Inc., a leading owner/ operator and franchiser of economy chain segment
hotels in the United States. Mr. Chichester holds an A.B. in American
Civilization form Brown University and an M.B.A. from Harvard Business School.

Michela English served as a director of the Company from July 2000 until
January 2001. Ms. English serves as the President of Discovery Enterprises
Worldwide, a unit of Discovery Communications, Inc., a privately held,
diversified media company. Ms. English joined Discovery.com, Inc. in March
1996. Ms. English received a B.A. in International Affairs at Sweet Briar
College and a Master of Public and Private Management degree from Yale
Universitys School of Management.

John R. Hummer served as a director of the Company from April 1999 until
January 2001. Mr. Hummer is a general partner of Hummer Winblad Venture
Partners, a private venture capital firm, which he co-founded in September
1989. From 1980 until 1989 he served as partner of Glenwood Management, a
private venture capital firm. Mr. Hummer is also a director of Extensity, Inc.,
Industrywide Mortgage Exchange, Inc., National Transportation Exchange, Inc.,
Mambo.com, and Netcontext. He holds a B.A. from Princeton University and an
M.B.A. from Stanford University.

Richard G. Couch was appointed to serve as our sole Director, Chief Executive
Officer, President, Chief Financial Officer and Treasurer, and Secretary in
January 2001 and is currently overseeing our dissolution and wind down. Since
September 1986, Mr. Couch has been Chairman of the Board, Chief Executive
Officer and Managing Principal of Diablo Management Group (DMG), a management
consulting company that provides services primarily to companies involved in
mergers, acquisitions, turnarounds, work-outs, reorganizations and sales (of
equity or assets). Through DMG, Mr. Couch has served in various interim
executive and/or advisory capacities to companies experiencing managerial,
financial or operational difficulties. Mr. Couch has over 25 years of
corporate, executive and turnaround management experience, and has handled over
170 assignments in a broad variety of businesses. Before founding DMG in 1986,
Mr. Couch founded and managed RGC Associates, through which he operated
troubled companies, usually as an interim President/ CEO. Also prior to DMG,
Mr. Couch was a Senior Vice President and Principal with INCO Venture Capital
Management, assisting in the selection, growth and transition of early-stage
companies. Mr. Couchs prior experience included CEO roles at two medium-sized
companies, following ten years at Xerox, where he held management and Vice
President positions in the Copier Manufacturing Group and the Printing Systems
Group. Mr. Couch has served as President, Chief Executive Officer and a
Director of Visual Numerics, Inc. since August 1990. In addition, he has
handled numerous assignments as a Chapter 11 bankruptcy trustee. Mr. Couch
received a B.A. in Social Science from the University of Buffalo, an M.S. in
Industrial Psychology from the University of Rochester, and an M.B.A. in
Finance and Economics from the Simon Graduate School of Business at the
University of Rochester.

BOARD COMPOSITION

As of December 31, 2000, our Bylaws provided for a Board of Directors
consisting of six directors. Each director was elected for a period of one year
and was to serve until our next annual meeting or until his or her successor
was duly elected and qualified. The executive officers served at the discretion
of the Board of Directors. There were no family relationships among any of our
directors or executive officers, each of whom resigned his or her position
effective as of January 16, 2001. Effective as of that date, our Bylaws were
amended to provide for a single director, and Richard G. Couch of Diablo
Management Group was appointed to serve as the Companys sole director and also
as Chief Executive Officer, President, Chief Financial Officer and Treasurer,
and Secretary.

BOARD COMPENSATION

Prior to the appointment on January 16, 2001 of Richard Couch as our sole
director, except for reimbursement for reasonable travel expenses relating to
attendance at board and committee meetings and the grant of stock options,
directors were not compensated for their services as directors. Directors who
were employees of the Company were eligible to participate in our 1999 Stock
Plan and our 1999 Employee Stock Purchase Plan and all directors were eligible
to participate in our 2000 Non-Statutory Stock Plan. As of December 31,

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2000, Julia Wainwright was the only director who was also an employee. During 2000,
we issued stock options to Ms. Wainwright
exercisable for a total of 100,000 shares of common stock under our 1999 Stock
Plan at an exercise price of $2.0625 per share. Ms. Wainwrights options vested
six months after the date of grant but were not exercised by Ms. Wainwright
prior to their expiration. We also granted Mr. Balousek options exercisable for
100,000 and 200,000 shares of common stock under our 1999 Stock Plan. The first
option was exercisable at an exercise price of $2.0625 and vested with respect
to 1/4 of the shares on November 27, 2000 and with respect to 1/24 of the
shares on the 27th day of each month thereafter. The second option was
exercisable at an exercise price of $0.6562 per share and was fully vested upon
August 17, 2000, the date of grant. These options were not exercised by Mr.
Balousek prior to their expiration. We also granted Mr. Chichester an option
exercisable for 100,000 shares of common stock under our 2000 Non-Statutory
Stock Option Plan. The option was exercisable at an exercise price of $2.0625
per share and vested with respect to 1/4 of the shares on November 27, 2000 and
with respect to 1/24 of the shares on the 27th day of each month thereafter. No
shares were exercised under this option by Mr. Chichester prior to its
expiration.

On January 16, 2001, the members of our Board of Directors resigned and Richard
Couch of Diablo Management Group, a consulting firm retained by the Company to
complete our approved wind-down and dissolution, was named as our sole
Director. Mr. Couch and other employees of Diablo Management Group render
consulting services in connection with our dissolution pursuant to a
compensation schedule approved by our Board of Directors on January 8, 2001 (a
copy of which is filed as Exhibit 10.48 hereto).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the compensation committee of our Board of Directors as of
December 31, 2000 were Mark Britto and John Hummer. Neither of them had at any
time been an officer or employee of the Company or any subsidiary of the
Company, nor were there any compensation committee interlocks or other
relationships during 2000 requiring disclosure under item 402(j) of Regulation
S-K promulgated by the Securities and Exchange Commission.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Exchange Act requires the Companys directors and
executive officers, and persons who own more than ten percent of a registered
class of the Companys equity securities to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and holders of more than ten percent of the Companys Common Stock
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.

To the Companys knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2000 all
Section 16(a) filing requirements applicable to the Companys officers,
directors and holders of more than ten percent of the Companys Common Stock
were complied with except that the following option grants were approved by the
Companys Board of Directors and were not required to be reported on Form-4s,
but were reported late on Form-5s: Julia L. Wainwright (May 27, 2000 option
grant for 100,000 shares); Christopher E. Deyo (May 27, 2000 option grant for
100,000 shares); Paul G. Manca (March 17, 2000 option grant for 35,000 shares,
April 17, 2000 option grant for 100,000 shares, and May 27, 2000 option grant
for 40,000 shares); Ralph E. Lewis (March 17, 2000 option grant for 25,000
shares and May 27, 2000 option grant for 30,000 shares); Paul W. Melmon (March
17, 2000 option grant for 55,000 shares and May 27, 2000 option grant for
30,000 shares); Kathryn C. Ringewald (March 17, 2000 option grant for 10,000
shares, May 27, 2000 option grant for 20,000 shares, and August 17, 2000 option
grant for 15,000 shares); Diane R. Hourany (March 17, 2000 option grant for
10,000 shares and May 27, 2000 option grant for 20,000 shares); John R.
Benjamin (March 17, 2000 option grant for 25,000 shares and May 27, 2000 option
grant for 20,000 shares); John M. Hollon (March 17, 2000 option grant for
30,000 shares and May 27, 2000 option grant for 20,000 shares); Matthew K. Gee
(August 9, 2000 option grant for 215,000 shares); John B. Balousek (May 27,
2000 option grant for 100,000 shares and August 17, 2000 option grant for
200,000 shares); David Chichester (May 27, 2000 option grant for 100,000
shares); Sue Ann Latterman (May 27, 2000 option grant for 15,000 shares).




ITEM 11. EXECUTIVE COMPENSATION.

The following table provides summary information concerning the compensation
received for services rendered to the Company during the fiscal year ended
December 31, 2000 by (a) each person who served as our chief executive officer
during 2000; (b) each of our other four most highly compensated executive
officers as of December 31, 2000, each of whose aggregate compensation during
our last fiscal year exceeded $100,000; and (c) one additional highly
compensated individual who would have been included under (b) above but for the
fact that he was no longer serving as an executive officer of the Company as of
December 31, 2000 (collectively, the Named Officers).

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SUMMARY COMPENSATION TABLE

|                            |                                              |     |                     |     |            |              |              |            |            |     |              |  |  |  |              |  |  |   |         |     | 
|--------------------------- | -------------------------------------------- | --- | ------------------- | --- | ---------- | ------------ | ------------ | ---------- | ---------- | --- | ------------ |  |  |  | ------------ |  |  | - | ------- | --- | 
|                            |                                              |     |                     |     |            |              |              |            |            |     |              |  |  |  | LONG-TERM    |  |  |   |        
|                            |                                              |     |                     |     |            |              |              |            |            |     |              |  |  |  | COMPENSATION |  |  |   |        
|                            |                                              |     |                     |     |            |              |              |            |            |     |              |  |  |  | AWARDS       |  |  |   |        
|                            |                                              |     | ANNUAL COMPENSATION |     |            |              |              |            |           
|                            |                                              |     |                     |     | SECURITIES |              | ALL OTHER   
|                            |                                              |     | SALARY              |     | BONUS      |              | OTHER ANNUAL |            | UNDERLYING |     | COMPENSATION
|NAME AND PRINCIPAL POSITION |                                              | (1) |                     | (2) |            | COMPENSATION |              | OPTIONS(#) |            | (3)
|                            |                                              |     |                     |     |            |              |              |            |            |    
|Julia L. Wainwright         |                                              | $   | 201,744             |     |            | $            | 275,000      |            |            | $   | 0            |  |  |  | 100,000      |  |  | $ | 235,000 |    
|                            | Chief Executive Officer                      |     |                     |     |            |              |              |            |            |     |              |  |  |  |              |  |  |   |         |     | 
|Christopher E. Deyo         |                                              | $   | 201,251             |     |            | $            | 275,000      |            |            | $   | 0            |  |  |  | 100,000      |  |  | $ | 235,000 |    
|                            | President                                    |     |                     |     |            |              |              |            |            |     |              |  |  |  |              |  |  |   |         |     | 
|Paul G. Manca               |                                              | $   | 200,659             |     |            | $            | 300,000      |            |            | $   | 0            |  |  |  | 175,000      |  |  | $ | 117,500 |    
|                            | Chief Financial Officer                      |     |                     |     |            |              |              |            |            |     |              |  |  |  |              |  |  |   |         |     | 
|Ralph Lewis                 |                                              | $   | 203,011             |     |            | $            | 150,000      |            |            | $   | 0            |  |  |  | 71,000       |  |  | $ | 375,000 | (4)
|                            | Vice President of Distribution and
Logistics |     |                     |     |            |              |              |            |            |     |              |  |  |  |              |  |  |   |         |     | 
|Paul W. Melmon(5)           |                                              | $   | 193,241             |     |            | $            | 175,000      |            |            | $   | 0            |  |  |  | 93,000       |  |  | $ | 117,500 |    
|                            | Vice President, Engineering                  |     |                     |     |            |              |              |            |            |     |              |  |  |  |              |  |  |   |         |     | 
|Kathryn C. Ringewald        |                                              | $   | 147,204             |     |            | $            | 175,000      |            |            | $   | 0            |  |  |  | 45,000       |  |  | $ | 82,500  |    
|                            | Vice President of Human Resources            |     |                     |     |            |              |              |            |            |     |              |  |  |  |              |  |  |   |         |     | 

(1)  Base salary paid to the officer during fiscal 2000.

(2)  Retention bonus and performance bonus paid to the Named Officer during
fiscal 2000. In addition to retention bonuses detailed under Item 13  Certain
Relationships and Related Transactions  below, the Named Officers were paid
the following performance bonuses during 2000: Julia L. Wainwright  $50,000;
Christopher E. Deyo  $50,000; Paul G. Manca  $75,000; Ralph Lewis 
$75,000; Paul W. Melmon  $25,000; Kathryn C. Ringewald  $25,000.

(3)  Severance paid to the officer during fiscal 2000.

(4)  Includes severance of $225,000 and loan forgiveness of $150,000
(signed in January 2001 but earned in fiscal 2000).

(5)  Mr. Melmon resigned as the Companys Vice President, Engineering,
effective December 22, 2000.

OPTION GRANTS

The following table provides summary information regarding stock options
granted to the Named Officers during the fiscal year ended December 31, 2000.
The options were granted pursuant to our 1999 Stock Plan. Stock price
appreciation of 5% and 10% is assumed pursuant to rules promulgated by the
Securities and Exchange Commission and does not represent how our stock
performed. The actual stock price appreciation over the ten-year option terms
are far below the assumed 5% and 10% levels, and all options listed have
terminated without being exercised by the Named Officer.

OPTION GRANTS IN LAST FISCAL YEAR

|                     |  |                   |         |                         |  |              |     |            |  |    |        |             |  |                      |          |  |  |   |         |  |  |   |         | 
|-------------------- |  | ----------------- | ------- | ----------------------- |  | ------------ | --- | ---------- |  | -- | ------ | ----------- |  | -------------------- | -------- |  |  | - | ------- |  |  | - | ------- | 
|                     |  | INDIVIDUAL GRANTS |         | POTENTIAL REALIZABLE   
|                     |  |                   |         | VALUE AT ASSUMED ANNUAL
|                     |  | NUMBER OF         |         | PERCENT OF              |  |              |     |            |  |    |        |             |  | RATES OF STOCK PRICE
|                     |  | SECURITIES        |         | TOTAL OPTIONS           |  |              |     |            |  |    |        |             |  | APPRECIATION FOR    
|                     |  | UNDERLYING        |         | GRANTED TO              |  | EXERCISE OR  |     |            |  |    |        | OPTION TERM
|                     |  | OPTIONS           |         | EMPLOYEES IN            |  | BASE PRICE   |     | EXPIRATION |  |   
|NAME                 |  | GRANTED(#)        |         | FISCAL YEAR(1)          |  | ($/SHARE)(2) |     | DATE(3)    |  | 5% |        | 10%        
|                     |  |                   |         |                         |  |              |     |            |  |    |        |            
|Julia L. Wainwright  |  |                   | 100,000 | (4)                     |  |              | 2.7 | %          |  | $  | 2.0625 |             |  |                      | 05/27/10 |  |  | $ | 129,710 |  |  | $ | 328,709 | 
|Christopher E. Deyo  |  |                   | 100,000 | (4)                     |  |              | 2.7 | %          |  | $  | 2.0625 |             |  |                      | 05/27/10 |  |  | $ | 129,710 |  |  | $ | 328,709 | 
|Paul G. Manca        |  |                   | 40,000  | (4)                     |  |              | 1.1 | %          |  | $  | 2.0625 |             |  |                      | 05/27/10 |  |  | $ | 51,884  |  |  | $ | 131,484 | 
|                     |  |                   | 100,000 | (5)                     |  |              | 2.7 | %          |  | $  | 2.1250 |             |  |                      | 04/17/10 |  |  | $ | 133,640 |  |  | $ | 338,670 | 
|                     |  |                   | 35,000  | (6)                     |  |              | 0.9 | %          |  | $  | 6.00   |             |  |                      | 03/17/10 |  |  | $ | 132,068 |  |  | $ | 334,686 | 
|Ralph Lewis          |  |                   | 30,000  | (4)                     |  |              | 0.8 | %          |  | $  | 2.0625 |             |  |                      | 05/27/10 |  |  | $ | 38,913  |  |  | $ | 98,613  | 
|                     |  |                   | 25,000  | (6)                     |  |              | 0.7 | %          |  | $  | 6.00   |             |  |                      | 03/17/10 |  |  | $ | 94,334  |  |  | $ | 239,061 | 
|                     |  |                   | 16,000  | (7)                     |  |              | 0.4 | %          |  | $  | 9.00   |             |  |                      | 01/21/10 |  |  | $ | 90,561  |  |  | $ | 229,499 | 
|Paul W. Melmon       |  |                   | 30,000  | (4)                     |  |              | 0.8 | %          |  | $  | 2.0625 |             |  |                      | 05/27/10 |  |  | $ | 38,913  |  |  | $ | 98,613  | 
|                     |  |                   | 55,000  | (6)                     |  |              | 1.5 | %          |  | $  | 6.00   |             |  |                      | 03/17/10 |  |  | $ | 207,535 |  |  | $ | 525,935 | 
|                     |  |                   | 8,000   | (7)                     |  |              | 0.2 | %          |  | $  | 9.00   |             |  |                      | 01/21/10 |  |  | $ | 45,280  |  |  | $ | 114,749 | 
|Kathryn C. Ringewald |  |                   | 15,000  | (8)                     |  |              | 0.4 | %          |  | $  | 0.6562 |             |  |                      | 08/17/10 |  |  | $ | 6,190   |  |  | $ | 15,687  | 
|                     |  |                   | 20,000  | (4)                     |  |              | 0.5 | %          |  | $  | 2.0625 |             |  |                      | 05/27/10 |  |  | $ | 25,942  |  |  | $ | 65,742  | 
|                     |  |                   | 10,000  | (6)                     |  |              | 0.3 | %          |  | $  | 6.00   |             |  |                      | 03/17/10 |  |  | $ | 37,734  |  |  | $ | 95,625  | 

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---

|(1) |  | We granted options for an aggregate of 2,753,325 shares to our employees
and consultants under our 1999 Stock Plan and 971,775 shares to our employees
and consultants under our 2000 Non-Statutory Stock Option Plan during our
fiscal year ended December 31, 2000, for a total of 3,725,100 shares subject to
options.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Options were granted at an exercise price equal to the fair market value of
the common stock, as determined by our Board of Directors on the date of grant.                                                                                                                                                              
|   
|   
|   
|   
|(3) |  | All options listed expired without being exercised subsequent to the Named
Officers termination of employment.                                                                                                                                                                                                          
|   
|   
|   
|   
|(4) |  | The options vested in full six months after the date of grant.                                                                                                                                                                                                                                                           
|   
|   
|   
|   
|(5) |  | The options would have vested with respect to 1/3 of the shares on April 3,
2001, and with respect to 1/36 of the shares on the third day of each month
thereafter.                                                                                                                                                      
|   
|   
|   
|   
|(6) |  | The options would have vested with respect to 1/3 of the shares on March
17, 2001, and with respect to 1/36 of the shares on the 17th day of each month
thereafter.                                                                                                                                                      
|   
|   
|   
|   
|(7) |  | The options would have vested with respect to 1/4 of the shares on January
21, 2001, and with respect to 1/48 of the shares on the 21st day of each month
thereafter.                                                                                                                                                    
|   
|   
|   
|   
|(8) |  | The options vested with respect to 1/24 of the shares on the 17th day of
each month.                                                                                                                                                                                                                                     

OPTION EXERCISES AND HOLDINGS

The following table provides summary information concerning the shares of
common stock acquired in the year ended December 31, 2000, the value realized
upon exercise of stock options during that period, and the number and value of
unexercised options with respect to each of the named officers as of December
31, 2000. The value was calculated by determining the difference between the
fair market value of underlying common stock and the exercise price.

FISCAL YEAR-END OPTION VALUES

|                     |  |             |   |          |  |                             |   |                             |  |                      |                 |  |  |   |     | 
|-------------------- |  | ----------- | - | -------- |  | --------------------------- | - | --------------------------- |  | -------------------- | --------------- |  |  | - | --- | 
|                     |  |             |   |          |  |                             |   |                             |  | NUMBER OF SECURITIES |                 |  |  |  
|                     |  | SHARES      |   |          |  |                             |   | UNDERLYING UNEXERCISED      |  | VALUE OF UNEXERCISED
|                     |  | ACQUIRED ON |   | VALUE    |  | OPTIONS AT                  |   | IN-THE-MONEY OPTIONS AT    
|                     |  | EXERCISE    |   | REALIZED |  | DECEMBER 31, 2000(#)        |   | DECEMBER 31, 2000($)       
|NAME                 |  | (#)         |   | ($)(1)   |  | (EXERCISABLE/UNEXERCISABLE) |   | (EXERCISABLE/UNEXERCISABLE)
|                     |  |             |   |          |  |                             |   |                            
|Julia L. Wainwright  |  |             |  |          |  | $                           |  |                             |  |                      | 100,000/0       |  |  | $ | 0/0 | 
|Christopher E. Deyo  |  |             |  |          |  | $                           |  |                             |  |                      | 100,000/0       |  |  | $ | 0/0 | 
|Paul G. Manca        |  |             |  |          |  | $                           |  |                             |  |                      | 102,500/272,500 |  |  | $ | 0/0 | 
|Ralph Lewis          |  |             |  |          |  | $                           |  |                             |  |                      | 67,917/143,083  |  |  | $ | 0/0 | 
|Paul W. Melmon       |  |             |  |          |  | $                           |  |                             |  |                      | 62,250/62,750   |  |  | $ | 0/0 | 
|Kathryn C. Ringewald |  |             |  |          |  | $                           |  |                             |  |                      | 33,563/23,437   |  |  | $ | 0/0 | 



---

|(1) |  | The amount set forth represents the difference between the fair market
value of our underlying common stock at December 29, 2000 (using the closing
sale price of $0.09375 reported on the Nasdaq Stock Market on that date) and
the exercise price of the option. No options were in the money.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth information regarding the beneficial ownership
of our common stock as of December 31, 2000 and upon conversion of all
outstanding shares of preferred stock into common stock by:



| |  | each stockholder known to us to own beneficially more than 5% of our common
stock;
|- |  | ----------------------------------------------------------------------------------
| 
| |  | each of our current directors and the named officers (as defined in the Act);
and 

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| |  | all current directors and executive officers as a group.
|- |  | --------------------------------------------------------

Except as otherwise noted, the address of each person listed in the table is
c/o IPET Holdings, Inc., c/o Diablo Management Group, 2000 Crow Canyon Place,
Suite 270, San Ramon, CA 94583. Beneficial ownership is determined in
accordance with the rules of the Securities
and Exchange Commission and includes voting and investment power with respect
to shares. To our knowledge, except under applicable community property laws or
as otherwise indicated, the persons named in the table have sole voting and
sole investment control with respect to all shares beneficially owned by each
stockholder as of December 31, 2000. In computing the number of shares
beneficially owned by a person and the percentage of ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or exercisable within 60 days of December 31, 2000
are deemed outstanding although no such options or warrants were actually
exercised by the individuals listed prior to their expiration. Those shares,
however, are not deemed outstanding for the purposes of computing the
percentage ownership of any other person. The percent of beneficial ownership
for each stockholder is based on 35,418,735 shares of common stock outstanding
as of December 31, 2000 (assuming conversion of all 1,143,895 outstanding
shares of non-voting Series A Preferred Stock into Common Stock).

|                                                             |                                    |                                    |            |              |  |              |      |            |  | 
|------------------------------------------------------------ | ---------------------------------- | ---------------------------------- | ---------- | ------------ |  | ------------ | ---- | ---------- |  | 
|                                                             |                                    |                                    |            |              |  |              |      | PERCENT OF
|                                                             |                                    |                                    |            | SHARES       |  | COMMON STOCK
|                                                             |                                    |                                    |            | BENEFICIALLY |  | BENEFICIALLY
|NAME AND ADDRESS                                             |                                    | OWNED                              |            | OWNED       
|                                                             |                                    |                                    |            |             
|Amazon.com, Inc.                                             |                                    |                                    | 8,973,029  |              |  |              | 25.3 | %         
|                                                             | 1200 12th Avenue South, Suite 1200 |                                    |            |              |  |              |      |            | 
|                                                             | Seattle, WA 98108-1226             |                                    |            |              |  |              |      |            | 
|Entities Affiliated with Hummer Winblad Venture              |                                    |                                    | 4,677,114  |              |  |              | 13.2 | %         
|                                                             | Partners                           |                                    |            |              |  |              |      |            | 
|                                                             | 2 South Park, 2nd Floor            |                                    |            |              |  |              |      |            | 
|                                                             | San Francisco, CA 94107            |                                    |            |              |  |              |      |            | 
|Petstore.com, Inc.                                           |                                    |                                    | 3,700,587  |              |  |              | 10.4 | %         
|                                                             |                                    | 1545 Park Avenue                   |            |              |  |              |      |            |  | 
|                                                             |                                    | Emeryville, CA 94608               |            |              |  |              |      |            |  | 
|Mark J. Britto                                               |                                    |                                    | 8,973,029  |              |  |              | 25.3 | %         
|                                                             |                                    | 1200 12th Avenue South, Suite 1200 |            |              |  |              |      |            |  | 
|                                                             |                                    | Seattle, WA 98108-1226             |            |              |  |              |      |            |  | 
|John R. Hummer                                               |                                    |                                    | 4,677,114  |              |  |              | 13.2 | %         
|                                                             |                                    | 2 South Park, 2nd Floor            |            |              |  |              |      |            |  | 
|                                                             |                                    | San Francisco, CA 94107            |            |              |  |              |      |            |  | 
|John B. Balousek                                             |                                    |                                    | 314,394    |              |  |              | *    |           
|David Chichester                                             |                                    |                                    | 62,500     |              |  |              | *    |           
|Michela English                                              |                                    |                                    | 0          |              |  |              | *    |           
|Julia L. Wainwright                                          |                                    |                                    | 1,012,318  |              |  |              | 2.9  | %         
|Christopher E. Deyo                                          |                                    |                                    | 623,175    |              |  |              | 1.8  | %         
|Paul G. Manca                                                |                                    |                                    | 110,833    |              |  |              | *    |           
|Paul W. Melmon                                               |                                    |                                    | 254,744    |              |  |              | *    |           
|Ralph E. Lewis                                               |                                    |                                    | 73,750     |              |  |              | *    |           
|Kathryn C. Ringewald                                         |                                    |                                    | 134,673    |              |  |              | *    |           
|All executive officers and directors as a group (11
persons) |                                    |                                    | 16,035,536 |              |  |              | 44.3 | %         



---

|* |  | Less than 1% of the outstanding shares of common stock.
|- |  | -------------------------------------------------------

The beneficial ownership for entities affiliated with Hummer Winblad Venture
Partners is comprised of 2,631,337 shares held by Hummer Winblad Venture
Partners III, L.P., 138,491 shares held by Hummer Winblad Technology Fund III,
L.P., 76,291 shares held by Hummer Winblad Technology Partners III, L.P., and
1,830,995 shares held by Hummer Winblad Venture Partners IV, L.P. The general
partner of each of the first three funds listed in the first sentence of this
paragraph is Hummer Winblad Equity Partners III, LLC, and the general partner
of the fourth fund is Hummer Winblad Equity Partners IV, LLC. The members of
each of the foregoing general partners are principals of Hummer Winblad Venture
Partners.

The beneficial ownership for Mark J. Britto is comprised of 8,973,029 shares
held by Amazon.com. As of December 31, 2000, Mr. Britto was a director of the
Company and Vice President of Strategic Alliances of Amazon.com and he
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in these shares.

The beneficial ownership for John R. Hummer is comprised of 2,631,337 shares
held by Hummer Winblad Venture Partners III, L.P., 138,491 shares held by
Hummer Winblad Technology Fund III, L.P., 1,830,995 shares held by Hummer
Winblad Venture Partners IV, L.P., and 76,291 shares held by Hummer Winblad
Technology Partners III, L.P. As of December 31, 2000, Mr. Hummer was a
director of the Company and a member of each of Hummer Winblad Equity Partners
III, LLC and Hummer Winblad Equity Partners IV, LLC, the general partners for
the four investment funds listed in the first two sentences of this paragraph,
and he disclaims beneficial ownership of these shares except to the extent of
his pecuniary interest in these shares.

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##### Table of Contents



The beneficial ownership for John B. Balousek includes 15,894 shares held by
the Balousek Family Ltd. Partnership and 262,500 shares under outstanding stock
options that are currently exercisable or exercisable within 60 days of
December 31, 2000.

The beneficial ownership for David Chichester includes 62,500 shares under
outstanding stock options that are currently exercisable or exercisable within
60 days of December 31, 2000.

The beneficial ownership for Julie L. Wainwright includes 100,000 shares under
outstanding stock options that are currently exercisable or exercisable within
60 days of December 31, 2000.

The beneficial ownership for Christopher E. Deyo includes 100,000 shares under
outstanding stock options that are currently exercisable or exercisable within
60 days of December 31, 2000.

The beneficial ownership for Paul G. Manca includes 110,833 shares under
outstanding stock options that are currently exercisable or exercisable within
60 days of December 31, 2000.

The beneficial ownership for Paul W. Melmon includes, 63,584 shares under
outstanding stock options that are currently exercisable or exercisable within
60 days of December 31, 2000.

The beneficial ownership for Ralph Lewis includes 73,750 shares under
outstanding stock options that are currently exercisable or exercisable within
60 days of December 31, 2000.

The beneficial ownership for Kathryn C. Ringewald includes 34,063 shares under
outstanding stock options that are currently exercisable or exercisable within
60 days of December 31, 2000.

The beneficial ownership for our executive officers and directors as a group
includes 797,396 shares under outstanding stock options that are currently
exercisable or exercisable within 60 days of December 31, 2000.

None of the options included above that were exercisable as of December 31,
2000 or within 60 days thereafter were subsequently exercised by the indicated
holders prior to their expiration.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The following individuals who were officers or directors of the Company prior
to our dissolution are parties to retention bonus agreements with the Company
which provided for payment to them of bonus compensation and severance in the
amounts specified (less applicable withholding tax) in the event of a change of
control or the liquidation, dissolution or winding up of the Company. These
retention bonus agreements were adopted by the Companys Board of Directors at
various times since April 2000 to help ensure that the Companys executive
officers had sufficient incentives to remain with the Company and maximize the
value of the Companys business and its assets in the event of: (i) a financing
in which the Company raised at least $10 million; (ii) a merger or sale of the
Company resulting in a change of control; (iii) liquidation of the Company. If
none of the foregoing occurred, then the retention bonuses were intended to
guarantee the individuals continued service with respect to the Companys
ongoing operations through March 1, 2001; however, the Company ceased all
formal operations on January 18, 2001, at which time the Company was formally
dissolved as effected by the filing of a Certificate of Dissolution with the
Delaware Secretary of State which became effective as of such date. Retention
bonuses were paid to the individuals listed below in December 2000. In
addition, each of the officers or directors listed was entitled to receive
severance payments for a period corresponding to the number of months set forth
below following his or her termination date (the Severance Period) equal to
his or her current base monthly salary, a pro-rated amount of such employees
target bonus based on the first three quarters in the year in which the
termination occurred, and continuation of health and life insurance benefits
through the end of the Severance Period (all subject to applicable withholding
tax). The severance listed below was also paid to each of the indicated persons
in December 2000.

|                     |  |                       |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       |  |  | 
|-------------------- |  | --------------------- |  | ------------ | ------- | ------ |  | --------- | -- | --------- |  | ------------ | ------- | --------- |  | - | ----- |  |  | 
|                     |  |                       |  |              |         |        |  |           |    | MONTHS IN |  | TOTAL        |         | PRO-RATED
|                     |  |                       |  |              |         | BONUS  |  | SEVERANCE |    | SEVERANCE |  | TARGET BONUS
|NAME                 |  | POSITION              |  | COMPENSATION |         | PERIOD |  | PAYMENT   |    | PAID     
|                     |  |                       |  |              |         |        |  |           |    |          
|Julie L. Wainwright  |  | Chief Executive       |  | $            | 225,000 |        |  |           | 12 |           |  | $            | 235,000 |           |  | $ | 0     | 
|                     |  | Officer and Chairman  |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|                     |  | of the Board of       |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|                     |  | Directors             |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|Christopher E. Deyo  |  | President             |  | $            | 225,000 |        |  |           | 12 |           |  | $            | 235,000 |           |  | $ | 0     | 
|Paul G. Manca        |  | Chief Financial       |  | $            | 225,000 |        |  |           | 6  |           |  | $            | 117,500 |           |  | $ | 0     | 
|                     |  | Officer               |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|John R. Benjamin     |  | Vice President of     |  | $            | 75,000  |        |  |           | 6  |           |  | $            | 77,500  |           |  | $ | 1,550 | 
|                     |  | Merchandising         |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|John M. Hollon       |  | Vice President of     |  | $            | 75,000  |        |  |           | 6  |           |  | $            | 75,000  |           |  | $ | 1,875 | 
|                     |  | Editorial             |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|Diane R. Hourany     |  | Vice President of     |  | $            | 75,000  |        |  |           | 12 |           |  | $            | 160,000 |           |  | $ | 2,000 | 
|                     |  | Customer Service      |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|Ralph E. Lewis       |  | Senior Vice President |  | $            | 75,000  |        |  |           | 12 |           |  | $            | 225,000 |           |  | $ | 1,125 | 
|                     |  | of Distribution and   |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|                     |  | Logistics             |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|Paul W. Melmon       |  | Chief Information     |  | $            | 150,000 |        |  |           | 6  |           |  | $            | 117,500 |           |  | $ | 1,763 | 
|                     |  | Officer               |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|Kathryn C. Ringewald |  | Vice President of     |  | $            | 150,000 |        |  |           | 6  |           |  | $            | 82,500  |           |  | $ | 1,031 | 
|                     |  | Human Resources       |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 
|Matthew K. Gee       |  | Senior Vice President |  | $            | 75,000  |        |  |           | 6  |           |  | $            | 105,000 |           |  | $ | 2,100 | 
|                     |  | of Merchandising      |  |              |         |        |  |           |    |           |  |              |         |           |  |   |       | 

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##### Table of Contents



On November 4, 2000, the Board of Directors elected not to repurchase shares of
unvested stock that had previously been acquired by
employees pursuant to restricted stock purchase agreements, through early
exercise of employee stock options or otherwise. As a result of that action,
the Companys repurchase right lapsed with respect to the indicated number of
shares held by the individuals below, at the specified purchase prices, and
such individuals will receive a pro rata distribution of stockholder proceeds
(currently estimated to be approximately $0.20 per share) based on their total
shareholdings, including those shares set forth below for which the Companys
repurchase right was waived.

|                     |  |                         |         |           |  |   |        | 
|-------------------- |  | ----------------------- | ------- | --------- |  | - | ------ | 
|                     |  | NUMBER OF SHARES        |         | PER SHARE
|                     |  | FOR WHICH               |         | PURCHASE 
|NAME                 |  | REPURCHASE RIGHT LAPSED |         | PRICE    
|                     |  |                         |         |          
|Julia D. Wainwright  |  |                         | 559,228 |           |  | $ | 0.0125 | 
|Christopher E. Deyo  |  |                         | 326,985 |           |  | $ | 0.1875 | 
|Paul G. Manca        |  |                         |        |           |  |   |       | 
|John R. Benjamin     |  |                         |        |           |  |   |       | 
|John M. Hollon       |  |                         | 62,500  |           |  | $ | 0.1875 | 
|Diane R. Hourany     |  |                         | 78,602  |           |  | $ | 0.1875 | 
|Ralph E. Lewis       |  |                         |        |           |  |   |       | 
|Paul W. Melmon       |  |                         | 119,475 |           |  | $ | 0.1875 | 
|Kathryn C. Ringewald |  |                         | 60,785  |           |  | $ | 0.1875 | 
|Mathew Gee           |  |                         |        |           |  |   |       | 
|OUTSIDE DIRECTORS    |  |                         |         |           |  |   |        | 
|John B. Balousek     |  |                         | 27,000  |           |  | $ | 0.1875 | 
|David Chichester     |  |                         |        |           |  |   |       | 

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##### Table of Contents



The table below sets forth information relating to stock options held by each
officer of the Company as well as two outside directors of the Company, as of
December 31, 2000. Other than as set forth below, in connection with its
approval and adoption of the Plan, the Board did not grant acceleration of
unvested, unexercised stock options, which options therefore terminated upon
dissolution of the Company.

|                     |                |            |         |            |  |               |         |            |  |              |   |              |  |          |        |  |  |          |        |         |  |          |        | 
|-------------------- | -------------- | ---------- | ------- | ---------- |  | ------------- | ------- | ---------- |  | ------------ | - | ------------ |  | -------- | ------ |  |  | -------- | ------ | ------- |  | -------- | ------ | 
|                     |                |            |         |            |  |               |         |            |  |              |   |              |  |          |        |  |  |          |        |         |  | WEIGHTED
|                     |                |            |         |            |  |               |         |            |  | ACCELERATION |   |              |  |          |        |  |  |          |        | AVERAGE
|                     |                |            |         |            |  |               |         |            |  | DUE TO       |   | ACCELERATION |  |          |        |  |  | EXERCISE
|                     |                | TOTAL      |         |            |  |               |         | ORIGINAL   |  | DUE TO       |   | "IN THE      |  | PRICE OF
|                     |                | OPTIONS    |         | VESTED     |  | OPTION        |         | RETENTION  |  | MONEY"       |   | VESTED      
|NAME                 | OUTSTANDING(1) | OPTIONS(1) |         | AGREEMENTS |  | AGREEMENTS(2) |         | OPTIONS(3) |  | OPTIONS     
|                     |                |            |         |            |  |               |         |            |  |             
|Julia D. Wainwright  |                |            | 100,000 |            |  |               | 100,000 |            |  |              |  |              |  |          |       |  |  |          |       |         |  | $        | 2.0625 | 
|Christopher E. Deyo  |                |            | 100,000 |            |  |               | 100,000 |            |  |              |  |              |  |          |       |  |  |          |       |         |  | $        | 2.0625 | 
|Paul G. Manca        |                |            | 375,000 |            |  |               | 102,500 |            |  |              |  |              |  |          |       |  |  |          |       |         |  | $        | 1.3765 | 
|John R. Benjamin     |                |            | 150,600 |            |  |               | 57,600  |            |  |              |  |              |  |          | 23,250 |  |  |          | 28,500 |         |  | $        | 1.1051 | 
|John M. Hollon       |                |            | 58,000  |            |  |               | 22,167  |            |  |              |  |              |  |          | 8,958  |  |  |          |       |         |  | $        | 2.0442 | 
|Diane R. Hourany     |                |            | 30,000  |            |  |               | 20,000  |            |  |              |  |              |  |          |       |  |  |          |       |         |  | $        | 2.0625 | 
|Ralph E. Lewis       |                |            | 211,000 |            |  |               | 67,917  |            |  |              |  |              |  |          |       |  |  |          |       |         |  | $        | 1.9578 | 
|Paul W. Melmon       |                |            | 125,000 |            |  |               | 41,333  |            |  |              |  |              |  |          | 20,917 |  |  |          |       |         |  | $        | 1.7540 | 
|Kathryn C. Ringewald |                |            | 57,000  |            |  |               | 25,750  |            |  |              |  |              |  |          | 7,813  |  |  |          |       |         |  | $        | 1.9023 | 
|Matthew K. Gee       |                |            | 215,000 |            |  |               |        |            |  |              |  |              |  |          | 53,750 |  |  |          |       |         |  | $        | 1.0625 | 
|OUTSIDE DIRECTORS    |                |            |         |            |  |               |         |            |  |              |   |              |  |          |        |  |  |          |        |         |  |          |        | 
|John B. Balousek     |                |            | 300,000 |            |  |               | 254,167 |            |  |              |  |              |  |          |       |  |  |          |       |         |  | $        | 0.9559 | 
|David Chichester     |                |            | 100,000 |            |  |               | 54,167  |            |  |              |  |              |  |          |       |  |  |          |       |         |  | $        | 2.0625 | 

(1)  As of December 31, 2000. All options listed have expired without being
exercised.

(2)  If the individual is terminated without cause within one year of a
liquidation or change of control, 25% of the persons unvested shares will
vest. The number of shares set forth in the table represent 25% of the
individuals unvested shares as of December 31, 2000.

(3)  Aggregate number of options exercisable at prices below the estimated
initial distribution per share of $0.20.

The Company loaned Ralph Lewis $150,000 pursuant to a Loan Agreement dated May
1, 2000 in connection with the sale of Mr. Lewiss prior residence and
relocation to the San Francisco Bay area. Mr. Lewis issued the Company a full
recourse demand promissory note for the principal amount of the loan, which
note was forgiven by the Company on January 2, 2001 pursuant to the terms of
the Loan Agreement in the event of the Companys dissolution. The Company paid
$986,285 in 2000 ($179,201 in 2001) to a common stockholder for legal services.




PART IV




ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

The following documents are filed as part of this report:

(a)  Exhibits (numbered in accordance with Item 601 of Regulation S-K) See
Exhibit Index.

(b)  Financial Statement Schedules: Independent Auditors Report of Stempek
Associates of Statement of Operations for the period January 1 to November 4,
2000, Balance Sheet as of November 4, 2000, Net Assets in Liquidation as of
December 31, 2000, Statements of Liquidating Activities for the period from
November 5, 2000 to December 31, 2000, and Notes to the Financial Statements.

(c)  Reports on Form 8-K

We filed Current Reports on Form 8-K and Form 8-K/A on July 28, 2000 and
September 26, 2000, respectively, with the Securities and Exchange Commission
to announce the signing on June 12, 2000 and closing on July 13, 2000 of a
definitive agreement pursuant to which we acquired certain strategic assets and
partnerships of Petstore.com, Inc., one of our former competitors in the online
pet product retail space. We also disclosed that in connection with the
PetStore.com acquisition we entered into a Tenancy and Promotion Agreement
dated June 12, 2000 with Discovery.com, Inc. and an Amended and Restated
Marketing and Promotion Agreement dated June 8, 2000 with Safeway Inc. The
acquisition of PetStore.com assets was accounted for as a purchase, and
accordingly, the operating results of Petstore.com were included in our
consolidated financial statements from the date of closing.

We filed a Current Report on Form 8-K on November 7, 2000 with the Securities
and Exchange Commission disclosing that our Board of Directors had decided on
November 4, 2000 that if no viable offers to acquire or fund the Company were
received by November 7, 2000, that we would commence an orderly wind-down of
our operations, including the lay-off of a majority of our employees and sales
of our remaining assets.

-47-



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##### Table of Contents



We filed a Current Report on Form 8-K on January 17, 2001 with the Securities
and Exchange Commission announcing that at a Special Meeting of Stockholders
held on January 16, 2001 our stockholders had approved our Plan of Complete
Liquidation and Dissolution and the change of our name from Pets.com, Inc. to
IPET Holdings, Inc. We also disclosed that our Certificate of Dissolution filed
with the Delaware Secretary of State would take effect as of January 18, 2001, that our
stock transfer books would be closed as of the close of business on that date,
that the proportionate interests of our stockholders would be fixed and any
future distribution of proceeds to stockholders would be made on the basis of
their respective stock holdings as of that time, and that our stock would be
delisted by Nasdaq as of that date. We also announced that our executive
officers and directors resigned on January 16, 2001, effective immediately
after the stockholder meeting, and that Richard Couch of Diablo Management
Group had been retained by the former Board to act as sole director and Chief
Executive Officer of IPET Holdings, Inc. and that Diablo Management Group would
handle the remaining issues in connection with our wind-down and dissolution.

We filed a Current Report on Form 8-K on March 27, 2001 with the Securities and
Exchange Commission announcing that we had engaged Stempek Associates as our
new independent auditors for the fiscal year ended December 31, 2000 to replace
the firm of Ernst and Young LLP, who declined to stand for reelection as our
auditors effective March 20, 2000.

We filed a Current Report on Form 8-K on September 7I, 2001 with the Securities
and Exchange Commission announcing that on August 31, 2001, the Sole Director
of the Company approved an initial cash distribution to be paid out of net
available assets of $0.09 per share to stockholders of record as of the
Companys final record date of January 18, 2001. On September 28, 2001, the
Company distributed the initial cash distribution payments to the stockholders
of record.




SIGNATURES

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

| |                                                                                                       |                     
| | ----------------------------------------------------------------------------------------------------- | --------------------
| | IPET HOLDINGS, INC.                                                                                  
|
| | By:                                                                                                   | /s/ RICHARD G. COUCH
| |                                                                                                      
| | Richard G. Couch
Chief Executive Officer, President,
Secretary, Chief Financial Officer
and Treasurer

Date: June 10, 2002

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature below
constitutes and appoints Richard G. Couch, jointly and severally, his or her
attorney-in-fact, each with the power of substitution, for him or her in any
and all capacities, to sign any amendments to this Report on Form 10-K/A, and
to file the same, with exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitute or
substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
registrant and in the capacity and on the date indicated.

|                                     |  |                                                                                                                                                                  |  |                    
|------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------
|SIGNATURE                            |  | TITLE                                                                                                                                                            |  | DATE               
|                                     |  |                                                                                                                                                                  |  |                    
|                                    
|                                    
|                                    
|                                    
|/s/ RICHARD G. COUCHRichard G. Couch |  | Chief Executive Officer (Principal Executive Officer),
President, Chief Financial Officer (Principal Financial
And Accounting Officer), Treasurer, and Secretary |  | Date: June 10, 2002
|                                    
|/s/ RICHARD G. COUCHRichard G. Couch |  | Sole Director                                                                                                                                                    |  | Date: June 10, 2002

-48-



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##### Table of Contents






EXHIBIT INDEX

|           |  |                                                                                                                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT    |  |                                                                                                                                                                                                 
|NUMBER     |  | DESCRIPTION                                                                                                                                                                                     
|           |  |                                                                                                                                                                                                 
|1.1*       |  | Form of U.S. Purchase Agreement.                                                                                                                                                                
|          
|          
|          
|          
|1.2*       |  | Form of Intersyndicate Agreement.                                                                                                                                                               
|          
|          
|          
|          
|2.1***     |  | Asset Purchase Agreement dated June 12, 2000, among the Company, P-Sub Corporation and Petstore.com, Inc.                                                                                       
|          
|          
|          
|          
|2.2++++    |  | Plan of Complete Liquidation and Dissolution of the Company.                                                                                                                                    
|          
|          
|          
|          
|3.1*       |  | Fifth Amended and Restated Articles of Incorporation of the Company.                                                                                                                            
|          
|          
|          
|          
|3.2*       |  | Form of First Amended and Restated Certificate of Incorporation of the Company.                                                                                                                 
|          
|          
|          
|          
|3.3*       |  | Bylaws of the Company, as amended.                                                                                                                                                              
|          
|          
|          
|          
|3.4*       |  | Form of Bylaws of the Company (proposed)                                                                                                                                                        
|          
|          
|          
|          
|4.1*       |  | Form of the Companys common stock certificate.                                                                                                                                                 
|          
|          
|          
|          
|4.1.1***   |  | Certificate of Designation of Rights, Preferences and Privileges of Series A Preferred Stock of Pets.com, Inc.
dated June 8, 2000.                                                              
|          
|          
|          
|          
|4.2***     |  | Amendment No. 1 to Amended and Restated Rights Agreement dated July 13, 2000, among the Company and certain
stockholders of the Company.                                                        
|          
|          
|          
|          
|4.3***     |  | Registration Rights Agreement dated July 13, 2000, among the Company and Petstore.com, Inc.                                                                                                     
|          
|          
|          
|          
|9.1***     |  | Voting Agreement dated July 13, 2000, among the Company, Petstore.com, Inc., Discovery.com, Inc. and certain
stockholders of the Company.                                                       
|          
|          
|          
|          
|10.1*      |  | Form of Indemnification Agreement between the Company and each of its former officers and directors.                                                                                            
|          
|          
|          
|          
|10.1.1++   |  | Retention Bonus Arrangements between the Company and its officers                                                                                                                               
|          
|          
|          
|          
|10.2.1*    |  | 1999 Stock Plan, as amended.                                                                                                                                                                    
|          
|          
|          
|          
|10.2.2*    |  | 2000 Employee Stock Purchase Plan.                                                                                                                                                              
|          
|          
|          
|          
|10.2.3**** |  | 2000 Non-Statutory Stock Option Plan.                                                                                                                                                           
|          
|          
|          
|          
|10.2.4++   |  | Addendum to Key Employee Retention Agreements between the Company and its officers.                                                                                                             
|          
|          
|          
|          
|10.3*      |  | Common Stock Purchase Agreement with Greg McLemore dated February 17, 1999.                                                                                                                     
|          
|          
|          
|          
|10.4*      |  | Restricted Stock Purchase Agreement dated March 10, 1999 with Julia Wainwright.                                                                                                                 
|          
|          
|          
|          
|10.5*      |  | Bill of Sale and Assignment with Greg McLemore and Koala Computer Products dated February 17, 1999.                                                                                             
|          
|          
|          
|          
|10.6*      |  | Offer Letter dated March 4, 1999 with Julia L. Wainwright.                                                                                                                                      
|          
|          
|          
|          
|10.7*      |  | Offer Letter dated March 19, 1999 with Kathryn C. Ringewald.                                                                                                                                    
|          
|          
|          
|          
|10.8*      |  | Offer Letter dated March 24, 1999 with Christopher E. Deyo.                                                                                                                                     
|          
|          
|          
|          
|10.9*      |  | Offer Letter dated March 26, 1999 with John M. Hollon.                                                                                                                                          
|          
|          
|          
|          
|10.10*     |  | Offer Letter dated April 7, 1999 with Paul G. Melmon.                                                                                                                                           
|          
|          
|          
|          
|10.11*     |  | Offer Letter dated April 21, 1999 with John R. Benjamin.                                                                                                                                        
|          
|          
|          
|          
|10.12*     |  | Offer Letter dated April 22, 1999 with Diane R. Hourany.                                                                                                                                        
|          
|          
|          
|          
|10.13*     |  | Offer Letter dated May 1, 1999 with Sue Ann Latterman.                                                                                                                                          
|          
|          
|          
|          
|10.14*     |  | Offer Letter dated May 5, 1999 with John A. Hommeyer.                                                                                                                                           
|          
|          
|          
|          
|10.15*     |  | Offer Letter dated August 20, 1999 with Paul G. Manca.                                                                                                                                          
|          
|          
|          
|          
|10.16*     |  | Revised Offer Letter, as amended, dated November 15, 1999 with Ralph E. Lewis.                                                                                                                  
|          
|          
|          
|          
|10.17*     |  | Series A Preferred Stock Purchase Agreement dated April 22, 1999.                                                                                                                               
|          
|          
|          
|          
|10.18*+    |  | Advertising Agreement with Amazon.com dated April 22, 1999.                                                                                                                                     
|          
|          
|          
|          
|10.19*     |  | Software License and Service Agreement with BroadVision, Inc. dated May 15, 1999.                                                                                                               
|          
|          
|          
|          
|10.20*     |  | Series B Preferred Stock Purchase Agreement dated June 18, 1999.                                                                                                                                
|          
|          
|          
|          
|10.21*     |  | License and Integration Agreement with Quality Software Systems, Inc. dated June 25, 1999.                                                                                                      
|          
|          
|          
|          
|10.22*     |  | PetPlace.com, Inc. Series A Preferred Stock Purchase Agreement dated November 12, 1999.                                                                                                         
|          
|          
|          
|          
|10.23*     |  | Series B Preferred Stock and Convertible Note Purchase Agreement dated November 5, 1999.                                                                                                        
|          
|          
|          
|          
|10.24*     |  | Amended and Restated Investors Rights Agreement dated January 18, 2000.                                                                                                                        
|          
|          
|          
|          
|10.25*+    |  | Lease Agreement, as amended, with the Paulsen Family Partnership dated April 8, 1999 for offices at 435 Brannan
Street, San Francisco, California.                                              
|          
|          
|          
|          
|10.26*+    |  | Sublease Agreement, as amended, with National Distribution Agency, Inc. dated July 1, 1999 for a warehouse and
distribution center at 33201 Dowe Avenue, Union City, California.                
|          
|          
|          
|          
|10.27*+    |  | Lease Agreement with Bryant Springs L.L.C. dated September 20, 1999 for
offices at 945 Bryant Street, San Francisco,
California.                                                                
|          
|          
|          
|          
|10.28*     |  | Lease Agreement with Rosenburg SOMA Investments IV, L.L.C. dated September 27, 1999 for a warehouse and
distribution center at 150-160 King Street, San Francisco, California.                  
|          
|          
|          
|          
|10.29*     |  | Lease Agreement with Whipple Properties 1001, L.L.C. dated November 5,
1999 for a warehouse and distribution center
at 1035 Whipple Road, Hayward, California.                                  
|          
|          
|          
|          
|10.30*+    |  | Lease Agreement with Precedent Industrial Group L.L.C. dated December
7, 1999 for a warehouse and distribution center at Building Number 1, Precedent
South Business Center, Greenwood, Indiana.
|          
|          
|          
|          
|10.32*+    |  | Exclusive Cross Marketing Agreement with PetPlace.com, Inc. dated September 17, 1999.                                                                                                           
|          
|          
|          
|          
|10.33*     |  | Sponsorship Agreement with American Veterinary Medical Foundation dated October 21, 1999.                                                                                                       

-49-



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##### Table of Contents



|           |  |                                                                                                                                                                                                                             
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT    |  |                                                                                                                                                                                                                             
|NUMBER     |  | DESCRIPTION                                                                                                                                                                                                                 
|           |  |                                                                                                                                                                                                                             
|          
|          
|          
|          
|10.34*     |  | Exclusive Sponsorship Agreement with American Veterinary Medical Foundation dated October 21, 1999.                                                                                                                         
|          
|          
|          
|          
|10.35*+    |  | Content Partnership/Distribution Agreement with Buena Vista Internet
Group and Infoseek Corporation dated January 15,
2000.                                                                                                 
|          
|          
|          
|          
|10.36*     |  | Series C Preferred Stock Purchase Agreement dated January 18, 2000.                                                                                                                                                         
|          
|          
|          
|          
|10.37**    |  | Exclusive Distribution with Salt H(2)0 Headquarters, Inc. dated December 8, 1999 and Amendment to Exclusive
Distribution Agreement dated April 28, 2000.                                                                    
|          
|          
|          
|          
|10.38**    |  | Yahoo! Remote Merchant Integration (RMI) Agreement dated as of February 3, 2000 with Yahoo! Inc.                                                                                                                            
|          
|          
|          
|          
|10.39**    |  | Exclusive Representation Agreement dated March 20, 2000 with Brian P. Hakan & Associates, Inc.                                                                                                                              
|          
|          
|          
|          
|10.39.1*** |  | Amended and Restated Marketing and Promotion Agreement dated June 8,
2000, among the Company and Safeway Inc.                                                                                                               
|          
|          
|          
|          
|10.40***   |  | Securities Purchase Agreement dated June 12, 2000 among the Company and Discovery.com, Inc.                                                                                                                                 
|          
|          
|          
|          
|10.41***   |  | Tenancy and Promotion Agreement dated June 12, 2000, among the Company and Discovery.com, Inc.                                                                                                                              
|          
|          
|          
|          
|10.42***** |  | Change of Control Agreement with Paul G. Manca dated March 17, 2000.                                                                                                                                                        
|          
|          
|          
|          
|10.43***** |  | Form of Key Employee Retention Agreement with the Companys Chief
Executive Officer and the Companys President.                                                                                                            
|          
|          
|          
|          
|10.44***** |  | Form of Key Employees Retention Agreement with each of the Companys Vice Presidents.                                                                                                                                       
|          
|          
|          
|          
|10.45***** |  | Loan Agreement with Ralph Lewis dated May 1, 2000, together with Promissory Note.                                                                                                                                           
|          
|          
|          
|          
|10.46+++++ |  | Form of Agreement re: Settlement and Release of Claims and Interests dated December, 2000 by and among the
Company, Buena Vista Internet Group, Catalyst Investments, LLC, Infoseek
Corporation and the Walt Disney Company.
|          
|          
|          
|          
|10.47+++++ |  | Form of Asset Purchase Agreement dated as of December 20, 2000 among
Petsmart.com, Inc., the Company and P-Sub
Corporation.                                                                                                 
|          
|          
|          
|          
|10.48+++++ |  | Compensation schedule for Diablo Management Group.                                                                                                                                                                          
|          
|          
|          
|          
|16.1+++    |  | Letter from Ernst & Young LLP to the Securities and Exchange Commission dated March 26, 2001.                                                                                                                               
|          
|          
|          
|          
|23.1       |  | Consent of Independent Auditors.                                                                                                                                                                                            
|          
|          
|          
|          
|24.1+++++  |  | Power of Attorney.                                                                                                                                                                                                          



---

|*     |  | Previously filed with our Registration Statement on Form S-1 (#333-92433) and
incorporated herein by reference.                                                                                             
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|     
|     
|     
|**    |  | Previously filed on May 15, 2000 with our Quarterly Report on Form 10-Q
(#000-29387) for the quarter ended March 31,
2000 and incorporated herein by reference.                                             
|     
|     
|     
|     
|***   |  | Previously filed with our Current Report on Form 8-K (#000-29387) dated
July 13, 2000 and filed on July 28, 2000
and incorporated herein by reference.                                                      
|     
|     
|     
|     
|****  |  | Previously filed with our Registration Statement on Form S-8 (#333-42410)
on July 28, 2000 and incorporated herein by
reference.                                                                            
|     
|     
|     
|     
|***** |  | Previously filed on August 14, 2000 with our Quarterly Report on Form
10-Q (#000-29387) for the quarter ended June
30, 2000 and incorporated herein by reference.                                           
|     
|     
|     
|     
|++    |  | Previously filed on November 14, 2000 with our Quarterly Report on Form 10-Q (#000-29387) for the quarter ended
September 30, 2000 and incorporated herein by reference.                                    
|     
|     
|     
|     
|+++   |  | Previously filed with our Current Report on Form 8-K (#000-29387) dated
March 20, 2001 and filed on March 27, 2001 and
incorporated herein by reference.                                                    
|     
|     
|     
|     
|++++  |  | Previously filed with our Definitive Proxy Statement pursuant to Schedule 14A of the Securities Exchange Act of 1934
(#000-29387) dated and filed on December 28, 2000 and incorporated herein by reference.
|     
|     
|     
|     
|+++++ |  | Previously filed on April 2, 2001 with our Annual Report on Form 10-K
(#000-29387) for the year ended December 31, 2000
and incorporated herein by reference.                                               
|     
|     
|     
|     
|+     |  | Material has been omitted pursuant to a request for confidential treatment.                                                                                                                                 

-50-