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

                                    FORM 10-K

                                   (Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

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

                        COMMISSION FILE NUMBER 000-27437

                               PLANETRX.COM, INC.

             (Exact name of registrant as specified in its charter)


                Delaware                                     94-3227733
      (State or other jurisdiction                        (I.R.S. Employer
   of incorporation or organization)                     Identification No.)

         6419 Shelby View Drive                                 38134
           Memphis, Tennessee                                (Zip Code)
(Address of principal executive offices)


                                  (901)379-2200
              (Registrant's telephone number, including area code)


           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $.0001 PAR VALUE

Indicate by check mark whether the Registrant (1) has filed all reports required
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days: 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 or any amendment to this
Form 10-K. [X]

Aggregate market value of voting stock held by  non-affiliates of the registrant
as of March 31, 2002.......................................$250,930

Number of shares of common stock outstanding as of March 31, 2002......6,119,115

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain sections of the  Registrant's  definitive proxy statement to be filed in
connection  with its 2002 annual  meeting of  stockholders  or Form 10-K/A to be
filed by April 30, 2002,  are  incorporated  by reference  into Part III of this
Form 10-K where indicated.

<PAGE>

                                     PART I


ITEM 1. BUSINESS

EXCEPT FOR HISTORICAL  INFORMATION,  THE FOLLOWING DESCRIPTION OF PLANETRX.COM'S
BUSINESS CONTAINS  FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING OF SECTION 21E
OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED.  THESE INCLUDE,  BUT ARE
NOT LIMITED  TO,  STATEMENTS  REGARDING  PLANETRX.COM'S  EXPECTATIONS,  BELIEFS,
INTENTIONS, PLANS, GOALS OR STRATEGIES REGARDING THE FUTURE. ALL FORWARD-LOOKING
STATEMENTS  INCLUDED IN THIS  DOCUMENT ARE BASED UPON  INFORMATION  AVAILABLE TO
PLANETRX.COM AS OF THE DATE HEREOF,  AND  PLANETRX.COM  ASSUMES NO OBLIGATION TO
UPDATE ANY SUCH FORWARD-LOOKING  STATEMENTS.  FORWARD-LOOKING STATEMENTS INVOLVE
RISKS AND  UNCERTAINTIES  WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER  MATERIALLY
FROM THOSE  PROJECTED.  THESE INCLUDE,  BUT ARE NOT LIMITED TO, RISKS ASSOCIATED
WITH THE CESSATION OF ACTIVE BUSINESS,  CHANGES IN ECONOMIC CONDITIONS AFFECTING
PLANETRX.COM, DECISIONS OF COURTS, REGULATORS AND GOVERNMENTAL BODIES, AND OTHER
FACTORS  OR RISKS  RELATING  TO  PLANETRX.COM  AS SET  FORTH  IN THIS  DOCUMENT,
INCLUDING (WITHOUT LIMITATION) UNDER THE CAPTIONS,  "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS"  AND "RISK FACTORS".
NOTHING  CAN OR SHOULD BE  INFERRED  ABOUT  PLANETRX.COM'S  FUTURE  REVENUES  OR
FINANCIAL  RESULTS  FROM  THE  FORWARD-LOOKING   STATEMENTS  CONTAINED  IN  THIS
DOCUMENT.

Overview

PlanetRx.com,  Inc. (sometimes referred to as "PlanetRx.com,"  "the Company," or
"we") was a leading  online  healthcare  destination  for commerce,  content and
community.  In October  1999,  we completed  our initial  public  offering.  Our
e-commerce  website,  www.PlanetRx.com,  launched on March 18, 1999,  provided a
convenient,  private and informative shopping experience. We offered products in
six  categories:  prescription  drugs;  non-prescription  drugs;  personal care;
beauty  and spa;  vitamins,  herbs and  nutrition;  and  medical  supplies.  Our
eCenters,  located within the PlanetRx.com  website,  incorporated  content that
addressed a variety of health-related topics. In addition, we owned and operated
a network of satellite  websites  targeting  specific  healthcare  conditions by
providing  relevant  content and a  destination  for online  communities.  These
condition-specific   websites,  which  included  diabetes.com,   depression.com,
obesity.com and alzheimers.com, were linked to the PlanetRx.com website.

In February  2001, we announced that we intended to evolve our business model to
focus  primarily  on  fulfilling  specialty  prescriptions,  and  that we  would
discontinue  the sale of retail health and beauty products as of March 12, 2001.
At that time we  anticipated  the imminent  execution a definitive  agreement to
acquire an existing  specialty pharmacy  business.  However,  those negotiations
could not be  consummated  on terms  acceptable to the Company.  On February 12,
2001, we stopped accepting new  prescriptions,  and on March 12, 2001, we closed
our on-line store.

Disposition of the Company

In April 2001, our Board of Directors authorized management to prepare a plan of
liquidation   and   dissolution   of  the  Company  for  review  by  the  Board.
Subsequently,  in an  effort  to  realize  as much  value  as  possible  for our
stockholders,  the Board of Directors  also  directed  management to explore and
evaluate various strategic options for the Company,  including a possible merger
or sale,  while  taking  steps to monetize  assets and settle  obligations  in a
manner  consistent  with the  consummation  of  either  a merger  or sale or the
liquidation and  dissolution of the Company.  These steps have included the sale
of  assets,  the  assignment  or  negotiated  cancellation  of leases  and other
contracts,  the payment or settlement of liabilities  and  obligations,  and the
reduction of personnel to three key managers.  We intend to continue these steps
to monetize assets and, to the extent possible, use the proceeds,  together with
available  cash, to pay our  obligations  and  liabilities.  No assurance can be
given that available  cash and amounts  received from the sale of assets will be
adequate to provide for our obligations, liabilities, expenses and claims.



<PAGE>


Description of Business

Prior  to  February  2001,   our  market   consisted  of   prescription   drugs,
non-prescription drugs, personal care products,  beauty and spa, vitamins, herbs
and nutrition and medical  supplies.  In the past,  these products had been sold
primarily through chain drugstores such as CVS, Eckerd,  RiteAid and Walgreen's,
mass  market  retailers  such  as  Kmart,  Target  and  Wal-Mart,  supermarkets,
warehouse clubs, mail-order companies and independent drugstores and pharmacies.
However, a significant number of consumers were beginning to use the Internet to
shop for healthcare products and as a source for health and medical information.

The  PlanetRx.com  approach was based on the belief that the use of the Internet
to research and purchase  healthcare-related  products has growth potential as a
result of the  limitations  of  traditional  channels  for  prescription  drugs,
non-prescription  drugs,  personal  care  products and medical  supplies.  These
limitations include the inconvenience of shopping at traditional  drugstores and
pharmacies,  the limited selection and product inventory at traditional  stores,
lack of readily available and detailed information useful to consumers in making
their purchase  decisions,  and lack of opportunity  for consumers of healthcare
products to share their  experiences with, and to learn from the experiences of,
others.

PlanetRx.com  sought to address the  limitations of  traditional  drugstores and
pharmacies  through a combination of an extensive product  selection,  excellent
customer service,  professionally-created  content and the development of online
communities focused on health-related topics. The key components of our solution
included an intuitive,  easy-to-use shopping interface available 24 hours a day,
seven days a week,  an extensive  selection of  healthcare-related  products,  a
broad array of reliable healthcare  resources that helped consumers find answers
to their critical healthcare  questions and make informed purchasing  decisions,
and  interactive  forums  hosted  on our  satellite  websites  organized  around
specific chronic health  conditions.  These satellite websites allowed consumers
to quickly link to the relevant product and purchase it on PlanetRx.com.

Through  our  advertising  and  promotional  activities,  we sought  to  develop
PlanetRx.com  as a  pervasive  brand  that  targeted  purchasers  of health  and
personal care products and identified us as a premier healthcare  destination on
the Internet. As part of our commitment to consumers, we endeavored to provide a
secure and private forum in which to communicate  and share ideas, we maintained
our own  distribution  center,  only  minutes  away from our  primary  supplier,
McKesson  Corporation,  and our  primary  shipping  agents,  FedEx  and the USPS
Priority  Mail Air  Center,  and we  operated  our own  pharmacy  with  licensed
pharmacists and were licensed to ship  prescription  products in all U.S. states
and territories.  By operating our own distribution center and pharmacy, we were
able to maintain  strict  control over  logistics,  provide  excellent  customer
service and offer reliable and prompt delivery.

We also endeavored to develop  strategic  relationships in order to increase our
revenue  opportunities  and build our reputation as a leading online  healthcare
destination. For example, we worked to develop relationships or partner with the
following types of  organizations:  pharmacy  benefit  managers and managed care
organizations  to  increase  payment  alternatives  for  our  prescription  drug
customers  (such  as our  relationship  with  Express  Scripts);  pharmaceutical
manufacturers  to  sponsor  our  various  satellite  sites  focused  on  chronic
conditions;  hospital organizations in order to market directly to their patient
and doctor  populations;  companies  that are working on providing  direct links
between doctors' offices and pharmacies to facilitate the delivery of electronic
prescriptions; and content and commerce portals and online service providers who
could drive traffic to our website.

Consumers   visiting   our   website   could   purchase   a  wide   variety   of
healthcare-related   products;   receive  relevant,   personalized   information
addressing  their  healthcare  concerns;  and interact with other consumers on a
broad range of health issues. Additionally, we provided personalized information
to our customers on a confidential  basis through such means as e-mail reminders
when  their  supply of a product  is about to run out;  useful  newsletters  and
notices of special  offers and new products;  timely and  high-quality  customer
service through our customer  service  department;  a high level of privacy when
purchasing  products that reveal  personally-sensitive  aspects of their health;
features such as Ask the  Pharmacist  where  consumers  could ask questions that
they would  otherwise  be  uncomfortable  asking in a  traditional  drugstore or
pharmacy;  and a secure  environment  for the storage of a  customer's  medical,
purchasing and payment information.

Our websites also provided in-depth  information on over 100 disease categories,
helping  consumers find answers to critical  healthcare  questions.  We provided
information on symptoms,  diagnosis,  treatments and  alternative  care for many
conditions.  Our  content  included  material  developed  internally  as well as
material  licensed  from outside  sources,  such as  iVillage,  Reuters News and
drkoop.com. The information was maintained and updated by our in-house editorial
team and  periodically  reviewed by our Healthcare  Advisory Board  comprised of
medical and pharmacy experts.

We provided  information to help consumers  understand generic drug alternatives
and dangerous  drug  interactions.  Consumers  could access our  extensive  drug
information library at the PlanetRx.com  website. Our Ask the Pharmacist service
provided  personalized  responses  by e-mail to help ensure  that each  customer
understood  the correct  usage,  possible  side effects and expected  beneficial
outcomes of a prescription or  non-prescription  medication.  Through our Health
Answers  feature,  users  could  search  for  information  on common  healthcare
conditions  and could link to  products  for their well  being,  including  drug
therapies, alternative treatments and self care and prevention.

As usage of the  Internet  continues  to grow,  users seek from the Internet the
same opportunity for expression,  interaction,  sharing, support and recognition
they seek in the  everyday  world.  This is  especially  true in the health care
context.  We provided forums,  such as bulletin boards, chat rooms and moderated
discussion groups, where users could discuss a variety of health-related topics.
We had eCenters on the  PlanetRx.com  website  organized around specific chronic
health conditions and targeted  demographic groups,  such as women,  seniors and
children.  In addition to our eCenters,  we had a network of satellite  websites
designed  to provide an  extended  community  for people  interested  in chronic
healthcare conditions.  These sites were built around intuitive domain names for
chronic   healthcare   conditions,   such   as   diabetes.com,   depression.com,
obesity.com, alzheimers.com,  cholesterol.com,  arthritis.com, breast.cancer.com
and  weightloss2000.com,  and had a  similar  look and feel to the  PlanetRx.com
website.

The  PlanetRx.com  pharmacy  was staffed 24 hours a day,  seven days a week with
experienced pharmacists.  In addition to being licensed, each of our pharmacists
was trained to provide  excellent  personal  service for our customers,  and all
were  members of the  American  Pharmaceutical  Association.  Our  pharmacy  was
licensed to ship  prescription  products in all U.S. states and territories.  In
addition,  we were certified by the National Association of Boards of Pharmacy's
Verified Internet Pharmacy Practice Sites program.  This program aims to set the
standards  for  Internet  pharmacies  as well as to inform  the  public of those
websites  that have  agreed to comply  with such  standards.  Our  pharmacy  was
located within our distribution  facility in Memphis,  Tennessee,  enabling each
customer's prescription to be shipped the same day it was filled.

Our marketing and  promotion  strategy was designed to build brand  recognition,
drive  customer  traffic to our online store,  add new  customers,  build strong
customer  loyalty,  encourage  repeat purchases and develop  additional  revenue
opportunities.  Our advertising and promotion campaigns targeted both online and
offline audiences.  Our online advertising  efforts were concentrated on leading
Internet portals,  health-related  websites, and other high traffic websites. We
used traditional off-line marketing and promotion efforts, including network and
cable  television  advertising,  national  radio  advertising,  special  product
promotions and promotional press releases.

We believed that operating our own distribution center and pharmacy was critical
to our strategy of providing quality customer service.  Our distribution  center
and pharmacy were located in Memphis,  Tennessee. Our primary supplier, McKesson
Corporation,  was  also  located  in  Memphis,  which  allowed  us  to  maintain
reasonable  inventory levels based on just-in-time  deliveries.  The location of
our  distribution  center also allowed us to take advantage of FedEx's major hub
operations  and the USPS Priority  Mail Air Center,  which are also located near
our distribution center.

We offered a variety of shipping options, including next-day delivery for orders
received  during the business  week. We shipped to anywhere in the United States
served by FedEx or the USPS.  Priority orders were flagged and expedited through
our fulfillment  processes.  For prescription products, our goal was to ship the
product as soon as the prescription was verified and our pharmacists completed a
drug utilization review.

We  implemented  a wide range of secure,  scalable  services and systems for the
PlanetRx.com website and our satellite websites, as well as for our distribution
center.  These  services  and  systems  included  website  management,  advanced
searching tools,  customer account  management,  transaction  processing,  order
management,  pharmacy  services and  operations,  store and  catalog,  inventory
control,  purchasing,  community message boards,  OnLine Analytical  Processing,
payment  services  and a variety of  marketing  applications.  A subset of these
systems formed the core set of software  applications that we used for accepting
and validating our customer orders, organizing, placing and managing orders with
our vendors, receiving product and assigning it to customer orders, and managing
shipment of products to customers.

We developed  proprietary  technologies  to augment  those that we licensed from
vendors,  such as Microsoft,  IBM and Sun Microsystems.  We focused our internal
development efforts on creating and enhancing our proprietary software. Our core
merchandise catalog,  customer  interaction,  order collection,  fulfillment and
back-end systems were all proprietary to PlanetRx.com. Our software platform and
architecture were integrated with relational database servers such as IBM UDB as
well as  Microsoft  SQL  server.  Our  system  was  designed  to include an open
application-programming  interface that provided  real-time  connectivity to our
distribution center systems for both pharmacy and non-pharmacy  products.  These
systems included a perpetual inventory system,  real-time order tracking system,
executive information system and inventory  replenishment system. The employment
of multiple web servers,  application servers, and database servers, allowed our
systems to be resilient  and  redundant.  Our Internet  servers used SSL to help
conduct secure communications and transactions.

The online commerce market is new, rapidly  evolving and intensely  competitive.
In particular, the health and personal care categories are intensely competitive
and are also highly fragmented, and there was no clear dominant leader in any of
our market segments. Our competitors could be divided into several groups: chain
drugstores,  such as Walgreen's,  RiteAid, CVS and Eckerd; mass market retailers
such as Wal-Mart, Kmart and Target;  supermarkets,  such as Safeway, Albertson's
and Kroger;  warehouse  clubs;  online  retailers of health,  beauty,  wellness,
personal care and/or pharmaceutical products, such as drugstore.com and CVS.com;
mail order pharmacies, such as Express Scripts and Merck-Medco; Internet portals
and online service providers that feature shopping services such as AOL, Yahoo!,
Excite@Home and Lycos;  and cosmetics  departments at major  department  stores,
such as  Nordstrom,  Macy's and  Bloomingdale's  and hair salons.  Most of these
competitors operate within one or more of our market segments.

Our business was subject to extensive federal, state and local regulations, many
of which are specific to pharmacies and the sale of over-the-counter  drugs. For
example,  under the Omnibus Budget  Reconciliation Act of 1990 and related state
and local regulations,  our pharmacists were required to offer counseling to our
customers  about  medication,  dosage,  delivery  systems,  common side effects,
adverse  effects  or  interactions  and  therapeutic  contraindications,  proper
storage,  prescription  refill,  and other information deemed significant by the
pharmacists.  We were also  subject to federal,  state and local  licensing  and
registration  regulations  with  respect to,  among other  things,  our pharmacy
operations and the pharmacists we employed.

We were subject to requirements under the Controlled  Substances Act and federal
Drug Enforcement Agency regulations, as well as related state and local laws and
regulations,  relating  to  our  pharmacy  operations,  including  registration,
security,  record keeping,  and reporting  requirements related to the purchase,
storage and dispensing of controlled  substances,  prescription  drugs, and some
over-the-counter  drugs.   "Compendial  standards"  which  can  also  be  called
"official compendium" means the standards for drugs related to strength, purity,
weight, quality,  labeling and packing contained in the official Pharmacopeia of
the United  States,  official  National  Formulary,  or any supplement to any of
them.  Under the Food,  Drug and Cosmetic Act of 1938, a drug  recognized by the
Homeopathic Pharmacopeia of the United States must meet all compendial standards
and  labeling   requirements   contained  therein,  or  it  will  be  considered
adulterated  (e.g.,  lacking  appropriate  strength,   quality,  or  purity;  or
containing  poisonous or unsanitary  ingredients) or misbranded (e.g.,  having a
false  or  misleading  label;  or label  containing  inaccurate  description  of
contents).  While homeopathic  remedies accounted for less than one percent (1%)
of our  revenues,  we were  still  required  to comply  with the Food,  Drug and
Cosmetic Act. The distribution of adulterated or misbranded homeopathic remedies
or other  drugs is  prohibited  under  the  Food,  Drug and  Cosmetic  Act,  and
violations  could  result in  substantial  fines and other  monetary  penalties,
seizure of the misbranded or adulterated items,  and/or criminal  sanctions.  We
were  required to comply with the Dietary  Supplement  Health and  Education Act
when selling dietary supplements and vitamins.

Intellectual Property

We relied on a combination  of copyright,  trademark,  and trade secret laws and
our  contractual  obligations  with  employees  and third parties to protect our
proprietary  rights.  We do not own any issued patents,  and other protection of
our  intellectual  property  is  limited.  Despite  our  efforts to protect  our
proprietary  rights,  it may be possible for a third party to copy or obtain and
use our intellectual  property  without our  authorization.  In addition,  other
parties may breach  confidentiality  agreements or other protective contracts we
have entered into,  and we may not be able to enforce our rights in the event of
these breaches.

We entered into  confidentiality  and invention  assignment  agreements with our
employees and  consultants,  and  nondisclosure  agreements with our vendors and
strategic  partners  to  limit  access  to and  disclosure  of  our  proprietary
information.  We cannot be certain that these  contractual  arrangements  or the
other  steps  taken by us to protect  our  intellectual  property  will  prevent
misappropriation  of our  technology.  We have licensed some of our  proprietary
rights, such as trademarks or copyrighted material,  to third parties.  While we
have attempted to ensure that the quality of the PlanetRx.com  products brand is
maintained by these  licensees,  we cannot assure that these  licensees will not
take actions that might hurt the value of our proprietary rights or reputation.

The domain names owned by  PlanetRx.com  as of December 31, 2002  included,  but
were   not   limited    to:    anorexia.com;    osteopathy.com;    podiatry.com;
pollenwatch.com; rxnet.com; and weightloss2000.com.

Employees

As of  December  31,  2000,  PlanetRx.com  had 193  employees.  During the first
quarter of 2001,  in  connection  with the rapid change in business  strategy at
PlanetRx.com,  we began to reduce our workforce  further.  As of March 31, 2002,
PlanetRx.com had 3 employees.

                                  RISK FACTORS

Risks Relating to Liquidation and Dissolution

Potential Stockholder Liability to Creditors of the Company

If a Plan of  Liquidation  and  Dissolution  should be  approved by our Board of
Directors and stockholders,  the Company would file a certificate of dissolution
with the  Secretary  of State of the State of Delaware to dissolve  the Company.
Under the Delaware  General Board of Directors and Corporation Law (the "DGCL"),
the  Company  would  continue  to exist for three  years  after the  dissolution
becomes  effective (or for such longer period as the Delaware  Court of Chancery
would  direct),  during  which  time the  Company  would  prosecute  and  defend
lawsuits,  gradually  dispose  of its  property,  and to  the  extent  possible,
discharge  its  liabilities  and  distribute to its  stockholders  any remaining
assets.

The  Company  would  establish a  contingency  reserve to pay its  expenses  and
liabilities during this three-year period. If the contingency  reserve should be
inadequate to pay the Company's  expenses and  liabilities,  under the DGCL each
stockholder  could be held liable to the Company's  creditors for payment of the
stockholder's  pro rata  share of  amounts  owed to  creditors  in excess of the
contingency  reserve. A stockholder's  liability would be limited to the amounts
previously  received as distributions from the Company (and from any liquidating
trust) pursuant to the dissolution.  If the contingency reserve is inadequate, a
stockholder  could be required to return all distributions  previously  received
from the Company pursuant to the dissolution,  in which case a stockholder might
receive nothing from the Company under the Plan.  Furthermore,  if a stockholder
has paid taxes on distributions previously received pursuant to the dissolution,
the  requirement to repay all or part of those  distributions  could result in a
net tax cost to the  stockholder  if the repayment does not cause a commensurate
reduction in taxes payable.

There  can be no  assurance  that any  contingency  reserve  established  by the
Company  would  be  adequate  to  cover  any  expenses  and   liabilities.   See
"Contingency Reserves" for more information.

Amount of Distributions

Uncertainties  as to the net  value of the  Company's  non-cash  assets  and the
ultimate  amount  of its  liabilities  make  it  impracticable  to  predict  the
aggregate  net  value,   if  any,  that   ultimately   will  be  distributed  to
stockholders.  Claims,  liabilities  and  expenses  from  operations  (including
operating  costs,  salaries,  income taxes,  payroll and local taxes,  legal and
accounting fees and miscellaneous office expenses) would continue to be incurred
following  approval  of the Plan.  These  expenses  will reduce the amount of or
possibly  eliminate assets available for ultimate  distribution to stockholders.
No assurances can be given that available cash and amounts  received on the sale
of  assets  would  be  adequate  to  provide  for  the  Company's   obligations,
liabilities, expenses and claims and to make cash distributions to stockholders.

Risks Relating to Sales or Merger

We have been  evaluating  possible  sale or merger  transactions  involving  the
Company.  There can be no  assurance  that we will be able to enter  into such a
transaction, or if we do enter into such a transaction,  that we will be able to
successfully  integrate  any acquired  business  without  substantial  expenses,
delays or other  problems.  In addition,  there can be no assurance  that if the
Company does enter into such a  transaction,  that it will  produce  anticipated
revenues and earnings.

Any agreement for a sale or merger of the Company would likely  contain a number
of conditions precedent to closing the transaction.  There could be no assurance
that the Company would be able to meet all of the conditions precedent which are
its  responsibility.  Furthermore,  any such transaction might fail to close for
any  number  of  reasons,  such as a  failure  by the  other  party  to meet its
obligations,  a material  adverse  change in the condition of either  party,  or
other unforeseen reasons.

If a sale or merger  involving  the Company were to be  successfully  concluded,
there could be no assurance that the Company would be able to profitably  manage
or successfully integrate the new business without substantial expenses,  delays
or other  operational  or financial  problems.  Furthermore,  such a transaction
might  involve   additional  risks  or  effects,   including   dilution  of  our
stockholders'  interest in the Company,  various one-time or ongoing acquisition
related  expenses,  and unanticipated  events or  circumstances,  some or all of
which could have a material adverse effect on the Company's business,  operating
results and  financial  condition.  There could be no  assurance  that,  even if
successful,  such a transaction  would result in the  generation of  anticipated
revenues and earnings.

ITEM 2. PROPERTIES

PlanetRx.com's principal executive offices are located in Memphis, Tennessee and
are occupied under a tenancy at will.

ITEM 3. LEGAL PROCEEDINGS

On March 27,  2001,  SDR  Investors,  LP filed a lawsuit  against  PlanetRx.com,
certain  underwriters  of the Company's  initial public offering in October 1999
(the "IPO"),  and certain former and current directors of the Company.  Named as
additional defendants in the suit, which was filed in the United States District
Court for the Southern District of New York, are The Goldman Sachs Group,  Inc.,
BancBoston  Robertson  Stephens,  Inc., Merrill Lynch,  Pierce,  Fenner & Smith,
Incorporated,  and Salomon Smith Barney,  Inc., each of which was an underwriter
of the IPO;  William  J.  Razzouk  and  Christos  M.  Cotsakos,  who are  former
directors  of the  Company;  and David M.  Beirne and Michael  Moritz,  who were
current  directors of the Company at the time the complaint  was filed,  but are
now former  directors  of the Company.  Between  April 19, 2001 and May 4, 2001,
five virtually identical additional complaints were filed. One of the additional
complaints also names as defendants  Hambrecht & Quist LLC,  William Blair & Co.
LLC,  Bear  Stearns & Co.,  Inc.,  additional  underwriters  of the IPO,  Morgan
Stanley Dean Witter & Co.  Incorporated  and Credit  Suisse First Boston  Corp.,
which were not underwriters of the IPO, and Steve  Valenzuela,  a former officer
of the Company.  The suits generally allege that the defendants violated federal
securities  laws  by not  disclosing  certain  actions  allegedly  taken  by the
underwriter defendants in connection with the IPO. The suits allege specifically
that  the  underwriter  defendants,  in  exchange  for the  allocation  to their
customers of shares of the Company's common stock sold in the IPO, solicited and
received from their customers  undisclosed  commissions on transactions in other
securities and required  their  customers to purchase  additional  shares of the
Company's  common stock in the  aftermarket at  pre-determined  prices that were
above  the  IPO  price.  The  suits  seek   unspecified   monetary  damages  and
certification of a plaintiff class consisting of all persons who acquired shares
of the Company's  common stock between  October 6, 1999, and March 24, 2001. The
complaints  have  been  consolidated  into  a  single  action,  which  is  being
coordinated with over three hundred other nearly identical actions filed against
other  companies  before one judge in the U.S.  District  Court for the Southern
District of New York. No date has been set for any response to the complaint. As
of the date  hereof,  we are unable to predict  the  outcome of the suit and its
ultimate effect, if any, on the Company's financial condition.

On June 19, 2001,  vTraction,  Inc.  filed a complaint for breach of contract in
the Chancery Court of Tennessee for the Thirtieth  Judicial  District at Memphis
alleging that PlanetRx.com entered into an oral agreement with vTraction to sell
certain  equipment  and  later  reneged,  and  claiming  damages  in  an  amount
including, but not limited to, the difference between the price agreed to in the
alleged oral contract and the market price of the  equipment.  PlanetRx.com  has
filed an answer  asserting the affirmative  defenses of failure of consideration
and statute of frauds and denying the existence of an oral contract.

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

None.

PART II


ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Market Information

On October 7, 1999,  the  Company's  common  stock  began  trading on the Nasdaq
National Market under the symbol "PLRX." Prior to that date, there was no public
market for our common stock. On January 16, 2001, the Company's common stock was
delisted by the Nasdaq  National Market as a result of the failure to maintain a
$1.00 bid price for the common  stock.  Since that date,  the  Company's  common
stock has been traded in the over-the-counter  market and has been quoted on the
OTC Bulletin Board.

The  following  table sets forth the high and low  closing  sale  prices for the
common stock for the period indicated as reported by the Nasdaq National Market.
These prices have been adjusted to reflect the impact of a 1-for-8 reverse stock
split which was effective December 4, 2000.
<TABLE>
<CAPTION>

        Fiscal 1999 - Quarter Ended                                                 High                   Low
        -----------------------------------                                   ----------------       ---------------
<S>                                                                            <C>                    <C>
        October 1 - December 31                                                 $       208.00         $      116.00


        Fiscal 2000 - Quarter Ended
        January 1 - March 31                                                    $       146.00         $       57.00
        April 1- June 30                                                        $        50.00         $       11.75
        July 1 - September 30                                                   $        14.00         $        3.50
        October 1 - December 31                                                 $         3.75         $        0.25


        Fiscal 2001 - Quarter Ended
        January 1 - March 31                                                    $         0.56         $        0.27
        April 1- June 30                                                        $         0.31         $        0.27
        July 1 - September 30                                                   $         0.28         $        0.09
        October 1 - December 31                                                 $         0.11         $        0.04
</TABLE>


As of March 31, 2002 there were 378 stockholders of record of our common stock.

Dividends

The Company has never declared or paid cash dividends on its common stock. We do
not anticipate paying any cash dividends in the foreseeable future.

Recent Sales of Unregistered Securities

None.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                      YEAR ENDED DECEMBER 31,
                                                         ---------------------------------------------
                                                            2001       2000       1999     1998   1997
                                                         ---------   --------   -------   -----   ----
STATEMENT OF OPERATIONS DATA:
<S>                                                      <C>        <C>         <C>       <C>     <C>
Net revenue:
  e-commerce...........................................  $   3,957  $  31,463   $ 7,856   $  --   $ --
  Sponsorship..........................................      1,817      4,702     1,143      --     --
                                                         ---------   --------   -------   -----   ----
                                                             5,774     36,165     8,999      --     --
                                                         ---------   --------   -------   -----   ----
Cost of net revenue:
  e-commerce...........................................      4,039     27,223     6,200      --     --
  Sponsorship..........................................         --        373       100      --     --
                                                         ---------   --------   -------   -----   ----
                                                             4,039     27,596     6,300      --     --
                                                         ---------   --------   -------   -----   ----
Gross profit...........................................      1,735      8,569     2,699      --     --
Operating expenses:
  Marketing and sales..................................        513     49,287    44,568     907     --
  Shipping, handling and related costs.................      3,594     24,476    11,905      --     --
  Product development..................................      1,335     18,261    12,946   1,025    113
  General and administrative...........................      5,364     11,399     6,448     541     23
  Amortization of intangible assets....................         --     40,860     9,627      --     --
  Stock-based compensation.............................      1,799      6,330    15,647   1,650     --
  Contract termination and severance charges...........         --      4,466        --      --     --
  Restructuring charges................................         --      3,737        --      --     --
  Impairment loss......................................      2,388    163,712        --      --     --
                                                         ---------   --------   -------   -----   ----
         Total operating expenses......................     14,993    322,528   101,141   4,123    136
                                                         ---------   --------   -------   -----   ----
Operating loss.........................................    (13,258)  (313,959)  (98,442) (4,123)  (136)
Other income...........................................      2,203         --        --      --     --
Interest income........................................        125      3,183     2,691      38     --
Interest expense.......................................       (571)      (894)   (2,263)     (2)    (1)
                                                         ---------   --------   -------   -----   ----
Net loss...............................................  $ (11,501) $(311,670) $(98,014)$(4,087) $(137)
                                                         =========   ========   =======   =====   ====
Extraordinary gain on the early extinguishment of debt,
net of taxes of $0.....................................        177         --        --      --     --

Effect of anti-dilution provisions of Series B
  Preferred Stock......................................         --         --    (1,009)     --     --
                                                         ---------   --------   -------   -----   ----
Net loss available to Common stockholders..............  $ (11,324) $(311,670) $(99,023)$(4,087)$(137)
                                                         =========   ========   =======   =====   ====
Basic and diluted net loss per share...................  $   (1.85) $  (51.84) $ (61.93)$(72.98)$  --
                                                         =========   ========   =======   =====   ====
Weighted average shares used to compute basic and
  diluted net loss per share...........................      6,121      6,012     1,599      56    --
                                                         =========   ========   =======   =====   ====




                                                                         DECEMBER 31,
                                                         ---------------------------------------------
                                                             2001       2000      1999     1998   1997
                                                         ---------   --------   -------   -----   ----
                                                                     (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents..............................  $     147  $   8,700  $116,748 $   935  $  15
Working capital (deficit)..............................        153      2,077   122,595     581    (19)
Total assets...........................................        477     21,142   338,515   5,707     36
Borrowings and capital lease obligations, long-term....         --         --     6,847       2     10
Total stockholders' equity (deficit)...................        253      9,856   315,645   3,469     (8)
</TABLE>



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

This report contains  forward-looking  statements  within the meaning of Section
21E of the Securities and Exchange Act of 1934, as amended.  These include,  but
are not limited to, statements regarding PlanetRx.com's  expectations,  beliefs,
intentions, plans, goals or strategies regarding the future. All forward-looking
statements  included in this  document are based upon  information  available to
PlanetRx.com as of the date hereof,  and  PlanetRx.com  assumes no obligation to
update any such forward-looking  statements.  Forward-looking statements involve
risks and  uncertainties  which could cause actual results to differ  materially
from those  projected.  These include,  but are not limited to, risks associated
with the cessation of active business,  changes in economic conditions affecting
PlanetRx.com, decisions of courts, regulators and governmental bodies, and other
factors  or risks  relating  to  PlanetRx.com  as set  forth  in this  document,
including (without limitation) under the caption "Risk Factors".  Nothing can or
should be inferred about  PlanetRx.com's  future  revenues or financial  results
from the forward-looking statements contained in this document.

Disposition of the Company

In April 2001, our Board of Directors authorized management to prepare a plan of
liquidation   and   dissolution   of  the  Company  for  review  by  the  Board.
Subsequently,  in an  effort  to  realize  as much  value  as  possible  for our
stockholders,  the Board of Directors  also  directed  management to explore and
evaluate various strategic options for the Company,  including a possible merger
or sale,  while  taking  steps to monetize  assets and settle  obligations  in a
manner  consistent  with the  consummation  of  either  a merger  or sale or the
liquidation and  dissolution of the Company.  These steps have included the sale
of  assets,  the  assignment  or  negotiated  cancellation  of leases  and other
contracts,  the payment or settlement of liabilities  and  obligations,  and the
reduction of personnel to three key managers.  We intend to continue these steps
to monetize assets and, to the extent possible, use the proceeds,  together with
available  cash, to pay our  obligations  and  liabilities.  No assurance can be
given that available  cash and amounts  received from the sale of assets will be
adequate to provide for our obligations, liabilities, expenses and claims.

Overview

PlanetRx.com was a leading online healthcare  destination for commerce,  content
and community.  Our e-commerce website,  www.PlanetRx.com,  which we launched on
March  18,  1999,  provided  a  convenient,  private  and  informative  shopping
experience  for health and personal  care  products.  Until March 12,  2001,  we
offered products in six categories:  prescription drugs; non-prescription drugs;
personal  care;  beauty and spa;  vitamins,  herbs and  nutrition;  and  medical
supplies.  Our  health  channels,   located  within  the  PlanetRx.com  website,
incorporated  content  that  addressed a variety of  health-related  topics.  In
addition,  we own and were  operating a network of websites  targeting  specific
healthcare conditions by providing relevant content and a destination for online
communities.  These  condition-specific  websites,  which include  diabetes.com,
depression.com, obesity.com, and alzheimers.com, were linked to the PlanetRx.com
website.

We were  incorporated  in Delaware on March 31, 1995 and were in the development
stage through  December 31, 1998. In March 1999, upon the launch of our website,
we began to recognize  our initial  revenues.  In October 1999, we completed our
initial  public  offering.   From  our  inception  through  the  launch  of  our
PlanetRx.com website, we did not generate any sales and our operating activities
consisted mainly of developing our business model, constructing our websites and
transaction  processing  system,   researching  and  developing   health-related
content,   recruiting  and  training   employees,   gaining  necessary  funding,
negotiating  advertising  contracts with several of the major Internet  portals,
building our pharmacy and distribution  center and establishing the PlanetRx.com
brand name.  After  launching  our  Planetrx.com  website,  we  continued  these
activities  and, in addition,  increased  the breadth of our product  offerings,
expanded our online information resources, and identified and executed strategic
partnerships.

On October 15, 2001, we sold certain  automated  pharmacy  equipment assets to a
third party for approximately  $200,000.  The net proceeds approximated the book
value of the assets at the time of sale.

In August 2001, we entered into a one-year  licensing  agreement with Revelation
America  Incorporated  (Revelation).  Under the terms of the agreement,  the two
companies have co-branded and marketed certain products and services using media
advertising  credits  (Advertising) we owned.  During the fourth quarter of 2000
and the first quarter of 2001, we used $4 million of the  Advertising to promote
a debit  Mastercard  issued  pursuant to an  agreement  between  Revelation  and
Merrick Bank  Corporation  (the Cash Card) and  Revelation  products,  including
PlanetRx  products  associated with the Cash Card.  Revelation has established a
toll-free  PlanetRx  number  to be used in the  Advertising.  For each Cash Card
issued and activated by using the toll-free  number or a click-through  from the
PlanetRx.com  website,  Revelation  will pay us a  royalty.  Royalty  revenue of
$31,640 was  recorded in  sponsorship  revenue for the year ended  December  31,
2001.

Based upon the rapid changes in business conditions and its expected future cash
flows,  the Company  determined  an impairment of its fixed assets had occurred.
Therefore,  the Company  wrote down fixed assets of  approximately  $2.3 million
during the first six months of 2001 and $8.0 million  during the fourth  quarter
ending December 31, 2000.  After the impairment loss and subsequent  sales,  the
Company's  net book value of fixed assets  approximated  $12,000 at December 31,
2001. The remaining  fixed assets have been written down to their net realizable
value and are currently classified as held for sale.

Based upon the rapid changes in business conditions and its expected future cash
flows, the Company determined an impairment of certain of its domain name assets
had occurred.  Therefore,  the Company wrote down intangible  assets  associated
with these domain names of $425,000  during the fourth quarter  ending  December
31, 2000,  approximately $92,000 during the second quarter ending June 30, 2001,
and  approximately  $56,000 during the fourth quarter ending December 31, 2001..
Additionally,   as  part  of   management's   plan  to  liquidate  the  company,
PlanetRx.com  began to sell domain name assets during the first quarter of 2001.
Associated with the sale of these assets,  the Company  recorded other income of
approximately  $2.2  million for the year ended  December  31,  2001.  See "Item
I-Description  of  Business"  for  information  about the current  status of our
domain names.

On March 30,  2001,  Comdisco,  Inc.  notified  us that  events of  default  had
occurred under the Subordinated Loan and Security  Agreement dated as of January
15,  2001,  pursuant  to which we  borrowed  the  original  principal  amount of
$7,000,000  secured by a lien on all of our  personal  property,  and the Master
Lease  Agreement  dated  as of  January  15,  1999,  pursuant  to which we lease
equipment  from Comdisco.  In July 2001, we reached a settlement  agreement with
Comdisco  which  cured  these  events of  default.  See  "Liquidity  and Capital
Resources - Events of Default  Under Loan  Agreement  and Lease  Agreement  with
Comdisco" in this Item 2.

On July 1, 2001,  we sold  certain  computer and  telecommunication  assets to a
third party for approximately  $358,000.  The net proceeds approximated the book
value of the assets at the time of sale.

On April 27, 2001, we sold certain  warehouse  equipment assets to a third party
for approximately $1.4 million. The net proceeds  approximated the book value of
the  assets  at the time of sale.  The  proceeds  were  used to make  additional
principal  payments  to  Comdisco  under  the  Subordinated  Loan  and  Security
Agreement dated as of January 15, 1999.

On March 27,  2001,  SDR  Investors,  LP filed a lawsuit  against  PlanetRx.com,
certain  underwriters  of the Company's  initial public offering in October 1999
(the "IPO"),  and certain former and current directors of the Company.  Named as
additional defendants in the suit, which was filed in the United States District
Court for the Southern District of New York, are The Goldman Sachs Group,  Inc.,
BancBoston  Robertson  Stephens,  Inc., Merrill Lynch,  Pierce,  Fenner & Smith,
Incorporated,  and Salomon Smith Barney,  Inc., each of which was an underwriter
of the IPO;  William  J.  Razzouk  and  Christos  M.  Cotsakos,  who are  former
directors  of the  Company;  and David M.  Beirne and Michael  Moritz,  who were
current  directors of the Company at the time the complaint  was filed,  but are
now former  directors  of the company.  Between  April 19, 2001 and May 4, 2001,
five virtually identical additional complaints were filed. One of the additional
complaints also names as defendants  Hambrecht & Quist LLC,  William Blair & Co.
LLC,  Bear  Stearns & Co.,  Inc.,  additional  underwriters  of the IPO,  Morgan
Stanley Dean Witter & Co.  Incorporated  and Credit  Suisse First Boston  Corp.,
which were not underwriters of the IPO, and Steve  Valenzuela,  a former officer
of the Company.  The suits generally allege that the defendants violated federal
securities  laws  by not  disclosing  certain  actions  allegedly  taken  by the
underwriter defendants in connection with the IPO. The suits allege specifically
that  the  underwriter  defendants,  in  exchange  for the  allocation  to their
customers of shares of the Company's common stock sold in the IPO, solicited and
received from their customers  undisclosed  commissions on transactions in other
securities and required  their  customers to purchase  additional  shares of the
Company's  common stock in the  aftermarket at  pre-determined  prices that were
above  the  IPO  price.  The  suits  seek   unspecified   monetary  damages  and
certification of a plaintiff class consisting of all persons who acquired shares
of the Company's  common stock between  October 6, 1999, and March 24, 2001. The
complaints  have  been  consolidated  into  a  single  action,  which  is  being
coordinated with over three hundred other nearly identical actions filed against
other  companies  before one judge in the U.S.  District  Court for the Southern
District of New York. No date has been set for any response to the complaint. As
of the date  hereof,  we are unable to predict  the  outcome of the suit and its
ultimate effect, if any, on the Company's financial condition.

On June 19, 2001,  vTraction,  Inc.  filed a complaint for breach of contract in
the Chancery Court of Tennessee for the Thirtieth  Judicial  District at Memphis
alleging that PlanetRx.com entered into an oral agreement with vTraction to sell
certain  equipment  and  later  reneged,  and  claiming  damages  in  an  amount
including, but not limited to, the difference between the price agreed to in the
alleged oral contract and the market price of the  equipment.  PlanetRx.com  has
filed an answer  asserting the affirmative  defenses of failure of consideration
and statute of frauds and denying the existence of an oral contract.

In February 2001, we signed a marketing agreement with drugstore.com.  Under the
terms of the agreement, we launched a new site and marketed to our customers the
drugstore.com  website for a flat marketing fee of $1.5 million. In addition, we
will also receive a customer  acquisition  fee for every  customer who purchases
something on the drugstore.com site from the Company's site based upon a sliding
scale. We also did not accept any new  prescription  orders after February 12th,
did not perform any  prescription  refills after  February  26th, and closed the
remainder  of our store on March  12th,  2001.  The term of the  agreement  with
drugstore.com was for 3 months.

In October 1999, we completed a series of agreements with Express Scripts,  Inc.
and its wholly owned subsidiary, YourPharmacy.com. We issued 1,296,000 shares of
our common stock, valued at approximately $168.0 million, to Express Scripts, in
exchange for selected  assets  totaling  $86,000 and  liabilities  totaling $3.4
million of  YourPharmacy.com.  The total purchase price of approximately  $190.0
million  also  consisted  of the  estimated  fair  value of  226,000  options to
purchase our common stock in exchange for outstanding  YourPharmacy.com options,
as well as direct  acquisition  costs.  The  allocation  of the  purchase  price
resulted in an excess  purchase  consideration  over tangible net liabilities of
approximately  $193.4  million,  which has been  allocated to intangible  assets
being amortized over 5 years. We amortized  approximately $8.4 million and $38.7
million for the year ended December 31, 1999 and 2000, respectively.  Based upon
the rapid changes in business conditions and its expected future cash flows, the
Company   determined  an  impairment  of  the  goodwill   associated   with  the
YourPharmacy.com  acquisition  had occurred  and no future  benefit is expected.
Therefore,  the  Company  wrote  down  intangible  assets  associated  with  the
YourPharmacy.com  goodwill of $146.3 million.  In June 2000, we restructured our
agreement with Express Scripts,  Inc. Under the new agreement,  which eliminates
our annual $14.6 million  payments to Express  Scripts,  we paid only the second
quarter  marketing  expenses  of $3.7  million,  as well as a one-time  contract
termination  fee of $4.3  million.  We were to  remain  the  preferred  Internet
pharmacy in the Express Scripts  network for a period of five years,  subject to
certain exceptions, with the right to participate in the Express Scripts network
for a period of five years, and Express Scripts retained ownership of its shares
of PlanetRx.com  common stock. In April, 2001, we gave notice to Express Scripts
that  the  Company  had  terminated  the  agreements  due  to  Express  Scripts'
non-payment  of certain sums due the Company under the  agreements.  The Company
subsequently  sued Express Scripts over the unpaid sums due to the company (Case
No.01CC-696, In the Circuit Court of St. Louis County, Missouri, Express Scripts
vs.  PlanetRx.com,  Inc.).  On January 22, 2002, the Case settled prior to trial
with the  Company  recovering  substantially  the amount of the unpaid sums from
Express Scripts.  As part of the Settlement  Agreement,  the Company and Express
Scripts  settled all other  business  claims between the two parties and severed
all remaining  business  relationships,  with the exception of Express  Scripts'
status as shareholder of the Company.

In  September  1999,  we issued  46,000  shares of Series D  Preferred  Stock to
iVillage,  Inc. in exchange  for  approximately  $7.5  million in cash.  We also
entered into a three-year sponsorship agreement and a three-year content license
agreement.  These agreements  originally  required us to pay approximately $22.5
million over the three-year period in exchange for certain advertising  services
and rights to certain online content.

In September 2000, we restructured our sponsorship agreement with iVillage, Inc.
Under the terms of the new agreement, we were provided with a specific number of
advertising  impressions through December 31, 2000. For the year ending December
31,  2000,  we have paid and  recognized  $3.7  million of  advertising  expense
related to this marketing agreement.

During  1999,  the  Company  issued  approximately  214,000  shares  of Series C
Preferred  Stock to News  Corporation  for $7.5 million in cash and $7.5 million
for future advertising  services.  The Company originally  recorded the value of
the future services as prepaid advertising.

The Company decided not to pursue the utilization of its content and advertising
arrangements.  Therefore,  the Company wrote down prepaid assets associated with
iVillage of $4.2 million and prepaid  assets  associated  with  Newscorp of $4.0
million during the fourth quarter ending December 31, 2000.

In December  1998, we issued  approximately  25,000 shares of common stock to an
employee for services  rendered in connection  with the acquisition and transfer
of domain names.  We recorded the estimated  fair value of the stock of $614,000
as a prepaid asset, and reclassified  such amount to intangible  assets upon the
transfer  of such names in January  1999.  The fair value of the stock was being
amortized as stock-based  compensation  expense over the estimated  useful life,
which is deemed to be two years.  In June 1999, we issued  approximately  43,000
shares of common stock to a company  affiliated  with an employee for additional
domain names.  We recorded the estimated fair value of the stock of $3.8 million
as an  intangible  asset.  The fair  value of the stock was being  amortized  as
stock-based compensation expense over the estimated useful life, which is deemed
to be two years.

During the quarter  ended  September  30,  2000,  we did not receive  guaranteed
payments of $500,000 in connection  with our  five-year,  exclusive  sponsorship
contract with the therapeutic  disease state management  sponsor on our diabetes
website.  A  settlement  between  the Company and Pfizer was reached in December
2000, and the agreement is now considered terminated.

In the third  quarter of 2000, in connection  with  management's  plan to reduce
costs and improve operating  efficiencies,  we recorded restructuring charges of
$3.0  million,  consisting  of $1.7 million for  headcount  reductions  and $1.3
million for consolidation of facilities and related fixed assets.  Additionally,
we recorded a charge in the fourth quarter of fiscal 2000 of $762,000 related to
this same  plan.  Headcount  reductions  consisted  of a  reduction  in force of
approximately 90 employees, or approximately 30 percent of our workforce.  These
positions were eliminated in South San Francisco, CA.

In July 2000, we signed a definitive agreement with Alpha Venture Capital,  Inc.
to provide us with up to $50.0 million in additional financing in the form of an
equity line subject to certain  terms and  conditions.  As of December 31, 2000,
the Company  allowed the agreement with Alpha Venture  Capital to expire without
drawing down any of the funds available under that agreement.

Net Revenue

e-commerce.  e-commerce net revenue consists of product sales, net of allowances
for coupons, discounts and estimated returns, and is recognized when the product
is shipped from the  Company's  warehouse to the  customer.  Amounts  billed for
shipping and handling are included in revenue and shipping, handling and related
costs are included in a separate  line item in operating  expenses.  The Company
provides an allowance for sales returns, based on historical experience,  in the
period revenues are  recognized.  Payment for product sales is generally made by
credit card.

Sponsorship.  Sponsorship  net revenue  includes  payments from third parties in
exchange for our  identification  of those parties within the sponsored  website
areas. Sponsorship revenue is recognized ratably over the related period.

Cost of Net Revenue

e-commerce.  Cost of e-commerce net revenue  consists  primarily of the costs of
products sold to customers and costs of inbound shipping.

Sponsorship.  Cost of sponsorship net revenue consists primarily of amounts paid
to the former owners of Internet domain names that have been  incorporated  into
certain  PlanetRx.com  communities.  These amounts are typically a percentage of
sponsorship revenue generated in connection with the corresponding community and
are generally capped at a specific dollar amount.

Operating Expenses

Marketing  and  Sales.   Marketing  and  sales  expenses  consist  primarily  of
advertising and promotional expenditures and payroll related expenses.

Shipping,  Handling and Related  Costs.  Shipping,  handling  and related  costs
consist  primarily  of  the  costs  of  product  distribution,  including  order
processing,  outbound  shipping,  credit card  commission  fees,  equipment  and
supplies, as well as payroll related expenses.

Product   Development.   Product  development   expenses  consist  primarily  of
payroll-related  expenses for website  development  and  information  technology
personnel,  certain  Internet  access fees,  certain online hosting  charges and
costs associated with creating and purchasing editorial and licensed content.

General  and  Administrative.   General  and  administrative   expenses  consist
primarily  of   payroll-related   expenses  for  executive  and   administrative
personnel,  corporate facility expenses,  professional services expenses, travel
and other general corporate expenses.

                   RESULTS OF OPERATIONS - FISCAL YEARS ENDED
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000

Net Revenue

Net revenues were $5.8 million and $36.2 million for the year ended December 31,
2001 and 2000,  respectively.  e-commerce  revenues  were $4.0 million and $31.5
million and sponsorship revenues were $1.8 million and $4.7 million for the year
ended December 31, 2001 and 2000, respectively. On February 12, 2001, we stopped
accepting new prescriptions, and on March 12, 2001, we closed our on-line store.

Cost of Net Revenue

Cost of net  revenues  were $4.0  million  and $27.6  million for the year ended
December  31, 2001 and 2000,  respectively.  We had  negative  gross  margins on
e-commerce  of 2% and positive  gross  margins on e-commerce of 13% for the year
ended December 31, 2001 and 2000, respectively.  Our sponsorship margin was 100%
and 92% for the year ended December 31, 2001 and 2000, respectively. On February
12, 2001,  we stopped  accepting  new  prescriptions,  and on March 12, 2001, we
closed our on-line store.

Operating Expenses

Marketing and Sales.  For the year ended December 31, 2001,  marketing and sales
expense was  approximately  $513,000  as compared to $49.3  million for the year
ended  December  31,  2000.  The  decrease  is due  primarily  to the absence of
marketing and promotional  campaigns and decreased headcount associated with the
closure of retail operations in 2001.

Shipping,  Handling  and Related  Costs.  For the year ended  December 31, 2001,
shipping,  handling  and  related  costs were $3.6  million as compared to $24.5
million  for the year ended  December  31,  2000.  This  decrease  is due to the
closure of retail operations in 2001.

Product  Development.  For the year ended December 31, 2001, product development
expense  was $1.3  million  as  compared  to $18.3  million  for the year  ended
December 31, 2000.  This decrease is related to the closure of our retail stores
and the related decline in the maintenance of our websites and internal systems.

General and  Administrative.  For the year ended December 31, 2001,  general and
administrative  expenses  were $5.4 million as compared to $11.4 million for the
year ended  December  31,  2000.  This  decrease is due to the closure of retail
operations in 2001.

Amortization of Intangible  Assets.  Amortization of intangible  assets was zero
for the year ended  December 31, 2001 as compared to $40.9  million for the year
ended  December 31,  2000.  The  amortization  recorded is  attributable  to the
amortization  of  intellectual  property  related to domain names and intangible
assets  resulting  from the  purchase  of  selected  assets and  liabilities  of
YourPharmacy.com  in October 1999.  These assets were  impaired  during 2000 and
2001 and are classified as held for sale.

Stock-Based  Compensation.  We recorded the  recapture  of deferred  stock-based
compensation of approximately $2.9 million for the year ended December 31, 2001,
and $17.0 million for year ended  December 31, 2000,  in  connection  with stock
options forfeited during the period. Our stock-based  compensation  expense, net
totaled  $1.8  million for the year ended  December 31, 2001 as compared to $6.3
million for the year ended  December  31, 2000.  The  remaining  deferred  stock
compensation  balance of  approximately  $1.1 million will be amortized  through
2004.

Impairment Loss. In accordance with Statement of Financial  Accounting Standards
No. 121,  "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of," the Company recorded a charge of  approximately  $2.3
million for the year ending  December 31, 2001 for the  impairment  in the asset
value of property and equipment.

Interest  Income and Expense.  Interest income consists of earnings on our cash,
cash  equivalents,  and marketable  securities and interest  expense consists of
interest  associated  with our notes  payable,  borrowings,  and  capital  lease
obligations.  Interest  income,  net of  interest  expense,  for the year  ended
December 31, 2001,  decreased over the corresponding period of 2000 due to lower
interest-bearing asset balances in 2001.

Income Taxes.  At December 31, 2001, we had a fully reserved  deferred tax asset
of $73.0 million.  We have incurred losses from inception  through  December 31,
2001 and believe,  based upon the history of such losses and other factors, that
the weight of available  evidence indicates that it is more likely than not that
we will not be able to realize our deferred tax assets and thus a full valuation
reserve has been  recorded  through  December 31,  2001.  See Note 9 of Notes to
Financial Statements.

Other Income

As part of  management's  plan to liquidate the Company,  PlanetRx.com  began to
sell domain name assets  during the first quarter of 2001.  Associated  with the
sale of these assets,  the Company recorded other income of  approximately  $2.2
million for the year ended December 31, 2001.

Extraordinary Gain on the Early Extinguishment of Debt

In July  2001,  we  reached  a  settlement  with  Comdisco,  Inc.  related  to a
Subordinated Loan and Security Agreement dated as of January 15, 2001 (the "Loan
Agreement"),  pursuant to which we borrowed  the  original  principal  amount of
$7,000,000,  and the Master  Lease  Agreement  dated as of January 15, 1999 (the
"Lease  Agreement"),  pursuant to which we leased equipment from Comdisco.  Upon
such settlement we recorded an extraordinary gain on the early extinguishment of
debt,  net of taxes,  in the  amount of  $177,000.  See  Liquidity  and  Capital
Resources.

                   RESULTS OF OPERATIONS - FISCAL YEARS ENDED
                     DECEMBER 31, 2000 AND DECEMBER 31, 1999

Net Revenue

Net revenues were $36.2 million and $9.0 million for the year ended December 31,
2000 and 1999,  respectively.  e-commerce  revenues  were $31.5 million and $7.9
million and sponsorship revenues were $4.7 million and $1.1 million for the year
ended December 31, 2000 and 1999, respectively. We launched our website in March
of 1999 and during  1999 we  increased  the  breadth of our  product  offerings,
expanded our on-line information resources and identified and executed strategic
partnerships.  The increase in net revenue was the result of the  culmination of
certain of these activities in 2000.

Cost of Net Revenue

Cost of net  revenues  were $27.6  million  and $6.3  million for the year ended
December 31, 2000 and 1999, respectively.  We had gross margins on e-commerce of
13% and 21% for the year ended  December  31, 2000 and 1999,  respectively.  Our
sponsorship  margin was 92% and 91% for the year  ended  December  31,  2000 and
1999, respectively.

Operating Expenses

Marketing and Sales.  For the year ended December 31, 2000,  marketing and sales
expense  was $49.3  million  as  compared  to $44.6  million  for the year ended
December 31, 1999.  The increase is due primarily to costs relating to marketing
and promotional campaigns and increased headcount.

Shipping,  Handling  and Related  Costs.  For the year ended  December 31, 2000,
shipping,  handling  and related  costs were $24.5  million as compared to $11.9
million for the year ended December 31, 1999.  This increase is due primarily to
increased order volume during 2000.

Product  Development.  For the year ended December 31, 2000, product development
expense  was $18.3  million  as  compared  to $12.9  million  for the year ended
December 31, 1999.  This increase is related to the  maintenance of our websites
and internal systems and related increased headcount.

General and  Administrative.  For the year ended December 31, 2000,  general and
administrative  expenses  were $11.4 million as compared to $6.5 million for the
year ended December 31, 1999. This increase is primarily related to increases in
headcount and increases in professional services fees.

Amortization of Intangible  Assets.  Amortization of intangible assets was $40.9
million for the year ended December 31, 2000 as compared to $9.6 million for the
year ended December 31, 1999. The  amortization  recorded is attributable to the
amortization  of  intellectual  property  related to domain names and intangible
assets  resulting  from the  purchase  of  selected  assets and  liabilities  of
YourPharmacy.com  in October  1999,  for which we amortized  approximately  $8.4
milion  and  $38.7  million  for the  year  ended  December  31,  1999  and 2000
respectively.   See  also  "Contract  termination  and  severance  charges"  and
"Impairment Loss."

Stock-Based   Compensation.   We  recorded   additional   deferred   stock-based
compensation  of  approximately  $3.8 million during the year ended December 31,
2000, in connection with stock options granted during the period.  Additionally,
we recorded the recapture of deferred stock-based  compensation of approximately
$17.0 million for year ended December 31, 2000, in connection with stock options
forfeited during the period. Our stock-based  compensation  expense, net totaled
$6.3 million for the year ended  December 31, 2000 as compared to $15.6  million
for the year ended December 31, 1999. The remaining  deferred stock compensation
balance of approximately $5.9 million will be amortized through 2004.

Contract  termination and severance  charges.  In June 2000 we restructured  our
agreement  with  Express  Scripts,   Inc.  and  recorded  a  one-time   contract
termination fee of $4.3 million.

Impairment Loss

In October 1999, we completed a series of agreements with Express Scripts,  Inc.
and  its  wholly  owned  subsidiary,  YourPharmacy.com.  The  allocation  of the
purchase price resulted in an excess  purchase  consideration  over tangible net
liabilities  of  approximately  $193.4  million,  which  has been  allocated  to
intangible assets being amortized over 5 years.  Based upon the rapid changes in
business  conditions and its expected future cash flows, the Company  determined
an impairment of the goodwill associated with the  YourPharmacy.com  acquisition
had occurred and no future  benefit is expected.  Therefore,  the Company  wrote
down intangible assets associated with the  YourPharmacy.com  goodwill of $146.3
million.

During  1999,  the  Company  issued  approximately  214,000  shares  of Series C
Preferred  Stock to News  Corporation  for $7.5 million in cash and $7.5 million
for future advertising  services.  The Company originally  recorded the value of
the future services as prepaid advertising.

The Company decided not to pursue the utilization of its content and advertising
arrangements.  Therefore,  the Company wrote down prepaid assets associated with
iVillage of $4.2 million and prepaid  assets  associated  with  Newscorp of $4.0
million during the fourth quarter ending December 31, 2000.

In  accordance  with  Statement  of  Financial  Accounting  Standards  No.  121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of," the Company recorded a charge of approximately $8.0 million for
the year  ending  December  31,  2000 for the  impairment  in the asset value of
property and equipment.

Interest  Income and Expense.  Interest income consists of earnings on our cash,
cash  equivalents,  and marketable  securities and interest  expense consists of
interest  associated  with our notes  payable,  borrowings,  and  capital  lease
obligations.  Interest  income,  net of  interest  expense,  for the year  ended
December 31, 2000, increased over the corresponding period of 1999 due to higher
interest-bearing asset balances in 2000.

Income Taxes.  At December 31, 2000, we had a fully reserved  deferred tax asset
of $69.8 million.  We have incurred losses from inception  through  December 31,
2000 and believe,  based upon the history of such losses and other factors, that
the weight of available  evidence indicates that it is more likely than not that
we will not be able to realize our deferred tax assets and thus a full valuation
reserve has been  recorded  through  December 31,  2000.  See Note 9 of Notes to
Financial Statements.

Liquidity and Capital Resources

PlanetRx.com  invests excess cash  predominantly  in debt  instruments  that are
highly  liquid,  of  high-quality   investment  grade,  and  predominantly  have
maturities  of less than one year with the  intent  to make such  funds  readily
available for operating  purposes.  Prior to our initial public offering,  which
closed in  October  1999 and  provided  net  proceeds  of  approximately  $101.0
million,  we  financed  our  operations   primarily  through  private  sales  of
convertible  preferred stock and common stock. At December 31, 2001, we had cash
and cash  equivalents and  investments in marketable  debt  securities  totaling
approximately  $147,000 compared to $8.7 million at December 31, 2000 and $116.7
at December 31, 1999.

In April 2001, our Board of Directors authorized management to prepare a plan of
liquidation   and   dissolution   of  the  Company  for  review  by  the  Board.
Subsequently,  in an  effort  to  realize  as much  value  as  possible  for our
stockholders,  the Board of Directors  also  directed  management to explore and
evaluate various strategic options for the Company,  including a possible merger
or sale,  while  taking  steps to monetize  assets and settle  obligations  in a
manner  consistent  with the  consummation  of  either  a merger  or sale or the
liquidation and  dissolution of the Company.  These steps have included the sale
of  assets,  the  assignment  or  negotiated  cancellation  of leases  and other
contracts,  the payment or settlement of liabilities  and  obligations,  and the
reduction of personnel to three key managers.  We intend to continue these steps
to monetize assets and, to the extent possible, use the proceeds,  together with
available  cash, to pay our  obligations  and  liabilities.  No assurance can be
given that available  cash and amounts  received from the sale of assets will be
adequate to provide for our obligations, liabilities, expenses and claims.

Net cash used in operating  activities  was $5.0  million  during the year ended
December  31,  2001,  primarily  a result  of  quarterly  net  losses as well as
decreases in accounts  payables,  accrued  expenses,  and accrued  restructuring
charges,  partially  offset by decreases in accounts  receivables,  inventories,
prepaid  expenses  and other  assets  and  non-cash  charges  for  depreciation,
amortization,  and impairment losses. Net cash used in operating  activities was
$98.8  million  during the year ended  December 31, 2000,  primarily a result of
quarterly  net  losses  as well as an  increase  in  accounts  receivable  and a
decrease in accounts payable and accrued expenses, partially offset by decreases
in prepaid  expenses  and other assets and  non-cash  charges for  depreciation,
amortization,  restructuring,  and impairment losses. Net cash used in operating
activities  was $72.1 million  during the year ended December 31, 1999 primarily
as a  result  of net  losses  as well  as  increases  in  prepaid  expenses  and
inventories,   partially  offset  by  increases  in  accounts  payable,  accrued
expenses, and non-cash charges for depreciation and amortization.

Net cash provided by investing  activities was approximately $4.9 million during
the year ended December 31, 2001, primarily consisting of proceeds from the sale
of intangible assets and property and equipment.  Net cash provided by investing
activities  was  approximately  $57.0 million during the year ended December 31,
2000,  primarily  consisting  of the sale of  short-term  investments  partially
offset by the  acquisition  of  equipment  and systems,  including  computer and
warehouse  equipment.  Net cash used in investing  activities  was $75.0 million
during the year ended  December  31,  1999 and  consisted  of net  purchases  of
short-term  investments of approximately $65.1 million and purchases of property
and equipment of $9.9 million.

Net cash used in financing  activities was approximately $8.5 million during the
year ended  December 31, 2001 and primarily  consisted of principal  payments on
borrowings and capital lease  obligations  and the repurchase of unvested Common
Stock  options.  Net cash used in financing  activities was  approximately  $1.2
million during the year ended  December 31, 2000 and primarily  consisted of the
repurchase  of unvested  common stock  options.  Net cash  provided by financing
activities  of $197.8  million  year ended  December  31,  1999,  was  primarily
attributable  to the October  1999  initial  public  offering  of  approximately
862,000 shares of common stock for net proceeds of approximately  $101.0 million
and other issuances of preferred and common stock.

As of  December  31,  2001,  we  had no  principal  commitments  or  obligations
outstanding under operating leases or long-term debt.

Events of Default under Loan Agreement and Lease Agreement with Comdisco

In July 2001, we reached a settlement with Comdisco, Inc., which had notified us
in March 2001 that events of default had occurred  under the  Subordinated  Loan
and  Security  Agreement  dated as of January 15,  2001 (the "Loan  Agreement"),
pursuant  to which we  borrowed  the  original  principal  amount of  $7,000,000
secured  by a lien  on all  of our  personal  property,  and  the  Master  Lease
Agreement  dated as of January  15, 1999 (the  "Lease  Agreement"),  pursuant to
which we lease  equipment from  Comdisco.  We  inadvertently  failed to make our
monthly  payments of principal  and interest  under the Loan  Agreement and rent
under the Lease Agreement for February 2001, and as a result,  Comdisco declared
that an event of default had occurred  under the Loan  Agreement  and, by way of
such default, under the Lease Agreement pursuant to its cross-default provision.
The notice from  Comdisco  also advised that the secured  obligations  under the
Loan  Agreement  and  obligation  to pay rent  under  the Lease  Agreement  were
accelerated,  that  Comdisco's  obligation to lease  additional  equipment to us
under the Lease  Agreement was  cancelled,  that our use of cash  collateral (as
defined in the Loan  Agreement)  was  restricted,  and that our  ability to sell
collateral (as defined in the Loan Agreement) was restricted.  Comdisco demanded
immediate  payment  of the  obligations  due and owing  under the Loan and Lease
Agreements and return of the leased equipment.  Comdisco also gave notice of its
intent to foreclose under its security interest.

We made the  February  payments  totaling  $102,902.50  on April  3,  2001,  and
requested that Comdisco waive the events of default under the Loan Agreement and
the Lease Agreement and reinstate both agreements. Comdisco ultimately agreed to
waive the events of default if (a) we paid Comdisco $6,100,000 (which we paid on
April 9, 2001),  which was applied  first,  to pay all  outstanding  obligations
under the Lease Agreement,  and then toward repayment of the Loan Agreement, and
(b) we agreed to terms amending the Loan Agreement,  which involved, among other
things,  an  additional  payment of  principal  under the Loan  Agreement in the
approximate amount of $1.4 million,  which was made during the second quarter of
2001, and a discounted payoff amount of $442,000.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, Business Combinations.  SFAS
No. 141 requires that the purchase method of accounting be used for all business
combinations  initiated  after June 30, 2001.  Goodwill  and certain  intangible
assets  will  remain on the  balance  sheet and not be  amortized.  On an annual
basis,  and when  there is  reason  to  suspect  that  their  values  have  been
diminished  or  impaired,  these  assets  must be  tested  for  impairment,  and
write-downs may be necessary.  The company  implemented  SFAS No. 141 on July 1,
2001 and  does not  expect  this  statement  to have a  material  effect  on the
company's consolidated financial position or results of operations.

In July 2001,  the FASB  issued  SFAS No.  142,  Goodwill  and Other  Intangible
Assets.   SFAS  No.  142  changes  the   accounting   for   goodwill  and  other
indefinite-lived   intangible   assets  from  an   amortization   method  to  an
impairment-only  approach.  Amortization of goodwill and other  indefinite-lived
intangible  assets will cease upon  adoption of this  statement.  The company is
required to  implement  SFAS No. 142 on January 1, 2002 and does not expect this
statement  to have a material  effect on the  company's  consolidated  financial
position or results of operations.

In October  2001,  the FASB issued SFAS 144,  Accounting  for the  Impairment or
Disposal of Long-Lived  Assets  effective for years beginning after December 15,
2001.  This  Statement  supersedes  SFAS 121,  Accounting  for the Impairment of
Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of, but retains the
fundamental  provision  of  SFAS  121 for  recognition  and  measurement  of the
impairment  of  long-lived  assets  to be  held  and  used  and  measurement  of
long-lived  assets to be held for sale.  The  statement  requires  that whenever
events or changes in circumstances  indicate that a long-lived  asset's carrying
value may not be recoverable, the asset should be tested for recoverability. The
statement  also  requires  that a long-lived  asset  classified as held for sale
should be carried at the lower of its carrying value or fair value, less cost to
sell. Management does not expect this statement to have a material effect on the
company's consolidated financial position or results of operations.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated  financial statements,  which have been prepared
in accordance with accounting principles generally accepted in the United States
of America.  The preparation of these financial  statements  requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,   and  related  disclosure  of  contingent  assets  and
liabilities.

On an ongoing basis,  we evaluate our estimates,  including those related to bad
debts,  carrying value of property and equipment and intangible  assets,  income
taxes,  contingencies  and  litigation.  We base  our  estimates  on  historical
experience and on various other  assumptions  that are believed to be reasonable
under  the  circumstances,  the  results  of which  form the  basis  for  making
judgments  about the  carrying  values of assets  and  liabilities  that are not
readily  apparent  from other  sources.  Actual  results  may differ  from these
estimates under different assumptions or conditions.

We  believe  the  following  critical   accounting   policies  affect  our  more
significant  judgments and estimates used in the preparation of our consolidated
financial statements.

We maintain allowances for doubtful accounts for estimated losses resulting from
the  inability of our  customers to make  required  payments.  If the  financial
conditions of our customers were to  deteriorate,  resulting in an impairment of
their ability to make payments, additional allowances may be required.

We record an  impairment  charge when we believe an  investment  in property and
equipment and intangible assets has been impaired such that future  undiscounted
cash flows would not recover the book basis of the  investment  in the  property
and equipment or intangible  asset.  Future adverse changes in market conditions
or poor operating  results of the company could result in losses or an inability
to recover the carrying value of the investments that may not be reflected in an
investment's  carrying value, thereby possibly requiring an impairment charge in
the future.

We record a valuation  allowance to reduce our deferred tax assets to the amount
that is more likely than not to be realized.  We have considered  future taxable
income and ongoing prudent and feasible tax planning strategies in assessing the
need for a  valuation  allowance.  Should we  determine  that we will be able to
realize all or part of our net deferred tax asset in the future,  an  adjustment
to the  deferred  tax asset would be  recognized  in income in the periods  such
determination was made.

At December 31, 2001,  certain suits have been filed against the Company,  which
exceed  insurance  coverage.  Although it is  impossible at this time to predict
with certainty the ultimate outcome of this litigation,  the Company believes it
has  meritorious  defenses and intends to vigorously  defend these suits.  It is
reasonably  possible  that  recorded  reserves  may not be adequate to cover the
future  payment to conclude  these  suits.  Adjustments,  if any,  to  estimates
recorded resulting from the ultimate conclusion of these suits will be reflected
in operations in the period in which such adjustments are known.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have assessed our vulnerability to certain market risks,  including  interest
rate  risk  associated  with  financial   instruments  included  in  cash,  cash
equivalents and short-term  investments.  Due to the short-term  nature of these
investments and our investment  policies and our procedures,  we have determined
that the risk  associated  with  interest  rate  fluctuations  related  to these
financial instruments does not pose a material risk to us.

<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                               PLANETRX.COM, INC.
                          INDEX TO FINANCIAL STATEMENTS




                                                                            Page

Report of Independent Accountants........................................    33

Balance Sheets...........................................................    34

Statements of Operations.................................................    35

Statements of Stockholders' Equity (Deficit).............................    36

Statements of Cash Flows.................................................    38

Notes to Financial Statements............................................    40



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of PlanetRx.com, Inc.

In our opinion, the accompanying financial statements listed in the accompanying
index  present  fairly,  in all material  respects,  the  financial  position of
PlanetRx.com,  Inc.  at  December  31,  2001 and 2000,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting  principles  generally accepted
in  the  United  States  of  America.   These   financial   statements  are  the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States of America, which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.


The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 2 to the  financial
statements,  the Company has made a decision to cease operations and proposes to
liquidate the Company's assets, which raises substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regards to the proposed
liquidation are described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.








/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 27, 2002

<PAGE>


                               PLANETRX.COM, INC.
                                 BALANCE SHEETS
                    (in thousands, except per share amounts)


<TABLE>
<CAPTION>

                                                                                 December 31,
                                                                             2000           2001
                                                                          ------------------------
ASSETS
Current assets:
<S>                                                                       <C>            <C>
         Cash and cash equivalents                                        $   8,700      $     147
         Accounts receivable, net                                             1,887             76
         Inventories                                                          1,557             --
         Prepaid expenses and other current assets                            1,219            154
                                                                          ------------------------
                  Total current assets                                       13,363            377
Property and equipment, net                                                   6,633             12
Intangible assets, net                                                          515             88
Other assets                                                                    631             --
                                                                          ------------------------
                                                                          $  21,142      $     477
                                                                          ========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
         Accounts payable                                                 $   1,752      $     127
         Accrued expenses                                                       787             28
         Accrued restructuring charge                                           179             69
         Borrowings, current                                                  6,496             --
         Capital lease obligations, current                                   2,072             --
                                                                          ------------------------
                  Total current liabilities                                  11,286            224
                                                                          ------------------------
                                                                             11,286            224


Commitments and contingencies (Note 11)

 Stockholders' equity:
         Preferred Stock:  issuable in series, $0.0001 per value;
         5,000 shares authorized; no shares issued and outstanding               --             --
         Common Stock:  $0.0001 par value; 200,000 shares authorized;
         6,157 and 6,119 shares issued and outstanding, respectively             --             --
         Additional paid-in capital                                         430,690        427,672
         Deferred stock-based compensation                                   (5,888)        (1,149)
         Accumulated deficit                                               (414,946)      (426,270)
                                                                          ------------------------
Total stockholder's equity                                                    9,856            253
                                                                          ------------------------
                                                                          $  21,142      $     477
                                                                          ========================
</TABLE>



The accompanying notes are an integral part of these financial statements.



<PAGE>



                               PLANETRX.COM, INC.
                            STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                        Year Ended December 31,
                                                                 -----------------------------------
                                                                    1999         2000         2001
                                                                 -----------------------------------
Net revenue:
<S>                                                              <C>          <C>          <C>
         e-commerce                                              $   7,856    $  31,463    $   3,957
         Sponsorship                                                 1,143        4,702        1,817
                                                                 -----------------------------------
                                                                     8,999       36,165        5,774
                                                                 -----------------------------------
Cost of net revenue:
         e-commerce                                                  6,200       27,223        4,039
         Sponsorship                                                   100          373           --
                                                                 -----------------------------------
                                                                     6,300       27,596        4,039
                                                                 -----------------------------------
Gross profit                                                         2,699        8,569        1,735
                                                                 -----------------------------------
Operating expenses:
         Marketing and sales                                        44,568       49,287          513
         Shipping, handling and related costs                       11,905       24,476        3,594
         Product development                                        12,946       18,261        1,335
         General and administrative                                  6,448       11,399        5,364
         Amortization of intangible assets                           9,627       40,860           --
         Stock-based compensation                                   15,647        6,330        1,799
         Contract termination and severance charges                     --        4,466           --
         Restructuring charges                                          --        3,737           --
         Impairment loss                                                --      163,712        2,388
                                                                 -----------------------------------
                  Total operating expenses                          101,141     322,528       14,993
                                                                 -----------------------------------
Operating loss                                                      (98,442)   (313,959)     (13,258)
Other income                                                             --          --        2,203
Interest income                                                       2,691       3,183          125
Interest expense                                                     (2,263)       (894)        (571)
                                                                 -----------------------------------
Net loss                                                         $  (98,014)  $(311,670)   $ (11,501)
Extraordinary gain on the early extinguishment of debt,
         net of taxes of $0                                              --          --          177
Effect of anti-dilution provisions of Series B Preferred Stock       (1,009)         --           --
                                                                 -----------------------------------
Net loss available to common stockholders                        $  (99,023)  $(311,670)   $ (11,324)
                                                                 ===================================
Basic and diluted net loss per share                             $   (61.93)  $  (51.84)   $  (1.85)
                                                                 ===================================
Weighted average shares used to compute basic and diluted
         net loss per share                                           1,599        6,012       6,121
                                                                 ===================================
</TABLE>



The accompanying notes are an integral part of these financial statements.

<PAGE>


                               PLANETRX.COM, INC.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                 Preferred Stock     Common Stock      Additional
                                                                ------------------------------------    Paid-in
                                                                 Shares    Amount   Shares    Amount    Capital
                                                                -------------------------------------------------
<S>                    <C> <C>                                    <C>                  <C>               <C>
Balance as of December 31, 1998                                   1,381        --      825        --     11,439
Issuance of Series A Preferred Stock for services                     3        --       --        --         77
Issuance of Series A Preferred Stock in connection
   with a warrant exercise                                           25        --       --        --        100

Issuance of Series B Preferred Stock at $40.00, net
   of issuance costs of $43                                         650        --       --        --     25,957
Issuance of Series B Preferred Stock in connection
   with a purchase option exercise                                   88        --       --        --      3,500
Issuance of Series C Preferred Stock at $70.04, net
   of issuance costs of $61                                         740        --       --        --     51,766
Issuance of Series C Preferred Stock for advertising                107        --       --        --      7,500
Issuance of Series D Preferred Stock at $161.68                      46        --       --        --      7,500
Issuance of Common Stock in initial public offering
   at $128.00, net of issuance costs of $1,612                       --        --      862        --    101,011
Conversion of Preferred Stock into Common Stock                  (3,040)       --    3,080        --         --
Issuance of Common Stock for charitable contribution                 --        --       25        --      3,200
Issuance of Common Stock for selected assets and
   liabilities of yourPharmacy.com, Inc.                             --        --    1,296        --    190,020
Issuance of Common Stock for intellectual property                   --        --       43        --      3,762
Issuance of Common Stock and options for services                    --        --       --        --      1,045
Issuance of Common Stock for cash in connection with
   stock option exercise, net                                        --        --      400        --      1,567
Issuance of Common Stock for services in connection
   with stock option exercises                                       --        --        5        --         21
Issuance of Series B Preferred Stock purchase
   option and warrant for financing                                  --        --       --        --      1,842
Deferred stock-based compensation                                    --        --       --        --     33,094
Amortization of stock-based compensation                             --        --       --        --         --
Effect of antidilution provisions of Series B
   Preferred Stock                                                   --        --       --        --      1,009
Net loss                                                             --        --       --        --         --
                                                                -------------------------------------------------

Balance at December 31, 1999                                         --        --    6,536        --    444,410
Repurchase of unvested Common Stock form prior
   exercises of stock options and from Founder                       --        --     (406)       --       (966)
Issuance of Common Stock pursuant to Employee Stock
   Purchase Plan                                                     --        --       27        --        481
Recapture of deferred stock-based compensation, net                  --        --       --        --    (17,016)
Deferred stock-based compensation                                    --        --       --        --      3,781
Amortization of stock-based compensation                             --        --       --        --         --
Recapture of amortization                                            --        --       --        --         --
Net Loss                                                             --        --       --        --         --
Repayment of note receivable from stockholder                        --        --       --        --         --
                                                                -------------------------------------------------
Balance at December 31, 2000                                         --     $  --    6,157     $  --   $430,690
Repurchase of unvested Common Stock from prior
   exercises of stock options and from Founder                       --        --      (38)       --        (78)
Issuance of Common Stock pursuant to Employee Stock
   Purchase Plan                                                     --        --       --        --         --
Recapture of deferred stock-based compensation, net                  --        --       --        --     (2,940)
Deferred stock-based compensation                                    --        --       --        --         --
Amortization of stock-based compensation                             --        --       --        --         --
Recapture of amortization                                            --        --       --        --         --
Net Loss                                                             --        --       --        --         --
Repayment of note receivable from stockholder                        --        --       --        --         --
                                                                -------------------------------------------------
Balance at December 31, 2001                                         --     $  --    6,119     $  --   $427,672
                                                                =================================================
</TABLE>



<PAGE>



<TABLE>
<CAPTION>

                                                                         Notes
                                                                       Receivable      Deferred                      Total Stock
                                                                          from        stock-based     Accumulated   holders' Equity
                                                                      Stock-holders   Compensation      Deficit        (Deficit)
<S>                 <C> <C>                                                <C>         <C>             <C>              <C>
Balance at December 31, 1998                                               (35)        (3,682)         (4,253)          3,469
Issuance of Series A Preferred Stock for services                           --             --              --              77
Issuance of Series A Preferred Stock in connection with a
   warrant exercise                                                         --             --              --             100
Issuance of Series B Preferred Stock at $40.00 net
   of issuance costs of $43                                                 --             --              --          25,957
Issuance of Series B Preferred Stock in connection with a
   purchase option exercise                                                 --             --              --           3,500
Issuance of Series C Preferred Stock at $70.04, net of
   issuance costs of $61                                                    --             --              --          51,766
Issuance of Series C Preferred Stock for advertising                        --             --              --           7,500
Issuance of Series D Preferred Stock at $161.68                             --             --              --           7,500
Issuance of Common Stock in initial public offering at
   $128.00, net of issuance costs of $1,612                                 --             --              --         101,011
Conversion of Preferred Stock into Common Stock                             --             --              --              --
Issuance of Common Stock for charitable contribution                        --             --              --           3,200
Issuance of Common Stock for selected assets and
   liabilities of yourPharmacy.com, Inc.                                    --             --              --         190,020
Issuance of Common Stock for intellectual property                          --             --              --           3,762
Issuance of Common Stock and options for services                           --             --              --           1,045
Issuance of Common Stock for cash in connection with
   stock option exercises, net                                              --             --              --           1,567
Issuance of Common Stock for services I connection with
   stock option exercises                                                   --             --              --              21
Issuance of Series B Preferred Stock purchase option and
   warrant for financing                                                    --             --              --           1,842
Deferred stock-based compensation                                           --        (33,094)             --              --
Amortization of stock-based compensation                                    --         11,322              --          11,322
Effect of anti-dilution provisions of Series B Preferred Stock              --             --          (1,009)             --
Net loss                                                                    --             --         (98,014)        (98,014)
                                                                     ------------------------------------------------------------
Balance at December 31, 1999                                               (35)       (25,454)       (103,276)        315,645
Repurchases of unvested Common Stock from prior
   exercises of stock options and from Founder                              --             --              --            (966)
Issuance of Common Stock pursuant to Employee Stock
   Purchase Plan                                                            --             --              --             481
Recapture of deferred stock-based compensation, net                         --         17,016              --              --
Deferred stock-based compensation                                           --         (3,781)             --              --
Amortization of stock-based compensation                                               13,401              --          13,401
Recapture of amortization                                                   --         (7,070)             --          (7,070)
Net Loss                                                                    --             --        (311,670)       (311,670)
Repayment of note receivable from stockholder                               35             --              --              35
                                                                     ------------------------------------------------------------
Balance at December 31, 2000                                              $  --       $ (5,888)     $(414,946)      $   9,856
Repurchases of unvested Common Stock from prior
   exercises of stock options and from Founder                              --             --              --            (78)
Issuance of Common Stock pursuant to Employee Stock
   Purchase Plan                                                            --             --              --              --
Recapture of deferred stock-based compensation, net                         --          2,940              --              --
Amortization of stock-based compensation                                                1,799              --           1,799
Net Loss                                                                    --             --         (11,324)        (11,324)
                                                                     ------------------------------------------------------------
Balance at December 31, 2001                                              $  --       $ (1,149)     $(426,270)      $     253
                                                                     ============================================================
</TABLE>



The accompanying notes are an integral part of these financial statements.

<PAGE>


                               PlanetRx.com, Inc.
                            Statements of Cash Flows
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                                  Year Ended December 31,
                                                                                         -----------------------------------------
                                                                                             1999           2000           2001
                                                                                         -----------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                       <C>           <C>             <C>
Net loss                                                                                  $(98,014)     $(311,670)      $(11,324)
Adjustments to reconcile net loss to net cash used in operating activities:
            Depreciation and amortization                                                    2,214          5,235          1,860
            Allowance for doubtful accounts                                                    218            512             --
            Non-cash interest charges related to purchase option and warrant                 1,812             --             --
            Stock-based compensation                                                        15,665          6,330          1,799
            Amortization of intangible assets                                                9,627         40,861             --
            Non-cash restructuring charges                                                      --          1,110             --
            Impairment loss                                                                     --        163,712          2,388
            Gain on early extinguishment of debt                                                --             --           (177)
            Gain on sale of intangible assets                                                   --             --
(2,114)
            Changes in operating assets and liabilities:
                        Inventories                                                         (2,258)           (48)         1,557
                        Accounts receivable                                                   (218)        (2,399)         1,811
                        Prepaid expenses and other current assets                          (10,814)        10,169          1,065
                        Other assets                                                          (817)           267            631
                        Accounts payable                                                     5,499         (5,347)        (1,625)
                        Accrued expenses                                                     4,985         (7,657)          (759)
                        Accrued restructuring charges                                           --            179           (110)
                        Deferred revenue                                                         8             (8)            --
                                                                                         -----------------------------------------
                                    Net cash used in operating activities                  (72,093)       (98,754)        (4,998)
                                                                                         -----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment                                                         (9,885)        (8,094)            --
Sale of property and equipment                                                                  --             --          2,521
Purchases of short-term investments                                                        (65,119)            --             --
Sales of short-term investments                                                                 --         65,119             --
Proceeds from sale of intangible assets                                                         --             --          2,393
                                                                                         -----------------------------------------
                        Net cash provided by (used in) investing activities                (75,004)        57,025          4,914
                                                                                         -----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock for cash, net                                              189,834            482             --
Proceeds from exercises of Common Stock options                                              1,567             --             --
Repurchase of unvested Common Stock options                                                     --           (966)           (78)
Proceeds from borrowings                                                                     6,400             --             --
Repayment of notes receivable from stockholders                                                 --             35             --
Principal payments on borrowings                                                                --           (504)        (6,319)
Principal payments on capital lease obligations                                                (10)          (247)        (2,072)
                                                                                         -----------------------------------------
                        Net cash provided by (used in) financing activities                197,791         (1,200)        (8,469)
                                                                                         -----------------------------------------
Increase (decrease) in cash and cash equivalents                                            50,694        (42,929)        (8,553)
Cash and cash equivalents at beginning of period                                               935         51,629          8,700
                                                                                         -----------------------------------------
Cash and cash equivalents at end of period                                                 $51,629      $   8,700      $     147
                                                                                         =========================================
Supplemental cash flow information:
Cash paid for interest                                                                     $   451      $     888      $     553
                                                                                         =========================================
Supplemental non-cash investing and financing activity:
Property and equipment acquired under capital leases                                       $   318      $   2,000      $      --
                                                                                         =========================================
Issuance of common stock in exchange for services,
reclassification of a prepaid asset to an intangible asset in 1999                         $   614      $      --      $      --
                                                                                         =========================================
Issuance of purchase option and warrant for Series B Preferred Stock for financing         $ 1,842      $      --      $      --
                                                                                         =========================================




                                                                                                  Year Ended December 31,
                                                                                         -----------------------------------------
                                                                                             1999           2000           2001
                                                                                         -----------------------------------------
Effect of anti-dilution provision of Series B Preferred Stock                               $ 1,009      $     --          $  --
                                                                                         =========================================
Issuance of Series C Preferred Stock for advertising                                        $ 7,500      $     --          $  --
                                                                                         =========================================
Issuance of Common Stock in exchange for intangible assets                                  $ 3,762      $     --          $  --
                                                                                         =========================================
Issuance of Common Stock for selected assets and liabilities of YourPharmacy.com, Inc.    $ 190,020      $     --          $  --
                                                                                         =========================================
</TABLE>



The accompanying notes are an integral part of these financial statements.




NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

PlanetRx.com,  Inc. ("PlanetRx" or the "Company"),  was incorporated in Delaware
on March 31, 1995 and was in the  development  stage through  December 31, 1998.
Until  March 12,  2001,  the Company was an online  healthcare  destination  for
commerce,  content and community. In April 2001 the Company's Board of Directors
authorized  management to prepare a plan of liquidation  and  dissolution of the
Company for review by the Board.

Stock-Split

Share  information  for the  years  ended  December  31,  1999 and 2000 has been
retroactively adjusted to reflect 1-for-8 reverse stock split.

Use of estimates

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

Cash and cash equivalents and short-term investments

The Company invests its excess cash in debt  instruments of the U.S.  Government
and its  agencies,  and in  high-quality  corporate  issuers.  All highly liquid
instruments  with an original  maturity of three  months or less are  considered
cash equivalents,  those with original  maturities greater than three months and
current  maturities  less than twelve  months  from the  balance  sheet date are
considered short-term  investments and those with maturities greater than twelve
months from the balance sheet date are considered long-term investments.

Prepaid expenses and other current assets

Prepaid  expenses  and  other  current  assets  consists  primarily  of  prepaid
advertising and operational costs.

Inventories

Inventories,  of which all are finished goods,  are carried at the lower of cost
or market determined using weighted average cost.

Property and equipment

Property and equipment,  including  leasehold  improvements,  are stated at cost
less accumulated depreciation.  Depreciation is computed using the straight-line
method over the estimated  useful lives of the related  assets,  generally three
years. Leasehold improvements and assets held under capital leases are amortized
over the term of the lease or estimated useful lives, whichever is shorter.

Long-lived assets

The Company evaluates the  recoverability of its long-lived assets in accordance
with Statement of Financial  Accounting  Standards No. 121,  "Accounting for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of"
("SFAS 121").  SFAS 121 requires  recognition of impairment of long-lived assets
in the event the net book value of such assets exceeds the future non-discounted
cash flows  attributable to such assets.  The Company assesses the impairment of
its long-lived assets when events or changes in circumstances  indicate that the
carrying  value  of  the  assets  may  not be  recoverable.  See  discussion  of
impairment of long-lived assets in Note 3 to the financial statements.

Intangible assets

Intangible  assets  are  amortized  using the  straight-line  method  over their
respective estimated useful lives from two to five years.

Revenue recognition

The Company  recognizes  revenue  from  product  sales,  net of  allowances  for
coupons,  discounts and estimated returns,  when the product is shipped from the
Company's  warehouse to the customer.  Amounts  billed for shipping and handling
are included in revenue and shipping, handling and related costs are included in
a separate line item in operating  expenses.  The Company  provides an allowance
for sales returns,  based on historical  experience,  in the period revenues are
recognized.  Payment for product  sales is generally  made by credit  card.  The
Company recognizes sponsorship revenue ratably over the related service period.

The Company  complies  with the  provisions  of  Emerging  Issues Task Force No.
99-17,  "Accounting for Barter  Transactions." The fair value of the advertising
barter  transactions  cannot be reasonably  determined and therefore the revenue
and corresponding advertising expenses have not been recorded.

The  Company  complies  with  Staff  Accounting   Bulletin  No.  101,   "Revenue
Recognition  in Financial  Statements  ("SAB  101").  SAB 101 was adopted in the
fourth  quarter  ending  December  31,  2000  and such  adoption  did not have a
material impact on the Company's  results of operations,  financial  position or
cash flows.

The Company  complies  with the Emerging  Issues Task Force  released  Issue No.
00-10 ("EITF 00-10"), "Accounting for Shipping and Handling Revenues and Costs".
In  accordance  with EITF 00-10,  amounts  billed for  shipping and handling are
included in revenue and shipping and handling and related  costs are included in
a separate line item included in operating  expenses.

Product development

Product development costs are expensed as incurred,  except for certain software
development  costs.  The Company  complies  with the  Statement of Position 98-1
("SOP  98-1")  "Accounting  for the  Costs of  Computer  Software  Developed  or
Obtained for Internal Use",  which requires  development  costs  associated with
internal use software to be charged to operations  until certain  capitalization
criteria are met.

The Company  complies  with the Emerging  Issues Task Force  released  Issue No.
00-02  ("EITF  00-02"),  "Accounting  for Web  Site  Development  Costs",  which
requires  certain web site development  costs to be capitalized.  EITF 00-02 was
adopted during the third quarter ending September 30, 2000 and such adoption did
not have a significant impact on the Company's results of operations,  financial
position or cash flows.

Advertising expense

The Company  recognizes  advertising  expenses in accordance  with  Statement of
Position 93-7  "Reporting on Advertising  Costs." As such, the Company  expenses
the cost of  communicating  advertising  in the period in which the  advertising
space or airtime is used. Internet  advertising expenses are recognized based on
the terms of the  individual  agreements,  but generally over the greater of the
ratio of the number of impressions  received over the total number of contracted
impressions,  or on a  straight-line  basis  over  the  term  of  the  contract.
Advertising  expenses were $29.2 million,  $28.5  million,  and $0 for the three
years ended December 31, 1999, 2000 and 2001, respectively.

Stock-based compensation

The Company  accounts for  stock-based  employee  compensation  arrangements  in
accordance  with  provisions  of  Accounting  Principles  Board  Opinion No. 25,
"Accounting for Stock Issued to Employees"  ("APB No. 25") and complies with the
disclosure  provisions of Statement of Financial  Accounting  Standards No. 123,
"Accounting for Stock-Based  Compensation"  ("SFAS No. 123").  Under APB No. 25,
compensation  expense is based on the  difference,  as of the date of the grant,
between  the fair  value of the  Company's  stock and the  exercise  price.  The
Company  accounts  for stock  issued to  non-employees  in  accordance  with the
provisions of SFAS No. 123 and Emerging Issues Task Force No. 96-18, "Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services".

The Company  amortizes  stock-based  compensation  recorded in  connection  with
certain stock option grants over the vesting periods of the related options.

During  the third  quarter  ending  September  30,  2000,  the  Company  adopted
Financial   Accounting  Standards  Board  issued  FASB  Interpretation  No.  44,
"Accounting  for  Certain   Transactions   Involving  Stock   Compensation,   an
Interpretation of APB Opinion No. 25" (the "Interpretation"). The Interpretation
clarified  certain issues that have arisen in practice since the issuance of APB
25. Such adoption did not have a significant  impact on the Company's results of
operations, financial position or cash flows.

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of
credit risk consist of cash and cash  equivalents,  short-term  investments  and
accounts  receivable.  The Company  manages credit risk related to cash and cash
equivalents and short-term  investments by only maintaining  these accounts with
high quality  financial  institutions.  As of December  31,  1999,  one customer
accounted for 11% of revenue.  As of December 31, 2000,  no customers  accounted
for more then 10% of  revenue  and two  customers  accounted  for 29% and 14% of
trade accounts  receivable.  As of December 31, 2001, no customers accounted for
more than 10% of revenue and four customers accounted for 55%, 17%, 14%, and 11%
of trade accounts receivable.

Fair value of financial instruments

The Company's financial  instruments  include cash and cash equivalents,  short-
term investments,  accounts receivable, accounts payable, borrowings and capital
lease  obligations.  These  financial  instruments  are  carried at cost,  which
approximates their fair value due to their short-term maturities.

Income taxes

Income taxes are computed using the asset and liability method.  Under the asset
and liability method,  deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation  allowance  is provided  for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized.

Net loss per common share

The  Company  computes  net  loss per  share in  accordance  with  Statement  of
Financial  Accounting  Standards No. 128,  "Earnings per Share" ("SFAS 128") and
SEC Staff Accounting Bulletin No. 98 ("SAB 98").

Segment information

The Company  complies with the  provisions of SFAS No. 131,  "Disclosures  about
Segments of an Enterprise and Related  Information".  The Company identifies its
operating segments based on business  activities and management  responsibility.
Through  March 12,  2001 the  Company  operated  as a single  business  segment;
providing online services in the United States.

Recent accounting pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, Business Combinations.  SFAS
No. 141 requires that the purchase method of accounting be used for all business
combinations  initiated  after June 30, 2001.  Goodwill  and certain  intangible
assets  will  remain on the  balance  sheet and not be  amortized.  On an annual
basis,  and when  there is  reason  to  suspect  that  their  values  have  been
diminished  or  impaired,  these  assets  must be  tested  for  impairment,  and
write-downs may be necessary.  The company  implemented  SFAS No. 141 on July 1,
2001 and  does not  expect  this  statement  to have a  material  effect  on the
company's consolidated financial position or results of operations.

In July 2001,  the FASB  issued  SFAS No.  142,  Goodwill  and Other  Intangible
Assets.   SFAS  No.  142  changes  the   accounting   for   goodwill  and  other
indefinite-lived   intangible   assets  from  an   amortization   method  to  an
impairment-only  approach.  Amortization of goodwill and other  indefinite-lived
intangible  assets will cease upon  adoption of this  statement.  The company is
required to  implement  SFAS No. 142 on January 1, 2002 and does not expect this
statement  to have a material  effect on the  company's  consolidated  financial
position or results of operations.

In October  2001,  the FASB issued SFAS 144,  Accounting  for the  Impairment or
Disposal of Long-Lived  Assets  effective for years beginning after December 15,
2001.  This  Statement  supersedes  SFAS 121,  Accounting  for the Impairment of
Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of, but retains the
fundamental  provision  of  SFAS  121 for  recognition  and  measurement  of the
impairment  of  long-lived  assets  to be  held  and  used  and  measurement  of
long-lived  assets to be held for sale.  The  statement  requires  that whenever
events or changes in circumstances  indicate that a long-lived  asset's carrying
value may not be recoverable, the asset should be tested for recoverability. The
statement  also  requires  that a long-lived  asset  classified as held for sale
should be carried at the lower of its carrying value or fair value, less cost to
sell. Management does not expect this statement to have a material effect on the
company's consolidated financial position or results of operations.

NOTE 2 - LIQUIDITY

The  Company  has   sustained   losses  since   inception  of  $426.3   million.
Additionally,   the  Company  expects  to  continue  to  incur  losses  for  the
foreseeable future.

The Company ceased retail  operations  effective March 12, 2001.  Given that the
Company will not have any future business  operations,  this raises  substantial
doubt about the Company's ability to continue as a going concern.

In April 2001, the Company's Board of Directors authorized management to prepare
a plan of  liquidation  and  dissolution of the Company for review by the Board.
Subsequently,  in an  effort  to  realize  as much  value  as  possible  for our
stockholders,  the Board of Directors  also  directed  management to explore and
evaluate various strategic options for the Company,  including a possible merger
or sale,  while  taking  steps to monetize  assets and settle  obligations  in a
manner  consistent  with the  consummation  of  either  a merger  or sale or the
liquidation and  dissolution of the Company.  These steps have included the sale
of  assets,  the  assignment  or  negotiated  cancellation  of leases  and other
contracts,  the payment or settlement of liabilities  and  obligations,  and the
reduction of personnel to three key  managers.  The Company  intends to continue
these steps to monetize  assets and, to the extent  possible,  use the proceeds,
together with available cash, to pay the Company's  obligations and liabilities.
No assurance can be given that available cash and amounts received from the sale
of assets will be adequate to provide for the obligations, liabilities, expenses
and claims of the Company.

NOTE 3 - IMPAIRMENT OF LONG-LIVED ASSETS

During the fourth quarter ending December 31, 2000, the Company  determined that
the carrying  value of certain  assets  exceeded its net  realizable  value as a
result of rapid changes in business  conditions which eventually resulted in the
announcement  of a plan  of  liquidation  and  dissolution  of the  Company.  In
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
of," the Company  recorded a charge of $163.7 million for this impairment in the
asset value for the year ending  December 31, 2000, and a charge of $2.4 million
for the year ending December 31, 2001.

Based upon the rapid changes in business conditions and its expected future cash
flows, the Company determined an impairment of the goodwill  associated with the
YourPharmacy.com  acquisition  had occurred  and no future  benefit is expected.
Therefore,  the  Company  wrote  down  intangible  assets  associated  with  the
YourPharmacy.com  goodwill of $146.3  million  during the fourth  quarter ending
December 31, 2000.

Based upon the rapid changes in business  conditions,  its expected  future cash
flows,  the Company  determined  an impairment of its fixed assets had occurred.
Therefore,  the Company  wrote down fixed assets of  approximately  $2.3 million
during the first six months of 2001 and $8.0 million  during the fourth  quarter
ending December 31, 2000.  After the impairment loss and subsequent  sales,  the
Company's  net book value of fixed assets  approximated  $12,000 at December 31,
2001. The remaining  fixed assets have been written down to their net realizable
value and are currently classified as held for sale.

Based upon the rapid changes in business conditions and its expected future cash
flows, the Company determined an impairment of certain of its domain name assets
had occurred.  Therefore,  the Company wrote down intangible  assets  associated
with these domain names of $425,000  during the fourth quarter  ending  December
31, 2000,  approximately $92,000 during the second quarter ending June 30, 2001,
and  approximately  $56,000 during the fourth quarter ending  December 31, 2001.
Additionally,   as  part  of   management's   plan  to  liquidate  the  company,
PlanetRx.com  began to sell domain name assets during the first quarter of 2001.
Associated with the sale of these assets,  the Company  recorded other income of
approximately $2.2 million for the year ended December 31, 2001.

The  Company  decided  not to pursue the  utilization  of all of its content and
advertising  arrangements.  Therefore,  the Company  wrote down  prepaid  assets
associated  with  iVillage of $4.2 million and prepaid  assets  associated  with
Newscorp of $4.0 million during the fourth quarter ending  December 31, 2000.

In August 2001, we entered into a one-year  licensing  agreement with Revelation
America  Incorporated  (Revelation).  Under the terms of the agreement,  the two
companies have co-branded and marketed certain products and services using media
advertising  credits  (Advertising) we owned.  During the fourth quarter of 2000
and the first quarter of 2001, we used $4 million of the  Advertising to promote
a debit  Mastercard  issued  pursuant to an  agreement  between  Revelation  and
Merrick Bank  Corporation  (the Cash Card) and  Revelation  products,  including
PlanetRx  products  associated with the Cash Card.  Revelation has established a
toll-free  PlanetRx  number  to be used in the  Advertising.  For each Cash Card
issued and activated by using the toll-free  number or a click-through  from the
PlanetRx.com  website,  Revelation  will pay us a  royalty.  Royalty  revenue of
$31,640 was  recorded in  sponsorship  revenue for the year ended  December  31,
2001.

Based upon the rapid changes in business conditions and its expected future cash
flows,  the Company  determined  an  impairment  of its  inventory had occurred.
Therefore,  the  Company  wrote down  inventory  of  $767,000  during the fourth
quarter ending December 31, 2000.

NOTE 4 - RESTRUCTURING AND RELATED CHARGES

In the third quarter ending September 30, 2000, in connection with  management's
plan to reduce costs and improve  operating  efficiencies,  the Company recorded
restructuring charges of approximately $3.0 million,  consisting of $1.7 million
for headcount  reductions and $1.3 million for  consolidation  of facilities and
related fixed assets.  In the fourth quarter of fiscal 2000 the Company recorded
an additional  restructuring charge of $762,000 for headcount reductions related
to this same plan.  Headcount  reductions  consisted  of a reduction in force of
approximately  90  employees,  or  approximately  30 percent  of  PlanetRx.com's
workforce. These positions were eliminated in South San Francisco, CA.

During the third and fourth  quarter of 2000,  $175,000 and $2.3 million of cash
was used for restructuring  costs,  respectively.  Total cash outlays associated
with the  restructuring  were  $2.4  million.  The  remaining  $1.3  million  of
restructuring costs consists of non-cash charges primarily for asset write-offs,
of which $1.1 million was used during the fourth  quarter of 2000.  During 2001,
$28,000 of cash was used for restructuring  costs and  approximately  $82,000 of
the reserve was written off due to more favorable than expected lease obligation
settlements.  The remaining  restructuring  accrual of $69,000 is expected to be
utilized during the first fiscal quarter of 2002.

Restructuring reserve consists of the following (in thousands):

<TABLE>
<CAPTION>

                                     Severance and
                                        Benefits           Facilities             Total
                                     ----------------------------------------------------
<S>           <C>                       <C>                 <C>                 <C>
Provision for 2000                      $ 2,448             $ 1,289             $ 3,737
Amount utilized in 2000                  (2,448)             (1,110)             (3,558)
                                     ----------------------------------------------------
Balance at December 30, 2000            $    --             $   179             $   179
Amount utilized in 2001                      --                 (28)                (28)
Amount credited to earnings in 2001          --                 (82)                (82)
                                     ----------------------------------------------------
Balance at December 30, 2001            $    --             $    69             $    69
                                     ====================================================
</TABLE>


NOTE 5 - EXPRESS SCRIPTS

In October 1999, we completed a series of agreements with Express Scripts,  Inc.
and its wholly owned subsidiary, YourPharmacy.com. We issued 1,296,000 shares of
our common stock, valued at approximately $168.0 million, to Express Scripts, in
exchange for selected  assets  totaling  $86,000 and  liabilities  totaling $3.4
million of  YourPharmacy.com.  The total purchase price of approximately  $190.0
million  also  consisted  of the  estimated  fair  value of  226,000  options to
purchase our common stock in exchange for outstanding  YourPharmacy.com options,
as well as direct  acquisition  costs.  The  allocation  of the  purchase  price
resulted in an excess  purchase  consideration  over tangible net liabilities of
approximately  $193.4  million,  which has been  allocated to intangible  assets
being amortized over 5 years. We amortized  approximately $8.4 million and $38.7
million for the year ended December 31, 1999 and 2000, respectively.  Based upon
the rapid changes in business conditions and its expected future cash flows, the
Company   determined  an  impairment  of  the  goodwill   associated   with  the
YourPharmacy.com  acquisition  had occurred  and no future  benefit is expected.
Therefore,  the  Company  wrote  down  intangible  assets  associated  with  the
YourPharmacy.com goodwill of $146.3 million.

The  following  table  illustrates  the  components of net revenues and net loss
attributable to PlanetRx.com and YourPharmacy.com for the periods presented,  as
if the purchase had occurred at the beginning of the period (in thousands):

                                                        December 31,

                                                   -----------------------
                                                            1999
                                                   -----------------------
    Net Revenue:
    PlanetRx.com                                                  $ 8,999
    YourPharmacy.com                                                  280
                                                   -----------------------
                                                                  $ 9,279
                                                   -----------------------

    Net loss available to common stockholders:
    PlanetRx.com                                                $ (99,023)
    YourPharmacy.com                                               (5,609)
                                                   -----------------------
                                                                $(104,632)
                                                   -----------------------





In June 2000, we restructured our agreement with Express Scripts, Inc. Under the
new agreement,  which  eliminates  our annual $14.6 million  payments to Express
Scripts,  we paid only the second quarter marketing expenses of $3.7 million, as
well as a one-time contract  termination fee of $4.3 million.  We were to remain
the preferred  Internet  pharmacy in the Express Scripts network for a period of
five years, subject to certain exceptions,  with the right to participate in the
Express Scripts network for a period of five years, and Express Scripts retained
ownership of its shares of PlanetRx.com  common stock.  In April,  2001, we gave
notice to Express  Scripts that the Company had terminated the agreements due to
Express  Scripts'  non-payment  of  certain  sums  due  the  Company  under  the
agreements.  The Company  subsequently sued Express Scripts over the unpaid sums
due to the company (Case No.01CC-696,  In the Circuit Court of St. Louis County,
Missouri, Express Scripts vs. PlanetRx.com, Inc.). On January 22, 2002, the Case
settled prior to trial with the Company  recovering  substantially the amount of
the unpaid sums from Express Scripts. As part of the Settlement  Agreement,  the
Company and Express  Scripts  settled all other business  claims between the two
parties and severed all remaining business relationships,  with the exception of
Express Scripts' status as shareholder of the Company.






NOTE 6 - BALANCE SHEET COMPONENTS (IN THOUSANDS):



                                                         December 31,
                                                 ---------------------------
                                                   2000                2001
                                                 ---------------------------
Accounts receivable:
Trade accounts receivable                        $ 2,095             $    76
Other receivables                                    522                  --
                                                 ---------------------------
Gross accounts receivable                          2,617                  76
Less: Allowance for doubtful accounts               (730)                 --
                                                 ---------------------------
                                                 $ 1,887             $    76
                                                 ===========================



Allowances for doubtful  accounts are provided based on specific  identification
where less than full recovery of accounts receivable is expected.



                                                            December 31,
                                                      -------------------------
                                                         2000              2001
                                                      -------------------------
Prepaid expenses and other current assets:
 Prepaid business liability insurance                 $   582            $  144
 Other                                                    637                10
                                                      -------------------------
                                                      $ 1,219            $  154
                                                      =========================





                                                        December 31,
                                              -----------------------------
                                                2000                   2001
                                              -----------------------------
Property and equipment:
 Computer equipment and software              $  6,941             $     63
 Warehouse equipment                             3,472                   --
 Equipment under capital leases                  2,318                   --
 Furniture and fixtures                            539                   --
 Leasehold improvements                            959                   --
                                              -----------------------------
                                                14,229                   63
Less: Accumulated depreciation and
 amortization                                   (7,596)                 (51)
                                              -----------------------------
                                              $  6,633             $     12
                                              =============================



Depreciation  expense for the three years ended December 31, 1999, 2000 and 2001
was $2.2 million, $5.2 million and $1.8 million, respectively. See discussion of
impairment of long-lived assets in Note 3 to the financial statements.

NOTE 7 - CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS:

All cash and cash equivalents and short-term investments as of December 31, 2000
and 2001, contractually mature within three months.

                                              December 31,
                                      --------------------------
                                          2000              2001
                                      --------------------------
Demand deposits                       $    434            $  147
Money market funds                       1,226                --
Commercial paper                            --                --
US Government and agencies               6,922                --
Certificate of deposit                     118                --
                                      --------------------------
                                      $  8,700            $  147
                                      ==========================




NOTE 8 - NOTE RECEIVABLE:

During 1999, in connection  with an employment  agreement,  the Company  entered
into a  full-recourse  note  receivable  with an employee for  $700,000  bearing
interest at 8.25% per annum payable over three years.  During the second quarter
of 2000, the Company forgave $250,000 of this note.  During the third quarter of
2000,  the  Company  forgave the  remaining  balance of  $450,000  plus  accrued
interest. The Company treated the amounts forgiven as compensation expense.

NOTE 9 - INCOME TAXES:

At December 31, 2001,  the Company had  approximately  $190.0 million and $150.0
million, of federal and state net operating loss  carry-forwards,  respectively,
available  to offset  future  taxable  income  which  expire in varying  amounts
beginning in 2018 and 2006, respectively.  Under the Tax Reform Act of 1986, the
amounts of and benefits from net operating loss  carry-forwards  may be impaired
or limited in certain  circumstances.  Events  which  cause  limitations  in the
amount of net  operating  losses  that the  Company  may utilize in any one year
include, but are not limited to, a cumulative ownership change of more than 50%,
as defined, over a three year period.

<PAGE>

The Company has incurred  losses from inception  through the year ended December
31, 2001. Due to the  uncertainty  surrounding  the realization of the favorable
tax  attributes  and future tax  returns,  the  Company  has placed a  valuation
allowance against its otherwise recognizable net deferred tax assets.

Deferred tax assets and liabilities consist of the following (in thousands):




                                                    December 31,
                                             -----------------------------
                                                 2000                 2001
                                             -----------------------------
Deferred tax assets:
 Net operating loss carryforwards            $ 72,669             $ 76,288
 Accruals and reserves                         (2,918)                (275)
                                             -----------------------------
                                               69,751               76,013
                                             -----------------------------
Less valuation allowance                      (69,751)             (76,013)
                                             -----------------------------
                                             $     --             $     --
                                             =============================



NOTE 10 - BORROWINGS:

Line of credit

During 1999, the Company entered into a $7.0 million line of credit under a Loan
and Security Agreement with a financing  institution.  Each draw down must be in
increments of at least $1.0  million.  This line of credit was cancelled in July
2001,  and at December  31,  2000 and 2001 the  Company had $7.0  million and $0
outstanding under the line of credit, respectively.

Equipment financing arrangement

During  1999,  the Company  entered  into a $2.0  million  capital  lease credit
facility with a financing  institution.  In July 2001, this equipment  financing
arrangement  was  cancelled,  and at  December  31,  2001,  the  Company  had $0
outstanding under the equipment financing arrangement.

NOTE 11 - COMMITMENTS AND CONTINGENCIES:

On March 27,  2001,  SDR  Investors,  LP filed a lawsuit  against  PlanetRx.com,
certain  underwriters  of the Company's  initial public offering in October 1999
(the "IPO"),  and certain former and current directors of the Company.  Named as
additional defendants in the suit, which was filed in the United States District
Court for the Southern District of New York, are The Goldman Sachs Group,  Inc.,
BancBoston  Robertson  Stephens,  Inc., Merrill Lynch,  Pierce,  Fenner & Smith,
Incorporated,  and Salomon Smith Barney,  Inc., each of which was an underwriter
of the IPO;  William  J.  Razzouk  and  Christos  M.  Cotsakos,  who are  former
directors  of the  Company;  and David M.  Beirne and Michael  Moritz,  who were
current  directors of the Company at the time the complaint  was filed,  but are
now former  directors  of the company.  Between  April 19, 2001 and May 4, 2001,
five virtually identical additional complaints were filed. One of the additional
complaints also names as defendants  Hambrecht & Quist LLC,  William Blair & Co.
LLC,  Bear  Stearns & Co.,  Inc.,  additional  underwriters  of the IPO,  Morgan
Stanley Dean Witter & Co.  Incorporated  and Credit  Suisse First Boston  Corp.,
which were not underwriters of the IPO, and Steve  Valenzuela,  a former officer
of the Company.  The suits generally allege that the defendants violated federal
securities  laws  by not  disclosing  certain  actions  allegedly  taken  by the
underwriter defendants in connection with the IPO. The suits allege specifically
that  the  underwriter  defendants,  in  exchange  for the  allocation  to their
customers of shares of the Company's common stock sold in the IPO, solicited and
received from their customers  undisclosed  commissions on transactions in other
securities and required  their  customers to purchase  additional  shares of the
Company's  common stock in the  aftermarket at  pre-determined  prices that were
above  the  IPO  price.  The  suits  seek   unspecified   monetary  damages  and
certification of a plaintiff class consisting of all persons who acquired shares
of the Company's  common stock between  October 6, 1999, and March 24, 2001. The
complaints  have  been  consolidated  into  a  single  action,  which  is  being
coordinated with over three hundred other nearly identical actions filed against
other  companies  before one judge in the U.S.  District  Court for the Southern
District of New York. No date has been set for any response to the complaint. As
of the date  hereof,  we are unable to predict  the  outcome of the suit and its
ultimate effect, if any, on the Company's financial condition.

On June 19, 2001,  vTraction,  Inc.  filed a complaint for breach of contract in
the Chancery Court of Tennessee for the Thirtieth  Judicial  District at Memphis
alleging that PlanetRx.com entered into an oral agreement with vTraction to sell
certain  equipment  and  later  reneged,  and  claiming  damages  in  an  amount
including, but not limited to, the difference between the price agreed to in the
allaeged oral contract and the market price of the equipment.  PlanetRx.com  has
filed an answer  asserting the affirmative  defenses of failure of consideration
and statute of frauds and denying the existence of an oral contract.

NOTE 12 - STOCKHOLDERS EQUITY (DEFICIT):

During  1999,  PlanetRx.com  completed  its initial  public  offering of 862,000
shares (including the exercise of the underwriters'  over-allotment option) at a
price  of  $128.00  per  share.  The  Company  received  net  cash  proceeds  of
approximately $101.0 million, after underwriting discounts and offering costs.

The Company's Certificate of Incorporation,  as amended,  authorizes the Company
to issue  200,000,000 and 5,000,000 shares of $0.0001 par value Common Stock and
Preferred  Stock,  respectively.  A portion of the shares sold is subject to the
right  of  repurchase  by the  Company  subject  to  vesting,  generally  over a
four-year  period.  The Board of  Directors  has declared no dividends on common
stock from inception through the year ending December 31, 2001.

Common Stock

Founder Stock Agreements

Certain  Common  Stock was issued to  founders  of the Company and is subject to
repurchase in the event of voluntary termination or involuntary termination with
cause. On September 15, 1998, generally twenty-five percent of the shares vested
immediately  with the  remaining  seventy-five  percent  vesting  monthly over a
three-year  period.  As of December  31, 1999  approximately  246,000  shares of
outstanding  Common Stock were subject to repurchase by the Company at $0.20. As
of  December  31,  2001 and 2000,  there  were no  founders'  shares  subject to
repurchase.

Notes receivable from stockholders

At December  31, 1999,  the Company held  full-recourse  notes  receivable  from
stockholders  of the Company  totaling  $35,000 for  purchases of the  Company's
Common Stock. The notes bear interest at 5.54% per annum.  During 2000 the notes
and accrued interest were paid in full.

Common Stock and options for services

During  1998 and 1999,  the  Company  granted  approximately  5,000  and  14,000
options,  respectively,  to  purchase  Common  Stock to  members  of the  Health
Advisory Board in exchange for services rendered.  The options originally vested
over four  years.  In 1999,  the Company  amended  the  options to become  fully
vested.  Until their  acceleration,  these options were subject to variable plan
accounting,  with  fair  value  re-measurements  at the  end of  each  quarterly
reporting period.  During the year ended December 31, 1998, the Company recorded
deferred  stock-based  compensation  expense related to these grants of $116,000
and amortized $5,000 as stock-based  compensation expense. During the year ended
December 31, 1999, but before the  acceleration of the vesting of these options,
the Company recorded additional  deferred  stock-based  compensation  expense of
$356,000.  During the year ended  December  31, 1999,  the Company  recognized a
total of $1.2 million, including the effect of the acceleration,  as stock-based
compensation  expense,  of which  $471,000 was recorded as  amortization  of the
deferred amount and $709,000 was charged as period expense.

During 1999, the Company granted  approximately 5,000 options to purchase Common
Stock to non-employees for services previously rendered.  The options were fully
vested upon grant date. The Company recorded stock-based compensation expense of
$193,000,  using the Black-Scholes pricing model. Of the 5,000 options that were
granted,  3,000 were exercised with additional services previously rendered. The
Company recorded  stock-based  compensation expense of $8,000 in connection with
these exercises.

During 1999, the Company granted options to purchase  approximately 2,000 shares
of Common Stock to non-employees in exchange for services rendered.  The options
originally  vested over two years. In June 1999, the Company amended the options
to become fully vested.  These options were subject to variable plan  accounting
until June 1999 when the options  became  fully  vested,  and  accordingly,  the
Company  periodically  re-measured the fair value of such options and recognized
stock-based  compensation  expense as the options  vested.  In 1999, the Company
recorded  the  estimated  fair value of the options and  recognized  stock-based
compensation  expense of $125,000,  using the  Black-Scholes  pricing model. The
options granted were exercised with additional services previously rendered. The
Company recorded stock-based  compensation expense of $13,000 in connection with
these exercises.

During the third quarter ending September 30, 2000, the Company issued a warrant
to a company to purchase  19,000 shares of Common Stock at $6.72 in exchange for
services in conjunction with the allergy health channel  sponsorship  agreement.
The shares are equally  exercisable in March 2001 and 2002. The warrant  expires
in September 2002. These options are subject to variable  accounting,  with fair
value  re-measurements at the end of each quarterly reporting period. During the
year ended December 31, 2000, the Company  recorded cost of net revenue  expense
related to these  grants of $8,000.  At  December  31,  2001,  this  warrant was
outstanding.

Common Stock for intellectual property

During 1998,  the Company issued 25,000 shares of Common Stock to an employee of
the Company  for  services  rendered  in  connection  with the  acquisition  and
transfer of certain domain names.  The Company recorded the estimated fair value
of the stock of $614,000 as a prepaid  asset,  and  reclassified  such amount to
intangible  assets upon the  transfer of such rights in January  1999.  The fair
value of the stock will be amortized as amortization of intangible asset expense
over the estimated useful life, which is deemed to be two years. During the year
ended December 31, 1999 and 2000, the Company  recognized  $308,000 and $360,000
as amortization of intangible asset expense, respectively.

During  1999,  the Company  issued  43,000  shares of Common  Stock to a company
affiliated  with an employee of the Company for  additional  domain  names.  The
Company  recorded the estimated  fair value of the stock of  approximately  $3.8
million as an  intangible  asset.  The fair value of the stock will be amortized
over the  estimated  useful  life,  which is deemed to be two years.  During the
years ended December 31, 1999 and 2000, the Company recognized $941,000 and $1.8
million of amortization of intangible asset expense, respectively.

See  discussion of  impairment  of long-lived  assets in Note 3 to the financial
statements.

Reserved shares

The Company has reserved  shares of Common Stock for future  issuance as follows
(in thousands):



                                               December 31,
                                                  2001
                                                -------
Options available and outstanding
 under the option plans                          19,279
Exercise of outstanding warrants                     19
Common Stock outstanding                          6,119
Undesignated                                    174,583
                                                -------
                                                200,000
                                                =======



Common stock and option grants

During  1999,  the Company  granted  incentive  stock  options to an employee to
purchase 94,000 shares of Common Stock at an exercise price of $72.00 and 31,000
shares of Common Stock at an exercise price of $128.00.  In connection  with the
stock  option  grants with an  exercise  price of $72.00,  the Company  recorded
unearned  compensation of approximately  $5.3 million,  which is being amortized
over the four-year vesting period of the related options.

During 1999,  the Company issued 3,000 shares of Common Stock to an employee and
recorded $400,000 as unearned  compensation.  The Company amortized $200,000 for
each of the years ended December 31, 1999 and 2000 as  stock-based  compensation
expense.

Preferred Stock

Upon the consummation of the initial public offering,  all outstanding shares of
preferred stock were converted into 3,080,000  shares of common stock.  Prior to
such  conversion,  Series A, B, C and D  Preferred  Stock held  certain  voting,
dividend,  liquidation  and conversion  rights.  No dividends on preferred stock
were  declared  by the Board of  Directors  from  inception  through the date of
conversion.  Per share conversion  ratios,  not effected for the 1-for-8 reverse
stock  split,  for Series A, B, C and D  Preferred  Stock were  1.0000,  1.0463,
1.0084 and 1.0000, respectively.

Series A Preferred Stock for services

During 1999,  the Company  issued 3,000 shares of Series A Preferred  Stock to a
non-employee  for  services  previously  rendered.   The  Company  recorded  the
estimated  fair  value  of the  stock of  $77,000  as  stock-based  compensation
expense.

Warrants for Series A Preferred Stock

During 1998, the Company issued  warrants to purchase  38,000 shares of Series A
Preferred  Stock for $4.00 per share to Directors of the Company in exchange for
services previously rendered. The warrants were exercisable on the date of grant
and expire in October 2000. The Company  recorded the fair value of the warrants
of approximately $339,000, using the Black-Scholes pricing model, at the date of
issuance  as  stock-based  compensation  expense.  All of  these  warrants  were
exercised during 1998 and 1999.

Series B Preferred Stock purchase option and warrant for financing

During 1999,  the Company  issued a purchase  option for up to 88,000  shares of
Series B  Preferred  Stock at  $40.00  per  share in  conjunction  with the $7.0
million line of credit. The Company recorded prepaid debt issuance costs of $1.8
million using the Black-Scholes  pricing model and recognized  non-cash interest
expense of $1.8 million during the year ended December 31, 1999. In August 1999,
the purchase  option was exercised and  approximately  92,000 shares of Series B
Preferred Stock were issued.

During 1999,  the Company  issued a warrant to purchase 2,000 shares of Series B
Preferred Stock at $40.00 per share in conjunction with the equipment  financing
arrangement.  The Company  recorded prepaid debt issuance costs of $42,000 using
the  Black-Scholes  pricing model and recognized  non-cash  interest  expense of
$12,000  during the years ended  December 31, 1999 and 2000,  respectively.  The
warrant expired in October 2000.

Effect of anti-dilution provision of Series B Preferred Stock

During 1999,  upon the change of the  conversion  ratio of Series B, the Company
recorded  $1.0  million  associated  with the then  outstanding  Series B stock,
warrants  and purchase  option.  The change of the  conversion  ratio was valued
using the  difference  of the fair value of the  Preferred  Stock in January and
June of 1999,  and a  calculation  of  potential  incremental  Common  Shares of
approximately 34,000.

Series C Preferred Stock for advertising

During  1999,  in  conjunction  with the sale of Series C Preferred  Stock,  the
Company issued approximately  214,000 shares of Series C Preferred Stock to News
Corp for $7.5 million in cash and $7.5 million for future advertising  services.
The  Company  originally  recorded  the value of the future  services as prepaid
advertising. The Company will recognize advertising expense during the period in
which the services are provided based upon the rate card value of such services.

See  discussion of  impairment  of long-lived  assets in Note 3 to the financial
statements.

Series D Preferred Stock for advertising

In September  1999, the Company issued 46,000 shares of Series D Preferred Stock
to  iVillage,  Inc. in exchange  for  approximately  $7.5  million in cash.  The
Company also entered into a three-year  sponsorship  agreement  and a three-year
content license agreement.  These agreements  originally required the Company to
pay  approximately  $22.5  million  over the  three-year  period in exchange for
certain advertising services and rights to certain online content.

In September  2000,  the Company  restructured  its  sponsorship  agreement with
iVillage,  Inc. Under the terms of the new  agreement,  the Company was provided
with a specific number of advertising impressions through December 31, 2000. For
the year ending  December 31,  2000,  the Company has paid and  recognized  $3.7
million of advertising expense related to this marketing agreement.

See  discussion of  impairment  of long-lived  assets in Note 3 to the financial
statements.

NOTE 13 - NET LOSS PER SHARE

Basic net loss per share is  computed  by  dividing  the net loss  available  to
common  stockholders  for the period by the weighted average number of shares of
common  stock  outstanding  during  the  period.  Diluted  net loss per share is
computed  using the weighted  average  number of common  shares and common share
equivalents,  if dilutive.  Common share equivalents  consist of the incremental
common shares subject to issuance upon conversion of the  convertible  preferred
stock (using the  if-converted  method) and shares issuable upon the exercise of
stock options and warrants  (using the treasury  stock  method),  and the common
shares  outstanding  subject to repurchase.  The periods presented below exclude
potential common shares as the effect of such shares on a weighted average basis
is anti-dilutive.



<PAGE>


The following table sets forth the computation of basic and diluted net loss per
share  and pro  forma  basic and  diluted  net loss per  share  for the  periods
indicated (in thousands, except per share amounts)

<TABLE>
<CAPTION>


                                                             Year Ended December 31,
                                            ----------------------------------------------------
                                               1999                 2000                  2001
                                            ----------------------------------------------------
Numerator:
<S>                                          <C>                 <C>                   <C>
 Net Loss                                    $(98,014)           $(311,670)            $(11,501)
Extraordinary gain on early extinguishment
 of debt, net of taxes of $0                       --                   --                  177
Effect of anti-dilution
 provisions of Series B Preferred Stock        (1,009)                  --                   --
                                            ----------------------------------------------------
Net loss available to Common
 Stockholders                                $(99,023)           $(311,670)            $(11,324)
                                            ----------------------------------------------------
Denominator:
 Weighted average common shares                 2,381                6,393                6,128
 Weighted average unvested common
  shares subject to repurchase                   (782)                (381)                  (7)
                                            ----------------------------------------------------
Denominator for basic and diluted
 calculation                                    1,599                6,012                6,121
                                            ----------------------------------------------------
Net loss per share:
 Basic and diluted                           $ (61.93)            $ (51.84)            $  (1.85)
                                            ====================================================
</TABLE>



NOTE 14 - EMPLOYEE BENEFIT PLANS:

401(k) Savings Plan

The Company had a savings plan (the "Savings Plan") which qualified as a defined
contribution arrangement under Section 401(a), 401(k) and 501(a) of the Internal
Revenue Code.  Under the Savings  Plan,  participating  employees  could defer a
percentage  (not to exceed  25%) of their  eligible  pretax  earnings  up to the
Internal  Revenue  Service's  annual  contribution  limit.  All employees on the
United States  payroll of the Company were eligible to  participate in the Plan.
The Company determined its  contributions,  if any, based on its current profits
and/or retained  earnings;  however,  no contributions  were ever made since the
inception of the Savings Plan. The plan was terminated on May 4, 2001.

Stock Plans

To date, options granted generally vest ratably monthly over four years; 25% one
year after date of grant and remaining options  thereafter vest in equal monthly
installments  over the following 36 months. At December 31, 1999, 2000, and 2001
there  were  approximately   486,000,   40,000.  and  1,389  shares  subject  to
repurchase,  respectively.  As of  December  31,  2001,  the  Company  had  four
stock-based compensation plans, which are described below.

1998 Stock Plan

In October 1998, the Company  adopted the 1998 Stock Plan,  which was amended in
February  1999 (the "1998  Plan").  The Plan provides for the granting of direct
stock grants and stock options to employees,  outside directors, and consultants
of the  Company.  Upon the  consummation  of the initial  public  offering,  all
options were assumed by the 1999 Equity  Incentive  Plan.  Options granted under
the 1998  Plan may be either  incentive  stock  options  or  nonqualified  stock
options.  Incentive  stock  options  ("ISO")  may be  granted  only  to  Company
employees   (including   officers  and  directors   who  are  also   employees).
Nonqualified  stock  options  ("NSO")  may be granted to Company  employees  and
consultants. The 1998 Plan provides that the options shall be exercisable over a
period not to exceed ten years from the date of the grant;  however, in the case
of an ISO granted to a person owning more than 10% of the combined  voting power
of all classes of the stock of the Company,  the term of the option will be five
years from the date of the grant.  Options are  exercisable  immediately and are
subject to a  repurchase  right by the Company at the original  issuance  price,
which lapses over a maximum period of five years.

In accordance  with the 1998 Plan,  the stated  exercise price shall not be less
than  85% of the  estimated  fair  value of the  shares  on the date of grant as
determined by the Board of Directors,  provided,  however, that (i) the exercise
price of an ISO and NSO shall  not be less  than  100% and 85% of the  estimated
fair  value of the  shares  on the  date of  grant,  respectively,  and (ii) the
exercise price of an ISO and NSO granted to a 10% shareholder  shall not be less
than  110% of the  estimated  fair  value of the  shares  on the date of  grant,
respectively.

1998 YourPharmacy.com Stock Plan

In October 1999, the Company assumed the  YourPharmacy.com  1998 Stock Plan (the
"YourPharmacy.com  Plan").  The Plan  provides  for the granting of direct stock
grants and stock options to employees, outside directors, and consultants of the
Company.  At December 31, 2001,  the Company has  reserved  1,810,000  shares of
common stock for issuance under the YourPharmacy.com Plan. Options granted under
the YourPharmacy.com  Plan may be either incentive stock options or nonqualified
stock options.  Incentive  stock options  ("ISO") may be granted only to Company
employees   (including   officers  and  directors   who  are  also   employees).
Nonqualified  stock  options  ("NSO")  may be granted to Company  employees  and
consultants.  The  YourPharmacy.com  Plan  provides  that the  options  shall be
exercisable  over a period  not to exceed  ten years from the date of the grant;
however,  in the case of an ISO granted to a person  owning more than 10% of the
combined  voting power of all classes of the stock of the  Company,  the term of
the option will be five years from the date of the grant.

In accordance  with the  YourPharmacy.com  Plan, the stated exercise price shall
not be less than 85% of the  estimated  fair  value of the shares on the date of
grant as determined by the Board of Directors,  provided,  however, that (i) the
exercise  price of an ISO and NSO  shall  not be less  than  100% and 85% of the
estimated fair value of the shares on the date of grant, respectively,  and (ii)
the exercise price of an ISO and NSO granted to a 10%  shareholder  shall not be
less than 110% of the  estimated  fair value of the shares on the date of grant,
respectively.

1999 Equity Incentive Plan

In July 1999,  effective  immediately prior to the effective date of the initial
public offering,  the Board of Directors adopted and the stockholders  approved,
the 1999 Equity  Incentive Plan (the "1999 Plan") and reserved  6,000,000 shares
of the Company's  Common Stock,  plus the aggregate  number of shares  available
under the 1998 Plan, for issuance thereunder.  At December 31, 2001, the Company
has  reserved  17,161,000  shares of common  stock for  issuance  under the 1999
Equity Incentive Plan. In January 2000, and every year thereafter until the year
2005, shares reserved for issuance will automatically increase by a number equal
to the lesser of 5% of the total number of Common Stock outstanding or 2,000,000
shares.  The 1999 Plan authorized the award of options,  restricted stock awards
and stock  bonuses  (the  "Awards").  No person will be eligible to receive more
than  2,000,000  shares in any calendar  year  pursuant to Awards under the 1999
Plan other than a new employee of the Company who will be eligible to receive no
more than 2,500,000 shares in the calendar year in which such employee commences
employment.  Options  granted under the 1999 Plan may be either  incentive stock
options ("ISO") or nonqualified stock options ("NSO").  ISOs may be granted only
to Company employees  (including officers and directors who are also employees).
NSOs may be granted to Company employees,  outside directors, and consultants of
the Company.

Options under the 1999 Plan may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date of
grant as determined by the Board of Directors,  provided,  however, that (i) the
exercise  price of an ISO may not be less than 100% of the estimated  fair value
of the  shares  on the date of  grant,  and (ii)  the  exercise  price of an ISO
granted to a 10%  shareholder  may not be less than 110% of the  estimated  fair
value of the shares on the date of grant.

1999 Director Stock Option Plan

In July 1999, the Board of Directors adopted and stockholders  approved the 1999
Director  Stock  Option  Plan  ("Director  Plan")  which will  become  effective
immediately  prior to the effective  date of the initial  public  offering.  The
Director Plan reserves a total of 400,000  shares of the Company's  Common Stock
for  issuance  thereunder.  Members  of the board who are not  employees  of the
Company,  are eligible to  participate  in the Director  Plan. The option grants
under the Director Plan are automatic  and  non-discretionary,  and the exercise
price of the options  must be 100% of the fair market  value of the common stock
on the date of grant.  Each eligible  director who first becomes a member of the
board will initially be granted an option to purchase  25,000 shares on the date
such director first becomes a director.

Immediately  following each annual meeting of the Company each eligible director
will  automatically be granted an additional option to purchase 10,000 shares if
such director has served  continuously as a member of the board for at least the
preceding six months. The term of such options is ten years,  provided that they
will  terminate  twelve months  following  the date the director  ceases to be a
director or a consultant of the Company (twelve months if the termination is due
to death or  disability).  Options will vest,  if  applicable,  as determined by
individual grant terms. As of December 31, 2000, 25,000 shares have been granted
under the Director Plan.


<PAGE>

Stock plan activity

The  following  summarizes  stock  option  activity  under the  stock  plans (in
thousands, except per share amounts):

<TABLE>
<CAPTION>

                                                      Options Outstanding
                                       -----------------------------------------------
                                          Options           Weighted
                                         Available          Average         Exercise
                                        for Grant          Number of          Price
                                                            Options
                                       -----------------------------------------------
<S>                                       <C>                                 <C>
Balance at December 31, 1998              4,430                134            $  0.40
 Shares authorized                       12,510                 --            $    --
 Options granted                         (1,088)             1,088            $ 39.68
 Options exercised                           --               (424)           $  4.00
 Options canceled                            20                (20)           $(13.36)
 Unvested shares repurchased                 18                 --            $    --
                                       -----------------------------------------------
Balance at December 31, 1999             15,890                778            $ 53.04
 Shares authorized                        2,000                 --            $    --
 Options granted                           (766)               766            $ 32.70
 Options exercised                           --                 (9)           $  1.60
 Options canceled                           958               (958)           $(44.20)
 Unvested shares repurchased                276                 --            $    --
                                       -----------------------------------------------
Balance at December 31, 2000             18,358                577            $ 41.55
 Shares authorized                          306                 --            $    --
 Options granted                             --                 --            $    --
 Options exercised                           --                 --            $    --
 Options canceled                           316               (316)           $(31.68)
 Unvested shares repurchased                 38                 --           $    --
                                       -----------------------------------------------
Balance at December 31, 2001             19,018                261            $ 53.54
                                       ===============================================
</TABLE>



The  weighted-average  grant-date  fair value of options granted during the year
ended December 31, 1999 and 2000 was $43.20 and $41.55, respectively.

The following table summarizes the information  about stock options  outstanding
and exercisable as of December 31, 2001:

<TABLE>
<CAPTION>

                                       Options Outstanding                                   Options Exercisable
                             Weighted Average         Weighted Average
                             Remaining Number       Contractual Exercise                   Weighted Average Exercise
Range of Exercise Price        Outstanding                  Life               Price           Number Outstanding           Price
<S> <C>       <C>                   <C>                       <C>                <C>                     <C>                 <C>
    $  2.12 - $  2.12               18,750                    8.84               $  2.12                 5,443               $  2.12
    $ 20.40 - $ 20.40               96,250                    8.30               $ 20.40                41,040               $ 20.40
    $ 57.84 - $ 57.84               20,000                    8.20               $ 57.84                 9,000               $ 57.84
    $ 72.00 - $ 72.00               94,360                    7.74               $ 72.00                53,073               $ 72.00
    $128.00 - $128.00               31,250                    7.80               $128.00                17,470               $128.00
                             -------------------------------------------------------------------------------------------------------
                                   260,610                    8.06               $ 53.54               126,026               $ 58.93
                             =======================================================================================================
</TABLE>



At December 31, 2001 the Company had 126,000 options vested and exercisable.

Employee Stock Purchase Plan

In July 1999, the Board of Directors and stockholders adopted the Employee Stock
Purchase  Plan (the "ESPP"),  which became  effective  immediately  prior to the
effective  date of the initial  public  offering.  As of  December  31, 2001 the
Company has reserved  1,750,000  shares of common  stock for issuance  under the
ESPP.  On each  September 1 beginning in 2000,  the  aggregate  number of shares
reserved for  issuance  under the ESPP will be  increased  automatically  to the
lesser of 2% of the total number of common shares outstanding or 750,000 shares.
Employees  generally  will be  eligible to  participate  in the ESPP if they are
customarily  employed  by the  Company  for more than 20 hours per week and more
than  five  months in a  calendar  year and are not (and  would not  become as a
result of being  granted  an  option  under  the  ESPP) 5%  stockholders  of the
Company.  Under  the  ESPP,  eligible  employees  may  select a rate of  payroll
deduction up to 15% of their W-2 cash  compensation  subject to certain  maximum
purchase limitations.  The first offering period began on the first business day
on which price  quotations for the Company's  common stock were available on The
NASDAQ National  Market.  Based on the effective date, the first Purchase Period
will be more than six months long. Offering periods thereafter will begin on May
1 and November 1.  Purchases  will occur on April 30 and October 31, or the last
day of trading  prior to these  dates.  The price at which the  Common  Stock is
purchased  under the ESPP is 85% of the lesser of the fair  market  value of the
Company's  Common  Stock on the date  before  the  first  day of the  applicable
offering period or on the last day of that purchase period.

Fair value disclosures

The Company applies the  measurement  principles of APB No. 25 in accounting for
its 1998 Plan. Had  compensation  expense for options granted for the year ended
December 31, 1999, 2000 and 2001 been determined  based on the fair value at the
grant dates as  prescribed  by SFAS No. 123, the  Company's  net loss would have
been increased to the pro forma amounts  indicated  below (in thousands,  except
per share amounts).

<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
                                                          1999                  2000                   2001
Net loss available to common stockholders:
<S>                                                   <C>                   <C>                    <C>
  As reported                                         $   (99,023)          $  (311,670)           $   (11,324)
                                                     ------------------------------------------------------------
  Pro forma                                           $  (113,327)          $  (313,928)           $   (11,337)
                                                     ------------------------------------------------------------
Net loss per share:
  As reported                                         $    (61.93)          $    (51.84)           $    (1.85)
                                                     ------------------------------------------------------------
  Pro forma                                           $    (70.87)          $    (52.22)           $    (1.85)
                                                     ============================================================
</TABLE>



The Company  calculated the fair value of each option grant on the date of grant
using the Black-Scholes option pricing model as prescribed by SFAS No. 123 using
the following assumptions:



                                           Year Ended December 31,
                                  ---------------------------------------
                                     1999           2000          2001
                                  ---------------------------------------
Risk-free interest rates            6.30%          5.80%         4.20%
Expected lives (in years)          4 years        4 years       4 years
Dividend yield                        0%             0%            0%
Expected volatility                  90%           130%           130%



Because additional stock options are expected to be granted each year, the above
pro forma  disclosures are not  representative  of pro forma effects on reported
financial results for future years.

Deferred stock-based compensation

In connection  with certain stock option grants to employees and Health Advisory
Board members from October 1998 through December 31, 1998 and for the year ended
December  31,  1999,  and 2000,  the  Company  recognized  deferred  stock-based
compensation   totaling  $4.6  million,   $33.1   million,   and  $3.8  million,
respectively,  which is being  amortized over the vesting periods of the related
options.  Stock-based  compensation  expense recognized from amortization of the
deferred  amounts  during the year ended  December  31,  1999,  2000,  and 2001,
totaled   approximately   $11.3  million,   $6.3  million,   and  $1.8  million,
respectively.

NOTE 15 - SPONSORSHIP REVENUE:

In February 2001, we signed a marketing agreement with drugstore.com.  Under the
terms of the agreement, we launched a new site and marketed to our customers the
drugstore.com  website for a flat marketing fee of $1.5 million. In addition, we
will also receive a customer  acquisition  fee for every  customer who purchases
something on the drugstore.com site from the Company's site based upon a sliding
scale. We also did not accept any new  prescription  orders after February 12th,
did not perform any  prescription  refills after  February  26th, and closed the
remainder  of our store on March  12th,  2001.  The term of the  agreement  with
drugstore.com was for 3 months.

In May 1999,  the Company  entered into a five-year  strategic  alliance  with a
pharmaceutical  company.  Under the terms of the  agreement,  the company is the
exclusive  therapeutic  disease state  management  sponsor  within the Company's
diabetes.com  community.  During the third quarter ended September 30, 2000, the
Company did not receive guaranteed  payments of $500,000 in connection with this
agreement and therefore  considered the contract  terminated.  During the fourth
quarter  ended  December 31, 2000,  the Company  received a $750,000  settlement
representing  the  third  quarter  and  half of the  fourth  quarter  guaranteed
payments which was recognized as sponsorship revenue during the fourth quarter.

<PAGE>

NOTE 16 - QUARTERLY RESULTS (UNAUDITED):

The  following  tables  contain  selected  unaudited   Statement  of  Operations
information  for each quarter of 2001 and 2000.  The Company  believes  that the
following  information reflects all normal recurring adjustments necessary for a
fair  presentation of the information for the periods  presented.  The operating
results for any quarter are not necessarily indicative of results for any future
period.


<TABLE>
<CAPTION>

                                                                Quarter Ended
                                  ----------------------------------------------------------------------------
                                   March 31,           June 30,             September 30,        December 31,
                                     2001                2001                  2001                 2001
                                  ----------------------------------------------------------------------------
                                                (in thousands, except per share amounts)
<S>                               <C>                  <C>                  <C>                  <C>
Net sales                         $  5,700             $     40             $     --             $      34
Gross profit                         1,662                   39                   --                    34
Net loss                            (6,669)              (3,365)                (807)                 (483)
Basic and diluted loss
 per share(1)                        (1.09)               (0.55)               (0.13)                (0.08)
Shares used in
 computation of basic
 and diluted loss per
 share                               6,119                6,121                6,119                 6,118







                                                               Quarter Ended
                                  ----------------------------------------------------------------------------
                                   March 31,           June 30,             September 30,        December 31,
                                     2000                2000                  2000                 2000
                                  ----------------------------------------------------------------------------
                                                (in thousands, except per share amounts)
Net sales                         $  8,773             $  9,435             $  9,942             $   8,015
Gross profit                         2,214                2,246                2,031                 2,078
Net loss                           (49,636)             (43,913)             (34,040)             (184,081)
Basic and diluted loss
 per share(1)                        (8.42)               (7.33)               (5.62)               (30.17)
Shares used in
 computation of basic
 and diluted loss per
 share                               5,895                5,991                6,061                 6,102
</TABLE>



(1) The sum of  quarterly  per share  amounts  may not  equal per share  amounts
reported  for  year-to-date  periods.  This is due to  changes  in the number of
weighted average shares outstanding and the effects of rounding for each period.


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

None.

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain  information  with respect to our directors and
executive officers:

Michael  Beindorff (age 49) has served as the Chairman of our Board since August
2001, as our Chief Executive Officer since April 2000. He has been a director of
Planet Rx.com since April.  From March 2000 to August 2000, Mr. Beindorff served
as our President, and from October 1999 to March 2000, he was our Executive Vice
President and Chief Operating Officer. From 1995 to October, 1999, Mr. Beindorff
was with Visa International,  where he served as president and chief "e" officer
of eVisa, Visa's Internet and electronic commerce division as well as Visa USA's
executive  vice  president of marketing and product  management.  Mr.  Beindorff
holds  a BS  degree  from  the  University  of  Alabama  and an MBA  from  Emory
University.

Paul  Risner (age 44),  was  appointed  Vice  President  and General  Counsel in
November  2000.  From March 1999 to November  2000, he was Of Counsel to the law
firm of Baker, Donelson,  Bearman & Caldwell, where his practice concentrated on
health law,  healthcare  information  and technology  law and  eBusiness.  Prior
thereto,  he was Vice  President of Legal  Affairs at Sarasota  Memorial  Health
System. Mr. Risner received his B.A. degree from Jacksonville University and his
J.D. degree from the University of Florida College of Law.

Todd  Steele (age 28),  has served as our Chief  Financial  Officer  since April
2001, and as our Vice President of Finance since August 2000.  From October 1999
to August 2001, he was our Director of Finance.  From June 1998 to October 1999,
Mr. Steele was Manager of Strategic Enablement Services at American Express, and
from May 1997 to June 1998, served as a Financial Analyst for the New York Times
Company.  From October 1994 to May 1997, Mr. Steele was an auditor for Ernst and
Young LLP. Mr. Steele holds a BA in Business  Economics  from the  University of
California, Los Angeles.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated  by reference from the information to be contained in the Company's
Proxy Statement for its 2002 Annual Meeting of Stockholders or Form 10-K/A to be
filed by April 30, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated   by  reference  from  the  information  to  be  contained  in  the
Registrant's Proxy Statement for its 2002 Annual Meeting of Stockholders or Form
10-K/A to be filed by April 30, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated  by reference from the  information  contained in the  Registrant's
Proxy Statement for its 2002 Annual Meeting of Stockholders or Form 10-K/A to be
filed by April 30, 2002.

                                    PART IV


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

(a) The following documents are filed as part of this report:

(1) Financial Statements filed as part of this report are noted below:



                                                                      Page
Report of Independent Accountants.................................     33
Balance Sheets....................................................     34
Statements of Operations..........................................     35
Statements of Stockholders' Equity (Deficit)......................     36
Statements of Cash Flows..........................................     38
Notes to Financial Statements.....................................     40



All  schedules  are omitted  because  they are not  applicable  or the  required
information is shown in the Financial Statements or Notes thereto.

(2) Exhibits are incorporated  herein by reference or are filed with this report
as indicated below (numbered in accordance with Item 601 of Regulation S-K):



Exhibit
Number        Description

2.1*           Asset   Contribution   and   Reorganization   Agreement   between
               PlanetRx.com,  Inc., PRX Holdings,  Inc., PRX Acquisition  Corp.,
               YourPharmacy.com,  Inc. and Express  Scripts,  Inc., dated August
               31, 1999.

3.1*           Certificate of Incorporation of the registrant, as amended.

3.2*           Bylaws of the registrant

4.1*           Reference is made to Exhibits 3.1 and 3.2

4.2*           Amended and Restated Investors' Rights Agreement

4.3*           Specimen Common Stock Certificate

4.4**          Registration   Rights  Agreement  between  registrant  and  Alpha
               Venture Capital, Inc. dated July 25, 2000.

10.1*          Form of Indemnification Agreement.

10.2*          1999 Equity Incentive Plan.

10.3*          Employee Stock Purchase Plan.

10.4*          1999 Director Stock Option Plan.

10.5*          Form of Warrant for the purchase of Preferred Stock.

10.6*          Real Property Lease between  registrant and Belz Devco, LP, dated
               October 16, 1998.

10.7*          Real Property  Sublease  between  registrant and Radar Companies,
               dated May 5, 1999.

10.8*          Real   Property   Sublease   between   registrant   and   Cellegy
               Pharmaceuticals, Inc., dated November 6, 1998.

10.9*          Asset Acquisition Agreement between registrant and NetHealth.com,
               Inc., dated June 30, 1999.

10.10*         Series C Preferred Stock Purchase  Agreement  between  registrant
               and the Investors named on Schedule thereto, dated June 3, 1999.

10.11*         Series D Preferred Stock Purchase  Agreement  between  registrant
               and the Investors named on Schedule  thereto,  dated September 3,
               1999.

10.12+*        Agreement  between  registrant and Express  Scripts,  Inc., dated
               August 31, 1999.

10.13+**       Agreement between registrant and Express Scripts, Inc. dated June
               19, 2000.

10.14**        Common Stock  Purchase  Agreement  between  registrant  and Alpha
               Venture Capital, Inc. dated July 25, 2000.

10.15***       Master Lease  Agreement  between  registrant  and Comdisco,  Inc.
               dated January 15, 1999,  Equipment  Schedules VL-1 and VL-2 dated
               January 20, 1999, and Addendum dated January 20, 1999.

10.16***       Subordinated Loan and Security  Agreement between  registrant and
               Comdisco, Inc. dated as of January 15, 2001. The exhibits to this
               document  have been omitted  from this  filing.  The Company will
               furnish,  as  supplementary  information,  copies of the  omitted
               materials to the Securities and Exchange Commission upon request.

10.17*****     Discounted  Payoff  Agreement,  between  registrant and Comdisco,
               Inc. dated July 27, 2001.

10.18******    Bill of Sale between  registrant  and  Lightning  Logistics,  LLC
               selling  and  assigning  leases  of real  and  personal  property
               located at 6399 Shelby View Drive, Suite 122, Memphis, Tennessee.

10.19******    Form  of   Assignment  of  Lease  among   registrant,   Lightning
               Logistics, LLC and Belz Devco GP.

10.20******    Form of Guaranty of Lease by Flextronics International, Ltd.

10.21******    Bill of Sale between  registrant  and Unicorp,  Inc.  dated as of
               July 1, 2001,  selling and assigning  leases of real and personal
               property  located at 6399  Shelby  View  Drive,  Suites  113-115,
               Memphis, Tennessee.

10.22******    Form of Assignment of Lease among  registrant,  UITSG,  LLC d/b/a
               Unicorp and Belz Devco GP.

10.23******    PlanetRx.com   Licensing   Agreement   between   registrant   and
               Revelation America Incorporated dated as of August 14, 2001.

10.24******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant  and  Guthy-Renker  Corporation  dated as of March 15,
               2001.

10.25******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Pharmacia Corp. dated as of March 21, 2001.

10.26******    Domain  Name   Purchase   Agreement  and  Bill  of  Sale  between
               registrant and Ortho Biotech Products,  L.P. dated as of April 2,
               2001.

10.27******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Johnson & Johnson dated as of March 16, 2001.

10.28******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and SmithKline Beecham dated as of March 12, 2001.

10.29******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and F.A.C.E.S. dated as of March 5, 2001.

10.30******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant  and  Simstar  Internet  Solutions  dated as of May 2,
               2001.

10.31******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Serono, Inc. dated as of March 15, 2001.

10.32******    Domain  Name   Purchase   Agreement  and  Bill  of  Sale  between
               registrant  and U.S.  Nursing  Corporation  dated as of March 14,
               2001.

10.33******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Johnson & Johnson dated as of March 14, 2001.

10.34******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Richard Gabriel dated as of March 30, 2001.

10.35++        Amendment to PlanetRx Licensing  Agreement between registrant and
               Revelation America Incorporated effective November 28, 2001.

10.36++        Settlement  Agreement,  Judgment  for  Permanent  Injunction  and
               Dismissal with Prejudice of Remaining  Claims between  registrant
               and Express Scripts, Inc. dated January 22, 2002.

23.1++         Consent of  PriceWaterhouse  Coopers  with respect to the audited
               financial statements of the registrant.

---------------

*              Incorporated   herein  by  reference  to  Form  S-1  as  declared
               effective on October 7, 1999 (File No. 333-82485).

**             Incorporated  herein by reference to report on Form 10-Q, for the
               quarterly period ended June 30, 2000 filed on August 14, 2000.

***            Incorporated  herein by reference to annual  report on Form 10-K,
               for the fiscal year ended  December 31, 2000,  filed on April 17,
               2001.

****           Incorporated  herein by reference to Form 10-K/A,  for the fiscal
               year ended December 31, 2000, filed on April 30, 2001.

*****          Incorporated  herein by reference to report on Form 10-Q, for the
               quarterly period ended June 30, 2001, filed on August 15, 2001.

******         Incorporated  herein by reference to report on Form 10-Q, for the
               quarterly  period ended  October 31, 2001,  filed on November 14,
               2001.

+              Confidential  treatment has been  requested for certain  portions
               which have been blacked out in the copy of the exhibit filed with
               the Securities and Exchange  Commission.  The omitted information
               has been  filed  separately  with  the  Securities  and  Exchange
               Commission   pursuant  to  the   application   for   confidential
               treatment.

++             Filed herewith

+              Confidential  treatment has been  requested for certain  portions
               which have been blacked out in the copy of the exhibit filed with
               the Securities and Exchange  Commission.  The omitted information
               has been  filed  separately  with  the  Securities  and  Exchange
               Commission   pursuant  to  the   application   for   confidential
               treatment.

(b) Reports on Form 8-K:

No reports on Form 8-K were filed by the  Company  during the fourth  quarter of
2001.

<PAGE>

                                   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.

                               PLANETRX.COM, INC.





By: /s/ Michael Beindorff
   ---------------------------
      Michael Beindorff
      Chairman of the Board of Director
      and Chief Executive Officer



Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.





      Signature                   Title                      Date

/s/ Michael Beindorff   Chief Executive Officer and     April 15, 2002
---------------------   Chairman of the Board of
Michael Beindorff       Directors

/s/ Paul E. Risner      Senior Vice President and       April 15, 2002
---------------------   General Counsel, Director

/s/ Todd Steele         Chief Financial Officer         April 15, 2002
---------------------
Todd Steele


<PAGE>


                                  EXHIBIT INDEX



EXHIBIT
NUMBER            DESCRIPTION
--------          -----------

2.1*           Asset   Contribution   and   Reorganization   Agreement   between
               PlanetRx.com,  Inc., PRX Holdings,  Inc., PRX Acquisition  Corp.,
               YourPharmacy.com,  Inc. and Express  Scripts,  Inc., dated August
               31, 1999.
3.1*           Certificate of Incorporation of the registrant, as amended.
3.2*           Bylaws of the registrant
4.1*           Reference is made to Exhibits 3.1 and 3.2
4.2*           Amended and Restated Investors' Rights Agreement
4.3*           Specimen Common Stock Certificate
4.4**          Registration   Rights  Agreement  between  registrant  and  Alpha
               Venture Capital, Inc. dated July 25, 2000.
10.1*          Form of Indemnification Agreement.
10.2*          1999 Equity Incentive Plan.
10.3*          Employee Stock Purchase Plan.
10.4*          1999 Director Stock Option Plan.
10.5*          Form of Warrant for the purchase of Preferred Stock.
10.6*          Real Property Lease between  registrant and Belz Devco, LP, dated
               October 16, 1998.
10.7*          Real Property  Sublease  between  registrant and Radar Companies,
               dated May 5, 1999.
10.8*          Real   Property   Sublease   between   registrant   and   Cellegy
               Pharmaceuticals, Inc., dated November 6, 1998.
10.9*          Asset Acquisition Agreement between registrant and NetHealth.com,
               Inc., dated June 30, 1999.
10.10*         Series C Preferred Stock Purchase  Agreement  between  registrant
               and the Investors named on Schedule thereto, dated June 3, 1999.
10.11*         Series D Preferred Stock Purchase  Agreement  between  registrant
               and the Investors named on Schedule  thereto,  dated September 3,
               1999.
10.12+*        Agreement  between  registrant and Express  Scripts,  Inc., dated
               August 31, 1999.
10.13+**       Agreement between registrant and Express Scripts, Inc. dated June
               19, 2000.
10.14**        Common Stock  Purchase  Agreement  between  registrant  and Alpha
               Venture Capital, Inc. dated July 25, 2000.
10.15***       Master Lease  Agreement  between  registrant  and Comdisco,  Inc.
               dated January 15, 1999.
10.16***       Subordinated Loan and Security  Agreement between  registrant and
               Comdisco, Inc. dated as of January 15, 2001. The exhibits to this
               document  have been omitted  from this  filing.  The Company will
               furnish,  as  supplementary  information,  copies of the  omitted
               materials to the Securities and Exchange Commission upon request.
10.17*****     Discounted  Payoff  Agreement,  between  registrant and Comdisco,
               Inc. dated July 27, 2001.
10.18******    Bill of Sale between  registrant  and  Lightning  Logistics,  LLC
               selling  and  assigning  leases  of real  and  personal  property
               located at 6399 Shelby View Drive, Suite 122, Memphis, Tennessee.
10.19******    Form  of   Assignment  of  Lease  among   registrant,   Lightning
               Logistics, LLC and Belz Devco GP.
10.20******    Form of Guaranty of Lease by Flextronics International, Ltd.
10.21******    Bill of Sale between  registrant  and Unicorp,  Inc.  dated as of
               July 1, 2001,  selling and assigning  leases of real and personal
               property  located at 6399  Shelby  View  Drive,  Suites  113-115,
               Memphis, Tennessee.
10.22******    Form of Assignment of Lease among  registrant,  UITSG,  LLC d/b/a
               Unicorp and Belz Devco GP.
10.23******    PlanetRx.com   Licensing   Agreement   between   registrant   and
               Revelation America Incorporated dated as of August 14, 2001.
10.24******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant  and  Guthy-Renker  Corporation  dated as of March 15,
               2001.
10.25******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Pharmacia Corp. dated as of March 21, 2001.
10.26******    Domain  Name   Purchase   Agreement  and  Bill  of  Sale  between
               registrant and Ortho Biotech Products,  L.P. dated as of April 2,
               2001.
10.27******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Johnson & Johnson dated as of March 16, 2001.
10.28******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and SmithKline Beecham dated as of March 12, 2001.
10.29******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and F.A.C.E.S. dated as of March 5, 2001.
10.30******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant  and  Simstar  Internet  Solutions  dated as of May 2,
               2001.
10.31******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Serono, Inc. dated as of March 15, 2001.
10.32******    Domain  Name   Purchase   Agreement  and  Bill  of  Sale  between
               registrant  and U.S.  Nursing  Corporation  dated as of March 14,
               2001.
10.33******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Johnson & Johnson dated as of March 14, 2001.
10.34******    Internet  Domain  Name  Transfer  &  Escrow   Agreement   between
               registrant and Richard Gabriel dated as of March 30, 2001.
10.35++        Amendment to PlanetRx Licensing  Agreement between registrant and
               Revelation America Incorporated effective November 28, 2001.
10.36++        Settlement  Agreement,  Judgment  for  Permanent  Injunction  and
               Dismissal with Prejudice of Remaining  Claims between  registrant
               and Express Scripts, Inc. dated January 22, 2002.
23.1++         Consent of  PriceWaterhouse  Coopers  with respect to the audited
               financial statements of the registrant.

---------------

*              Incorporated   herein  by  reference  to  Form  S-1  as  declared
               effective on October 7, 1999 (File No. 333-82485).

**             Incorporated  herein by reference to report on Form 10-Q, for the
               quarterly period ended June 30, 2000 filed on August 14, 2000.

***            Incorporated  herein by reference to annual  report on Form 10-K,
               for the fiscal year ended  December 31, 2000,  filed on April 17,
               2001.

****           Incorporated  herein by reference to Form 10-K/A,  for the fiscal
               year ended December 31, 2000, filed on April 30, 2001.

*****          Incorporated  herein by reference to report on Form 10-Q, for the
               quarterly period ended June 30, 2001, filed on August 15, 2001.

******         Incorporated  herein by reference to report on Form 10-Q, for the
               quarterly  period ended  October 31, 2001,  filed on November 14,
               2001.

+              Confidential  treatment has been  requested for certain  portions
               which have been blacked out in the copy of the exhibit filed with
               the Securities and Exchange  Commission.  The omitted information
               has been  filed  separately  with  the  Securities  and  Exchange
               Commission   pursuant  to  the   application   for   confidential
               treatment.

++             Filed herewith

+              Confidential  treatment has been  requested for certain  portions
               which have been blacked out in the copy of the exhibit filed with
               the Securities and Exchange  Commission.  The omitted information
               has been  filed  separately  with  the  Securities  and  Exchange
               Commission   pursuant  to  the   application   for   confidential
               treatment.


<PAGE>
Exhibit 10.35

                 FIRST AMENDMENT TO PLANETRX LICENSING AGREEMENT

     THIS  DOCUMENT  AMENDS  THAT  CERTAIN  PLANETRX  LICENSING  AGREEMENT  (the
"Agreement")  which is dated as of the 14th day of August,  2001 by and  between
REVELATION AMERICA INCORPORATED,  a Delaware corporation ("Revelation") with its
principal place of business at 4466 Elvis Presley Boulevard, Suite 222, Memphis,
Tennessee  38116  and  PLANETRX.COM,  INC.,  a  Delaware  corporation  with  its
principal  place of business at 6399  Shelby  View  Drive,  Suite 122,  Memphis,
Tennessee 38134  ("PlanetRx") and this AMENDMENT is effective on the 28th day of
November, 2001.

     WHEREAS,  PlanetRx  and  Revelation  have  previously  entered into a joint
effort under a licensing  arrangement to co-brand and market certain  Revelation
and  PlanetRx  products and services and pay PlanetRx a royalty from the sale of
the Cash Cards (defined in the AGREEMENT); and

     WHEREAS,  PlanetRx  and  Revelation  desire to amend  certain  terms of the
AGREEMENT to meet the current needs of the Parties;

     NOW, THEREFORE,  in consideration of the mutual agreements and undertakings
set forth herein, the receipt and sufficiently of which are hereby acknowledged,
Revelation and PlanetRx agree as follows:

1.   To the extent not modified,  canceled or amended by the terms of this FIRST
     AMENDMENT, the terms of the AGREEMENT are regarded as valid and enforceable
     by the Parties. The AGREEMENT is incorporated herein by reference.

2.   In exchange for the $250,000.00  sum stated herein,  to be paid to PlanetRx
     by  Revelation,  PlanetRx  agrees to commit all of its media credits to the
     cause of the  joint-marketing  arrangement  described in the AGREEMENT.  In
     order to induce  PlanetRx  to commit all of the media  credits,  Revelation
     agrees to pay the $250,000.00 to PlanetRx, as stated below.

3.   Revelation  shall  pay to  PlanetRx  a sum of Two  Hundred  Fifty  Thousand
     Dollars ($250,000.00) in cash out of the proceeds received from the sale of
     Preferred  Stock as  outlined  in the  Private  Placement  Memorandum.  The
     $250,000.00  stated  hereunder  is to be in  addition  to the  sums  due to
     PlanetRx under the AGREEMENT.

4.   Although  the  $250,000.00  additional  fee is to be paid  only  out of the
     proceeds of the Private Placement,  the total amount is deemed to be due to
     PlanetRx.com at the completion of the ad campaign.

5.   The Parties shall  conduct a joint e-mail  messaging  campaign  designed to
     deliver messages about the Parties services to the substantially all of the
     members of PlanetRx.com. The Parties shall jointly design the message to be
     sent.  The campaign shall commence at any point after the execution of this
     AMENDMENT  that the Parties agree and continue  until  terminated by one or
     both Parties.  Revelation shall pay to PlanetRx.com  the sum of $5,000,  in
     advance  of each  e-mail  drop.  Revelation  shall  not have  access to the
     confidential  customer  lists of  PlanetRx.com  and shall have no ownership
     interest in the customer lists independent of PlanetRx.com.

     IN WITNESS WHEREOF,  the Parties have hereunto set their hands in execution
of this Agreement as of the date first written above.



                                                 REVELATION AMERICA INCORPORATED

                                                 BY:  s/John C. Miller
                                                 ---------------------
                                                 NAME:  John C. Miller
                                                 TITLE: President & CEO



                                                 PLANETRX.COM, INC.

                                                 BY:  s/W. Todd Steele
                                                 ---------------------
                                                 NAME:  Todd Steele
                                                 TITLE:  CFO







<PAGE>
Exhibit 10.36

In The Circuit Court Of St. Louis County, Missouri

Express Scripts, Inc. Plaintiff(s) vs.
PlanetRx.com, Inc., Defendant(s)
Date 1-22-02                                    Filed January 22, 2002
Case Number 01CC-696                            Joan M. Gilmer
Division 36                                     Circuit Clerk, St. Louis County




                              SETTLEMENT AGREEMENT,

                      JUDGMENT FOR PERMANENT INJUNCTION AND

                  DISMISSAL WITH PREJUDICE OF REMAINING CLAIMS


1.   ESI shall pay $205,000 to PlanetRx.com on or before February 1, 2002.

2.   Both Parties  dismiss the present action,  with  prejudice,  and each party
     shall bear its own costs.

3.   Each Party hereby  releases  the other party from all claims,  defenses and
     matters raised in the present  action or reasonably  related to the matters
     stated  therein,  and  including  any  matters  reasonably  related  to the
     commercial  relationship of the Parties,  from the beginning of time to the
     date of this  document,  and  including  any issue of setoff.  This release
     shall not apply to any claim that ESI or any  shareholder  of  PlanetRx.com
     may  have  arising  from  its  status  as a  shareholder  of  PlanetRx.com,
     including  without  limitation  the  right  of ESI or  any  shareholder  of
     PlanetRx.com   to  receive   distribution(s)   upon  the   liquidation   of
     PlanetRx.com.

4.   The Court hereby permanently enjoins  PlanetRx.com and anyone acting on its
     behalf  from   sending  any  e-mail   messages   to  any   individuals   in
     PlanetRx.com's  install-base who purchased  prescriptions from PlanetRx.com
     and  identified  themselves  as an ESI member in the process (at a minimum,
     the approximately 6,500 individuals previously identified by PlanetRx.com).
     In addition,  PlanetRx.com will not provide any third-party with the e-mail
     addresses for these individuals

5.   PlanetRx.com  will not  pursue  any claim  against  HIP of NY, or any other
     third  parties,  for any  claims  related to the  issues  contained  in the
     present action.

6.   After  execution  of this  settlement  agreement,  and within ten (10) days
     after  payment  from ESI is received  by  PlanetRx.com,  PlanetRx.com  will
     provide ESI with a notarized summary that states the assets and liabilities
     of PlanetRx.com as of this date. In addition,  PlanetRx.com  will provide a
     similar summary of the 10-Qs for fiscal year 2001,  previously  released to
     the public.  To the extent such  information  is not included in the 10-Qs,
     PlanetRx.com  shall  provide a notarized  summary  identifying  the sale or
     other disposition of any assets greater than $10,000 of PlanetRx.com to any
     third parties since February 2001.

7.   PlanetRx.com agrees to provide,  approximately every 30 days,  effective as
     of the date of  payment by ESI, a  notarized  updated  summary of the total
     assets and  liabilities of  PlanetRx.com  and a report of the sale or other
     disposition of any assets of PlanetRx.com to any third party (not including
     assets with a value of less than $10,000.)  This paragraph  shall remain in
     force  only  so  long  as  ESI  remains  a  shareholder  of   PlanetRx.com.
     PlanetRx.com will make available its officers,  and related  personnel,  at
     reasonable  times and  places to  discuss  the  wind-up  of the  affairs at
     PlanetRx.com.  If ESI desires to have  meetings in any location  other than
     Memphis,  Tennessee,  ESI  shall  bear  the  out-of-pocket  expense  of the
     necessary personnel then employed by PlanetRx.com to attend the meetings on
     behalf  of  PlanetRx.com.  ESI  shall  always  bear  its own  expenses  for
     attending such a meeting, no matter where it is held.

8.   This Agreement, and the terms stated herein, shall be confidential,  except
     for any disclosure required by law, regulation or court order.

9.   ESI states that in receiving  confidential  information from  PlanetRx.com,
     ESI is familiar with all securities regulations surrounding the disclosure,
     receipt  and  use of  confidential  information.  ESI  shall  not  use  the
     information  in violation of any securities  regulations.  In the event ESI
     violates any securities  regulation  related to the disclosure,  receipt or
     use of this information,  ESI agrees to defend and indemnify  PlanetRx.com,
     its  officers  and  directors,  for any actions  brought  against them as a
     result.

10.  When referred to in this Agreement,  ESI shall mean Express Scripts,  Inc.,
     all affiliates,  subsidiaries,  and any company owned or controlled by ESI,
     including their respective officers and directors. When referred to in this
     Agreement,  PlanetRx.com  shall mean  PlanetRx.com,  Inc., all  affiliates,
     subsidiaries or related  companies,  and any company in which  PlanetRx.com
     owns  a 5% or  greater  stake,  including  their  respective  officers  and
     directors.


                               AGREED AND ACCEPTED:

                               Express Scripts, Inc.

                               By: /s/ Gretchen Gates Kelly
                                  ---------------------------
                                    Gretchen Gates Kelly, Senior Counsel (per
                                    authority of T. Bacteau)


                               PlanetRx.com, Inc.

                               By: /s/ Paul E. Risner
                                  ---------------------
                                    Secretary and General Counsel with authority
                                    to bind PlanetRx.com


              SO ORDERED:

                               /s/Carolyn C. Whittington
                               -------------------------
                               Entered:  1-22-02



<PAGE>

                                                                    EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement on Forms S-8 (Nos.  333-89047 and 333-33272) of our report dated March
27, 2002,  relating to the financial  statements of  PlanetRx.com,  Inc.,  which
appears in  PlanetRx.com,  Inc.'s  Annual Report on Form 10-K for the year ended
December 31, 2001.

/s/PricewaterhouseCoopers LLP
Atlanta, Georgia
April 15, 2002