UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 10-Q


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

                                       OR

[ ]  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.)

                           2207 Sawgrass Village Drive
                           Ponte Vedra Beach, Fl 32082
                    (Address of principal executive offices)


       Registrant's telephone number, including area code: (904) 285-0000


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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

           Class                                Outstanding at October 7, 2002
           -----                                ------------------------------

   Common Stock, $0.0001 par value                           62,192,744


<PAGE>



<TABLE>

<CAPTION>
                                Table of Contents


<S>       <C>                                                                                               <C>
PART I.   FINANCIAL INFORMATION                                                                            PAGE

Item 1.   Financial Statements                                                                               1

          Balance Sheets at June 30, 2002                                                                    1
          (unaudited) and December 31, 2001

          Statements of Operations (unaudited) for the Three and Six Months                                  2
          Ended June 30, 2002 and Period From Inception (August 3, 2001)
          Through June 30, 2002

          Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2002                        3
          and Period From Inception (August 3, 2001) Through June 30, 2002

          Notes to Financial Statements                                                                      4

 Item 2.  Management's Discussion and Analysis of Financial                                                  6
          Condition and Results of Operations

 Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                         8

PART II.  OTHER INFORMATION

 Item 1.  Legal Proceedings                                                                                 9

 Item 2.  Changes in Securities and Use of Proceeds                                                         9

 Item 3.  Defaults Upon Senior Securities                                                                   9

 Item 4.  Submission of Matters to a Vote of Security Holders                                               9

 Item 5.  Other Information                                                                                 10

 Item 6.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                  10

SIGNATURE                                                                                                   11

</TABLE>



<PAGE>

                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>

<CAPTION>
                               PLANETRX.COM, INC.
                          (A Development Stage Company)
                                 Balance Sheets
                    (in thousands, except per share amounts)
                                                                                             June 30,            December 31,
                                                                                               2002                 2001
                                                                                            (Unaudited)
                                                                                       ------------------    ------------------
<S>                                                                                     <C>                       <C>
ASSETS
Current assets:
      Cash and cash equivalents                                                        $             204         $         --
      Deposits                                                                                         5
                                                                                       ------------------    ---------------------

         Total current assets                                                                        209                   --

      Property and equipment, net                                                                      1
                                                                                       -------------------   ---------------------
         Total assets                                                                  $             210         $         --
                                                                                       ===================   =====================


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                                 $             155         $          42
      Accrued salaries and related benefits                                                          425                   154
      Accrued expenses                                                                                61
                                                                                          ----------------    ---------------------
         Total liabilities                                                                           641                   196

Commitments and contingencies (Note 5)

Stockholders' equity:
      Preferred Stock: issuable in series, $0.0001 par value;
      5,000 shares authorized; no shares issued and outstanding                                       --                    --
      Common Stock: $0.0001 par value; 200,000 shares authorized;
      61,734 and 33,822 shares issued and outstanding at June 30, 2002 and
      December 31, 2001, respectively                                                                  6                     3
      Additional paid-in capital                                                                     929                    --
      Subscriptions receivable                                                             (           2  )          (       3   )
      Deficit accumulated during the development stage                                     (       1,025  )          (     196   )
      Deferred compensation                                                                (         339  )
                                                                                       -------------------    ---------------------


         Total stockholders' equity                                                        (         431  )          (     196   )
                                                                                       -------------------    ---------------------

         Total liabilities and stockholders' equity                                    $             210         $          --
                                                                                       ===================    =====================

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

</TABLE>

<PAGE>

<TABLE>


<CAPTION>
                               PLANETRX.COM, INC.
                          (A Development Stage Company)
                            Statements of Operations
               (Unaudited, in thousands, except per share amounts)

                                                                                                                     Cumulative
                                                                                                                        From
                                                                                                                     Inception
                                                                 Three Months Ended        Six Months Ended       (August 3, 2001)
                                                                      June 30,                 June 30,            through June 30,

                                                                ---------------------    ---------------------
                                                                        2002                     2002                      2002
                                                                ---------------------    ---------------------     -----------------



<S>                                                             <C>                      <C>                       <C>
Net revenue                                                     $             --         $              --         $           --


Operating expenses:
         Salaries, wages and related benefits                                157                       271                     425
         Professional fees                                                   218                       271                     296
         Non cash stock compensation                                          46                       261                     261
         General and administrative                                           19                        26                      43
                                                                -----------------        ------------------        -----------------


                  Total operating expenses                                   440                       829                   1,025

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

Net loss available to common shareholders                       $    (       440 )      $   (          829 )      $   (      1,025 )
                                                                ==================       ==================       ==================


Basic and diluted net loss per share                            $   (       0.01  )     $   (        0.02  )
                                                                ==================       ==================


Weighted average shares used to compute basic and diluted
net loss per share                                                        42,804                    39,106
                                                                ==================       ==================



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

</TABLE>

<PAGE>



<TABLE>

<CAPTION>
                               PLANETRX.COM, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows
                                 (in thousands)

                                                                                                                         Period
                                                                                                                          From
                                                                                                                        Inception
                                                                                           Six Months Ended            (August 3,
                                                                                               June 30,                   2001)
                                                                                             (Unaudited)            through June 30,
                                                                                         ---------------------      ----------------

                                                                                                 2002                      2002
                                                                                         ---------------------      ----------------


<S>                                                                                       <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                                           $  (          829  )       $ (     1,025  )
      Adjustments to reconcile net loss to change in cash
         Depreciation                                                                                    1                      1
         Non cash stock compensation                                                                   261                    261
         Changes in assets and liabilities:
                  Deposits                                                                  (            5  )         (         5  )
                  Accounts payable                                                                     113                    155
                  Accrued salaries and related benefits                                                271                    425
                                                                                         ------------------         ----------------


                           Net cash used in operating activities                            (          188  )         (       188  )

CASH FLOWS USED IN INVESTING ACTIVITIES:
      Purchase of property and equipment                                                    (            2  )         (         2  )

CASH FLOWS FROM FINANCING ACTIVITIES:
      Net proceeds from issuance of common stock                                                       394                    394
                                                                                          -------------------       ----------------

Increase in cash and cash equivalents                                                                  204                    204
Cash and cash equivalents at beginning of period                                                        --                     --
                                                                                          -------------------      -----------------


Cash and cash equivalents at end of period                                               $             204          $         204
                                                                                          ===================       ================


Non cash effect of merger, assumption of certain liabilities (Note 1)                                   61                     61

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

</TABLE>

<PAGE>

                               PLANETRX.COM, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
               (Unaudited, in thousands, except per share amounts)

1.       The Company and Basis of Presentation

The Company

On May 31, 2002  PlanetRx.com  ("PlanetRx"  or the  "Company"),  a public  shell
company,  merged with Paragon Homefunding,  Inc.,  ("Paragon") a privately held,
development stage company based in Ponte Vedra Beach,  Florida,  that intends to
enter  the  financial  services  market  through  acquisitions.  For  accounting
purposes, the transaction has been treated as a recapitalization of Paragon with
Paragon  viewed as the  acquirer  in a  reverse  acquisition.  As a result,  the
financial  statements  presented  before the merger  are those of  Paragon.  The
historical  stockholders'  equity  of  Paragon  prior  to the  merger  has  been
retroactively  restated  for the  equivalent  number of shares  received  in the
merger by Paragon  after  giving  effect to the  difference  in par value of the
PlanetRx's and Paragon's stock with the difference  recorded as paid-in capital.
Also,  as a result of the Merger,  Paragon  also  assumed  approximately  $61 of
PlanetRx's accrued  liabilities for legal services.  Paragon was incorporated in
Delaware on August 3, 2001. We are a development stage company that has recorded
no revenue since inception.  Accordingly, we have no operating history and prior
periods do not exist for comparison to the periods  presented.  These  financial
statements  have  been  prepared  in  accordance  with  Statement  of  Financial
Accounting  Standards  No. 7,  "Accounting  and Reporting by  Development  Stage
Enterprises,"  to recognize the fact that the Company is devoting  substantially
all  of its  efforts  to  establishing  a new  business  and  planned  principal
operations have not commenced.

PlanetRx  was  incorporated  in Delaware  on March 31,  1995 and  operated as an
online healthcare destination for commerce,  content and community.  The Company
closed its online  health store in March 2001 and shortly  thereafter  began the
process of  liquidating  and  dissolving  the  Company.  The merger with Paragon
completed this process.

Pursuant to the merger, a wholly-owned subsidiary of the Company merged with and
into Paragon, and the Company issued approximately 55,561 shares of common stock
to the Paragon stockholders  equaling 90% of the total outstanding shares of the
Company's  common  stock  immediately  after the merger.  As a result,  the then
existing stockholders of the Company saw their ownership stake reduced from 100%
to 10% of the outstanding common stock. As a result of the merger,  Paragon also
assumed  approximately $61 of PlanetRx's accrued liabilities for legal services.
There could be further  dilution of this  interest  following  the merger in the
event that the  Company  issues  additional  shares of common  stock.  Paragon's
management has assumed control of the Company.  Paragon has no operating history
and we give no assurance when or if we will ever commence operations.  Thus, our
ability to continue to exist will depend on a number of factors,  including  the
ability to secure  adequate  sources of capital as well as locating  and funding
acquisitions of suitable companies.

The  accompanying   unaudited   condensed   financial   statements  reflect  all
adjustments,  which include only normal  recurring  adjustments,  which,  in the
opinion of  management,  are necessary for the fair  statement of the results of
operations for the periods shown. The results of operations for such periods are
not  necessarily  indicative  of the results to be expected  for the full fiscal
year or any future period. The information  included in this Form 10-Q should be
read in conjunction with the 2001 audited financial statements and notes thereto
included herewith.

2.       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
equivalent  shares  if  dilutive.   Common  equivalent  shares  consist  of  the
incremental  common  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 common  equivalent
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 for the periods indicated (in thousands, except per share amounts):
<TABLE>

                                                                                                                       Period
                                                                                                                    From Inception
                                                                                                                     (August 3,
                                                                Three Months Ended        Six Months Ended              2001)
                                                                     June 30,                 June 30,            through June 30,
                                                               ----------------------    -------------------     -------------------

                                                                       2002                     2002                    2002
                                                               ----------------------    -------------------     -------------------

<S>                                                            <C>                       <C>                     <C>
Numerator: Net loss available to common shareholders           $   (        440  )       $   (       829  )      $  (        1,025 )

Denominator: Weighted average common shares                              42,804                   39,106                    35,849

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

Basic and diluted net loss per share                           $   (       0.01  )       $   (      0.02  )      $  (         0.03 )
                                                               ======================    ===================     ===================

</TABLE>

3.       Accrued Salaries and Related Benefits

The Company has entered into employment  agreements with its executive officers.
All executive  officers have elected to defer receipt of the salaries,  benefits
and other items due them pursuant to such contracts  until the Company  acquires
sufficient  operating  capital through the  acquisition of operating  companies,
fundraising  or both.  At June 30,  2002 and  December  31, 2001 the Company had
accrued $425 and $154 pursuant to these contracts, respectively.

4.       Stockholders' Equity

The Company has been  seeking  capital  through the sale of its common stock via
private  placement  transactions.  During  February,  March  and May of 2002 the
Company  sold 10,783  shares of common stock for  approximately  $394 to private
investors.

In March 2002 the Company and the founding  shareholders issued 16,432 shares of
restricted and unrestricted common stock to its Chief Executive Officer, John W.
Brink in connection with his employment  agreement.  As a result of the issuance
of 5,477  shares of  unrestricted  stock the Company  recorded  $200 of non-cash
stock compensation in March 2002. Of the restricted  shares,  8,216 were to vest
over  time  with the value of the stock  award  amortized  over the  appropriate
vesting  period.  The remaining  2,739  restricted  shares were to vest upon the
Company's initial acquisition,  with a compensation charge recorded based on the
market value of the stock at the time of the acquisition. These shares have been
recorded  as  issued  and  outstanding  at June 30,  2002  and $400 of  deferred
compensation has been recorded in stockholders' equity

On July 16, 2002 Mr. Brink resigned as Chief  Executive  Officer of the Company.
In  connection  with his  resignation  he  rescinded  and  cancelled  the  above
mentioned stock grant as well as all options that he had been granted.  Pursuant
to the terms of the  merger  agreement,  the  shares  given to Mr.  Brink by the
founding  shareholders  were  returned  to them and the  remaining  shares  were
reallocated to the shareholders that existed at the time of the merger described
above.

5.       Commitments and Contingencies

On March 27, 2001, SDR Investors,  LP filed a lawsuit against PlanetRx,  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


<PAGE>

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 December 6, 2000. The Action,  which is being
coordinated  with several 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.  A motion to  dismiss  addressing  issues  common to the
companies and individuals  sued in this action was filed on July 15, 2002. As of
the date  hereof,  the  Company is unable to predict the outcome of the suit and
its ultimate effect, if any, on the Company's  financial  condition,  results of
operations or cash flows.

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 the Company  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.  The Company has
filed an answer  asserting the affirmative  defenses of failure of consideration
and statute of frauds and denying the existence of an oral  contract.  As of the
date  hereof,  the  Company is unable to predict the outcome of the suit and its
ultimate  effect,  if any,  on the  Company's  financial  condition,  results of
operations or cash flows.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Forward Looking Statements

Certain information  contained in the matters set forth in this Quarterly Report
are  forward-looking  statements  within the meaning of the  Private  Securities
Litigation Reform Act of 1995, and is subject to the safe harbor created by that
act.  PlanetRx  cautions readers that certain  important  factors may affect the
PlanetRx's actual results and could cause such results to differ materially from
any  forward-looking  statements  which  may be deemed to have been made in this
item and elsewhere in this Quarterly  Report,  or which are otherwise made by or
on behalf of  PlanetRx.  For this  purpose,  any  statements  contained  in this
Current  Report that are not  statements of historical  fact may be deemed to be
forward-looking  statements.  Without  limiting the generality of the foregoing,
words such as may, will, expect, believe, explore, consider, anticipate, intend,
could, estimate,  plan, or continue or the negative variations of those words or
comparable  terminology  are  intended to identify  forward-looking  statements.
Factors that may affect PlanetRx's  results include,  but are not limited to the
risks and uncertainties associated with the following:

o    our  ability to raise  capital  necessary  to sustain  our  operations  and
     implement our business plan,

o    our ability to implement our business plan,

o    our ability to obtain  regulatory  permits and  approvals to operate in the
     financial services area,

o    our  ability  to  identify  and  complete   acquisitions  and  successfully
     integrate the businesses we acquire, if any,

o    changes in the real estate market, interest rates or the general economy of
     the markets in which we operate,

o    our ability to employ and retain qualified management and employees,

o    changes in  government  regulations  that are  applicable  to our regulated
     brokerage, lending and property management businesses,

o    general volatility of the capital markets and the establishment of a market
     for our shares,

o    changes in the demand for our services,

<PAGE>

o    the degree and nature of our competition,

o    our ability to generate sufficient cash to pay our creditors, and

o    disruption  in the economic and  financial  conditions  primarily  from the
     impact of past terrorist  attacks in the United  States,  threats of future
     attacks,  police and  military  activities  overseas  and other  disruptive
     worldwide political events.

PlanetRx is also subject to other risks detailed herein or detailed from time to
time in PlanetRx's Securities and Exchange Commission filings.

History and Recent Events

Paragon was  incorporated  in Delaware in August 2001 and our  headquarters  are
located in Ponte Vedra Beach, Florida. We intend to enter the financial services
industry  through a series of  acquisitions  and  initially  plan to pursue  the
acquisition  of companies  who  originate or broker  residential  mortgages.  We
believe our acquisition  candidates  would be willing to be acquired in exchange
for  securities  of a publicly  traded  company and, as a result,  subsequent to
incorporation  Paragon began to pursue the acquisition of a public  company.  On
April 26, 2002, we announced that we had entered into a definitive  agreement to
merge with  Paragon.  Prior to  commencing  liquidation,  PlanetRx was a leading
online healthcare  destination for commerce,  content and community.  The merger
was completed on May 31, 2002. Pursuant to the merger, a wholly-owned subsidiary
of PlanetRx  merged with and into Paragon,  and we issued shares of common stock
to the Paragon  stockholders  equaling  90% of the total  outstanding  shares of
PlanetRx's common stock  immediately  after the merger. As a result,  PlanetRx's
then existing stockholders saw their ownership stake reduced from 100% to 10% of
the outstanding  common stock.  There could be further dilution of this interest
following  the  merger in the event  that we issue  additional  shares of common
stock.  Paragon's  management  has assumed  control of PlanetRx.  For accounting
purposes, the transaction has been treated as a recapitalization of Paragon with
Paragon  viewed as the  acquirer  in a  reverse  acquisition.  As a result,  the
financial statements presented before the merger are those of Paragon.

As  discussed  above,  we plan to acquire  companies in the  financial  services
market and have initially  targeted  companies that specialize in originating or
brokering  residential  home  mortgages.  To date we have  raised  approximately
$394,000  through the sale of common  stock to  individual  investors.  We are a
development  stage  company  that  has  recorded  no  revenue  since  inception.
Accordingly,  we have no  operating  history and prior  periods do not exist for
comparison to the periods presented.

Results of Operations

For the Three Months ended June 30, 2002

Net Revenue

Net revenues were zero the three months ended June 30, 2002.

Operating Expenses

Salaries,  wages and related expenses.  For the three months ended June 30, 2002
salaries,  wages and related expenses were $157,000. These are primarily related
to  salaries  accrued  for  the  executive   officers   pursuant  to  employment
agreements.  Such officers have elected to defer receipt of the accrued  amounts
until we acquire businesses with cash flow sufficient to pay the amounts or when
sufficient additional capital is secured.

Professional  fees. For the three months ended June 30, 2002  professional  fees
were  $218,000 and  primarily  relate to legal and  accounting  fees incurred in
connection with the merger with Paragon.

Non cash stock  compensation.  For the three months ended June 30, 2002 non cash
stock  compensation  costs  were  $46,000  and relate to the  amortization  of a
restricted stock awarded to the Chief Executive Officer.

<PAGE>

General and Administrative  expenses.  For the three months ended June 30, 2002,
general and administrative expenses were $19,000 and relate to the operation and
maintenance of the corporate offices.

For the Six Months Ended June 30, 2002

Net Revenue

Net revenues were zero for the six months ended June 30, 2002.

Operating Expenses

Salaries,  wages and related  expenses.  For the six months  ended June 30, 2002
salaries,  wages and related expenses were $271,000. These are primarily related
to  salaries  accrued  for  the  executive   officers   pursuant  to  employment
agreements.  As discussed above,  such amounts will be deferred until we acquire
businesses  with cash flow  sufficient  to pay the  amounts  or when  sufficient
additional capital is secured.

Professional fees. For the six months ended June 30, 2002 professional fees were
$271,000  and  primarily  relate  to  legal  and  accounting  fees  incurred  in
connection with the merger with Paragon.

Non cash stock  compensation.  For the six months  ended June 30,  2002 non cash
stock  compensation  costs were  $261,000 and relate to the granting of stock to
the Chief Executive  officer and the  amortization of a restricted stock awarded
to the Chief Executive Officer.

General and  Administrative  expenses.  For the six months  ended June 30, 2002,
general and administrative expenses were $26,000 and relate to the operation and
maintenance of the corporate offices.

Liquidity and Capital Resources

We invest excess cash  predominantly in 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.  At  June  30,  2002,  we  had  cash  and  cash  equivalents  totaling
approximately $204,000.

Net cash used in operating  activities was approximately  $188,000 since we were
formed  in  August  2001 and  primarily  represent  the  payment  of  legal  and
accounting fees. As discussed above, we have raised approximately  $394,000 from
the issuance of common stock to individual investors. As of June 30, 2002 all of
our executive officers have elected to defer receipt of any salaries and bonuses
until  sufficient  additional  capital is secured or we acquire a business  with
sufficient cash flow to allow us to continue our existence.

We have entered into a non-binding  letter of intent to acquire a company in the
financial  services field. The proposed  transaction  contemplates,  among other
things, that PlanetRx will issue approximately 53,000,000 unregistered shares of
common stock to the seller. We are currently negotiating the terms of definitive
agreements and determining the ultimate  structure of, and consideration in, the
transaction.  We cannot  assure that this  transaction  will be entered  into or
closed.

There  can be no  guarantees  that we  will be  successful  in  either  securing
additional capital or acquiring businesses with sufficient cash flow to allow us
to continue our existence and execute our business plan.

We presently have no revenues, and we do not anticipate generating revenues from
operations  unless  we  close  an  acquisition  of a  company  operating  in the
financial services  industry.  We will need to raise more capital to allow us to
continue our existence and implement our business plan.

ITEM 3. 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 and cash
equivalents.  Due  to  the  short-term  nature  of  these  instruments  and  our
investment policies

<PAGE>

and  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.


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On March 27, 2001, SDR Investors,  LP filed a lawsuit against PlanetRx,  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 complaints have been consolidated into a single action and a
consolidated   amended  complaint  has  been  filed.  The  consolidated  amended
complaint names PlanetRx, Mr. Razzouk, Mr. Cotsakos, Mr. Beirne, Mr. Moritz, Mr.
Valenzuela,  Goldman  Sachs,  Robertson  Stephens (as successor to  BancBoston),
BancBoston,  J.P.  Morgan (as  successor to Hambrecht & Quist LLC),  Hambrecht &
Quist LLC,  William Blair & Co. LLC, Bear Stearns & Co.,  Inc.,  Merrill  Lynch,
Pierce,  Fenner  &  Smith,  Incorporated  and  Salomon  Smith  Barney,  Inc.  as
defendants.  The action generally  alleges that the defendants  violated federal
securities  laws  by not  disclosing  certain  actions  allegedly  taken  by the
underwriter   defendants  in  connection   with  the  IPO.  The  action  alleges
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  action  seeks
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 December 6, 2000. The action 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. A motion
to dismiss  addressing  issues common to the companies and  individuals  sued in
these actions was filed on July 15, 2002.  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, results of operations, or cash flows.

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  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.  We have filed an
answer asserting the affirmative defenses of failure of consideration and statue
of frauds and denying the existence of an oral contract.  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, results of operations, or cash flows.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

<PAGE>

ITEM 5.  OTHER INFORMATION

The following  amends and restates,  in its  entirety,  Item 7 of  PlanetRx.com,
Inc.'s (the "Company" or "PlanetRx") Form 8-K dated and filed June 17, 2002 (the
"Form 8-K") pursuant to which,  on May 31, 2002, a change in control of PlanetRx
occurred  as a result of the  closing  of the  announced  Agreement  and Plan of
Merger dated April 22, 2002 among PlanetRx,  PHI Acquisition  Corp., and Paragon
Homefunding, Inc.

Form 8-K ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

     (a)  Financial statements of businesses acquired

          Audited financial statements of Paragon  Homefunding,  Inc., as of and
          for the period from  inception  (August 3, 2001) to December  31, 2001
          and the independent accountants report thereon, are attached hereto as
          Exhibit 99.1.

          Unaudited   condensed   interim   financial   statements   of  Paragon
          Homefunding, Inc., as of March 31, 2002 are attached hereto as Exhibit
          99.2.

     (b)  Exhibits

          99.1 Audited financial statements of Paragon Homefunding,  Inc., as of
               and for the period from inception (August 3, 2001) to December
               31, 2001, and the independent accountants report thereon, filed
               herewith.

          99.2 Unaudited  condensed  interim  financial  statements  of  Paragon
               Homefunding, Inc,, as of March 31, 2002 filed herewith.



ITEM 6.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) Exhibits

     The document  listed in the Exhibit Index  following the signature  page of
     this report is filed as part of this report.

     (b) Reports on Form 8-K

     The  Company  filed a current  report  on Form 8-K on June 17,  2002 for an
     event dated May 31, 2002 with the Securities and Exchange  Commission under
     items 1, 2 and 7 that it had  completed a merger with Paragon  Homefunding,
     Inc.



<PAGE>



                                    SIGNATURE

     Pursuant to the  requirements  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/ Steven A. Burleson
                                                  -----------------------------
                                                  Steven A. Burleson
                                                  Chief Executive Officer and
                                                  Principal Accounting Officer




Date:   October 8, 2002



<PAGE>



                                  CERTIFICATION
                                      UNDER
                                   SECTION 302
                                     OF THE
                           SARBANES-OXLEY ACT OF 2002


I,  Steven  A.  Burleson,  being  the  Chief  Executive  Officer  and  principal
accounting  officer of PlanetRx.com,  Inc., a Delaware  corporation  (PlanetRx),
certify that:

     1.   I have  reviewed  this  quarterly  report on Form 10-Q for the  period
          ended June 30, 2002 of PlanetRx;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report; and

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report.

Dated:  October 8, 2002

                                                 /s/ Steven A. Burleson
                                                --------------------------
                                                  Steven A. Burleson
                                                  Chief Executive Officer and
                                                  Principal Accounting Officer


<PAGE>




                                  EXHIBIT INDEX

Exhibit
Number                         Description of Exhibit
----------------     -----------------------------------------------------------


       2       Agreement  and Plan of Merger dated as of April 22,  2002,  among
               PlanetRx.com,   Inc.,  PHI   Acquisition   Corp.,   and   Paragon
               Homefunding, Inc.*

     99.1      Audited financial statements of Paragon Homefunding,  Inc., as of
               and for the period  from  inception  (August 3, 2001) to December
               31, 2001, and the independent  auditors'  report  thereon,  filed
               herewith.

     99.2      Unaudited  condensed  interim  financial  statements  of  Paragon
               Homefunding, Inc., as of March 31, 2002 filed herewith




-------------
* Incorporated herein by reference to Exhibit 2 to PlanetRx's Quarterly Report
  on Form 10-Q for the period ended March 31, 2002.