<PAGE>

                                 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 September 30, 2000

                                       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 _________


                               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.)

                       349 Oyster Point Blvd., Suite 201
                     South San Francisco, California 94080
                    (Address of principal executive offices)


      Registrant's telephone number, including area code: (650) 616-1500
                                                          --------------

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 31, 2000

              Common Stock, $0.0001 par value                50,042,371
<PAGE>

                               PLANETRX.COM, INC.

                               Table of Contents


PART I.        FINANCIAL INFORMATION

Item 1.        Condensed Financial Statements

               Condensed Balance Sheets at September 30, 2000
               (unaudited) and December 31, 1999

               Condensed Statements of Operations for the Three and
               Nine Months Ended September 30, 2000 and 1999
               (unaudited)

               Condensed Statements of Cash Flows for the Nine Months
               Ended September 30, 2000 and 1999 (unaudited)

               Notes to Condensed Financial Statements
Item 2.
               Management's Discussion and Analysis of Financial
               Condition and Results of Operations

Item 3.        Quantitative and Qualitative Disclosures About Market
               Risk

PART II.       OTHER INFORMATION

Item 1.        Legal Proceedings

Item 2.        Changes in Securities and Use of Proceeds

Item 3.        Defaults Upon Senior Securities

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

Item 5.        Other Information

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

Signatures

<PAGE>

PART I
ITEM 1. FINANCIAL STATEMENTS

                              PLANETRX.COM, INC.
                           Condensed Balance Sheets
                   (in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                           September 30,     December 31,
                                                               2000              1999
                                                          ---------------   --------------
<S>                                                       <C>               <C>
                                                            (unaudited)        (audited)
ASSETS
Current assets:
     Cash and cash equivalents                                  $  25,248        $  51,629
     Short-term investments                                             -           65,119
     Inventories                                                    3,018            2,276
     Prepaid expenses and other current assets                     13,974           19,594
                                                          ---------------   --------------
         Total current assets                                      42,240          138,618
     Property and equipment, net                                   17,773           10,884
     Intangible assets, net                                       157,469          188,115
     Other assets                                                     211              898
                                                          ---------------   --------------
                                                                $ 217,693        $ 338,515
                                                          ===============   ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                           $   4,982        $   7,099
     Accrued expenses                                               5,685            8,444
     Accrued restructuring charges                                  2,800                -
     Deferred revenue                                                  17                8
     Borrowings, current                                            3,052              418
     Capital lease obligations, current                               605               54
                                                          ---------------   --------------
         Total current liabilities                                 17,141           16,023
     Borrowings, long-term                                          3,783            6,582
     Capital lease obligations, long-term                           1,632              265
                                                          ---------------  ---------------
                                                                   22,556           22,870
                                                          ---------------  ---------------

Commitments and contingencies

Stockholders' equity:
     Preferred Stock: issuable in series, $0.0001 par value;
         5,000 shares authorized; none issued and
         outstanding                                                    -                -
     Common Stock: $0.0001 par value; 100,000 shares
         authorized; 51,039 and 52,286 shares issued and
         outstanding, respectively                                      5                5
     Additional paid-in capital                                   430,731          444,405
     Notes receivable from stockholders                               (34)             (35)
     Deferred stock-based compensation                             (4,700)         (25,454)
     Accumulated deficit                                         (230,865)        (103,276)
                                                          ---------------   --------------
         Total stockholders' equity                               195,137          315,645
                                                          ---------------   --------------
                                                                $ 217,693        $ 338,515
                                                          ===============  ===============
</TABLE>

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

                              PLANETRX.COM, INC.
                      Condensed Statements of Operations
              (unaudited, in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                  Three Months Ended                    Nine Months Ended
                                                     September 30,                         September 30,
                                            ------------------------------         ------------------------------
                                                2000              1999                 2000              1999
                                            ------------------------------         ------------------------------
<S>                                            <C>                <C>                 <C>                <C>
Net revenue:
      e-commerce                               $  9,078           $  2,670            $  25,023          $  3,292
      Sponsorship                                   864                411                3,127               606
                                             ----------         ----------          -----------       -----------
                                                  9,942              3,081               28,150             3,898
                                             ----------         ----------          -----------       -----------
Cost of net revenue:
      e-commerce                                  8,705              2,535               23,775             3,229
      Sponsorship                                     8                 65                  373               100
                                             ----------         ----------          -----------       -----------
                                                  8,713              2,600               24,148             3,329
                                             ----------         ----------          -----------       -----------
Gross profit                                      1,229                481                4,002               569
                                             ----------         ----------          -----------       -----------
Operating expenses:
      Marketing and sales                        13,350             17,240               62,692            26,854
      Product development                         4,117              4,006               15,929             7,260
      General and administrative                  4,513              2,208                9,372             4,574
      Amortization of intangible                 10,215                547               30,645               547
       assets
      Stock-based compensation                      389              3,301                7,518             7,609
      Contract termination and
       severance charges                              -                  -                4,466                 -
      Restructuring charges                       2,975                  -                2,975                 -
                                             ----------         ----------          -----------       -----------
             Total operating expenses            35,559             27,302              133,597            46,844
                                             ----------         ----------          -----------       -----------
Operating loss                                  (34,330)           (26,821)            (129,595)          (46,275)
Interest income                                     484                681                2,665             1,080
Interest expense                                   (194)              (569)                (659)           (1,615)
                                             ----------         ----------          -----------       -----------
Net loss                                       $(34,040)          $(26,709)           $(127,589)         $(46,810)
                                             ==========         ==========          ===========       ===========
Effect of anti-dilution provisions of
 Series B Preferred Stock                             -                 -                     -            (1,009)
                                             ----------         ----------          -----------       -----------
Net loss available to common
 stockholders                                  $(34,040)          $(26,709)           $(127,589)         $(47,819)
                                             ==========         ==========          ===========       ===========

Basic and diluted net loss per share           $  (0.70)          $  (7.47)           $   (2.67)         $ (16.68)
                                             ==========         ==========          ===========       ===========

Weighted average shares used to
 compute basic and diluted net
 loss per share                                  48,486              3,577               47,862             2,867
                                             ==========         ==========          ===========       ===========
</TABLE>

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

<PAGE>

                              PLANETRX.COM, INC.
                      Condensed Statements of Cash Flows
                           (unaudited, in thousands)

<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                              September 30,
                                                           ------------------------------------------------
                                                                  2000                         1999
                                                           -------------------          -------------------
<S>                                                           <C>                          <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                       $(127,589)                    $(46,810)
      Adjustments to reconcile net loss to net cash
       used in operating activities:
           Depreciation and amortization                                 4,648                        1,321
           Non-cash interest charges related to
            purchase option and warrant                                      -                        1,359
           Stock-based compensation                                      7,518                        7,473
           Amortization of intangible assets                            30,646                          701
           Changes in assets and liabilities:
                Inventories                                               (742)                      (2,306)
                Prepaid expenses and other current                       5,620                      (14,243)
                 assets
                Other assets                                               687                         (107)
                Accounts payable                                        (2,117)                       7,286
                Accrued expenses and restructuring charges                  41                        1,082
                Deferred revenue                                             9                            7
                                                           -------------------          -------------------
                      Net cash used in operating                       (81,279)                     (44,237)
                       activities                          -------------------          -------------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases  of property and equipment                             (11,537)                      (5,312)
      Purchases of short-term investments                                                            (3,928)
      Sales of short-term investments                                   65,119                            -
                                                           -------------------          -------------------
                      Net cash provided by (used in)
                       investing activities                             53,582                       (9,240)
                                                           -------------------          -------------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of stock for cash, net                          -                       85,273
      Proceeds from exercises of Common Stock
       options                                                             536                        5,039
      Repurchase of unvested Common Stock                                 (974)                           -
      Repayment of notes receivable from stockholders                        1                            -
      Proceeds from borrowings and equipment
       financing                                                         2,000                        6,400
      Principal payments on capital lease obligations                      (82)                          (6)
      Principal payments on borrowings                                    (165)                           -
                                                           -------------------          -------------------
                      Net cash provided by financing
                       activities                                        1,316                       96,706
                                                           -------------------          -------------------

 (Decrease) increase in cash and cash equivalents                      (26,381)                      43,229
 Cash and cash equivalents at beginning of period                       51,629                          935
                                                           -------------------          -------------------
 Cash and cash equivalents at end of period                          $  25,248                     $ 44,164
                                                           ===================          ===================
</TABLE>

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

                              PLANETRX.COM, INC.
                    Notes to Condensed Financial Statements
                                  (unaudited)


Note 1--The Company and Basis of Presentation

     PlanetRx.com, Inc. ("PlanetRx" or the "Company") is an online healthcare
destination for commerce, content and community.  The Company was incorporated
in Delaware on March 31, 1995 and was in the development stage through December
31, 1998.

     The accompanying unaudited condensed financial statements reflect all
adjustments, which, in the opinion of management, are necessary for the fair
statement of the results of operation 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. These financial
statements should be read in conjunction with the Company's annual report on
Form 10-K for its fiscal year ended December 31, 1999.

Liquidity

     The Company has sustained losses since inception and expects to continue to
incur losses for the foreseeable future. The Company has incurred net losses of
$7,000 for the year ended 1996, $137,000 for the year ended 1997, $4.1 million
for the year ended 1998, $98.0 million for the year ended December 31, 1999 and
$127.6 million for the nine months ended September 30, 2000. In July 2000, the
Company signed a common stock purchase agreement for up to $50.0 million in
equity financing. However, there is no assurance that the Company will be able
to meet the conditions required for drawing funds from the equity line, and the
Company may need to raise additional funds. The Company cannot be certain that
additional financing will be available on favorable terms when required, or at
all.

Recent accounting pronouncements

     In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 is effective
for the fourth quarter of years ending after December 31, 1999. The Company will
adopt SAB 101 in the quarter ending December 31, 2000, and does not expect such
adoption to have a significant impact on the Company's results of operations,
financial position or cash flows.

     In July and September 2000, the Emerging Issues Task Force released Issue
No. 00-10 ("EITF 00-10"), "Accounting for Shipping and Handling Revenues and
Costs". EITF 00-10 notes that amounts billed, if any, for shipping and handling
should be included in revenue. If shipping and handling costs are significant
and are not included in costs of sales, a company should disclose both the
amount of such costs and which line item on the income statement includes that
amount. EITF 00-10 is effective for the Company's fourth quarter of 2000. The
Company will adopt the pronouncement in the quarter ending December 31, 2000,
and does not expect such adoption to have a significant impact on its results of
operations, financial position, or cash flows.

     In May 2000, the Emerging Issues Task Force released Issue No. 00-14 ("EITF
00-14"), "Accounting for Certain Sales Incentives". EITF 00-14 is effective for
the fourth quarter of 2000. The Company will adopt the pronouncement in the
quarter ending December 31, 2000, and does not expect such adoption to have a
significant impact on its results of operations, financial position, or cash
flows.


Note 2--Property and Equipment (in thousands)

<TABLE>
<S>                                                            <C>                     <C>
                                                                September 30,           December 31,
                                                                    2000                    1999
                                                            -------------------     -----------------
      Computer equipment and software                                   $13,595               $10,585
      Warehouse equipment                                                 4,554                   179
      Equipment under capital leases                                      2,318                   339
      Furniture and fixtures                                              1,510                   990
      Leasehold improvements                                              2,072                   485
      Construction in progress                                              734                   668
                                                            -------------------     -----------------
                                                                         24,783                13,246
      Less:  Accumulated depreciation and amortization                   (7,010)               (2,362)
                                                            -------------------     -----------------
                                                                        $17,773               $10,884
                                                            ===================     =================
</TABLE>


Note 3--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.
<PAGE>
                              PLANETRX.COM, INC.
                    Notes to Condensed Financial Statements
                                  (unaudited)

Diluted net loss per share is computed using the weighted average number of
common and common equivalents, if dilutive. Common equivalent shares 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.

    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>
<CAPTION>
                                                             Three Months Ended                        Nine Months Ended
                                                                September 30,                            September 30,
                                                   -----------------------------------      -----------------------------------
                                                        2000                 1999                2000                 1999
                                                   --------------      ---------------      --------------      ---------------
<S>                                                   <C>                 <C>                  <C>                 <C>
Numerator:
  Net loss                                               $(34,040)            $(26,709)          $(127,589)            $(46,810)
  Plus effect of antidilution provisions of Series
    B Preferred Stock                                           -                    -                   -               (1,009)

                                                   --------------      ---------------      --------------      ---------------
  Net loss available to common shareholders              $(34,040)            $(26,709)          $(127,589)            $(47,819)
                                                   ==============      ===============      ==============      ===============
Denominator:
  Weighted average common shares                           51,038               10,030              51,686                9,226
  Weighted average unvested common shares
    subject to repurchase                                  (2,552)              (6,453)             (3,824)              (6,359)
                                                   --------------      ---------------      --------------      ---------------
  Denominator for basic and diluted
    calculation                                            48,486                3,577              47,862                2,867
                                                   ==============      ===============      ==============      ===============
Net loss per share:
  Basic and diluted                                        $(0.70)              $(7.47)             $(2.67)             $(16.68)
                                                   ==============      ===============      ==============      ===============
</TABLE>
Note 4--Sponsorship Agreement

     For the quarter ended September 30, 2000, the Company did not receive
guaranteed payments of $500,000 in connection with its five-year, exclusive
sponsorship contract with the therapeutic disease state management sponsor on
the PlanetRx.com diabetes website. In September 2000, the Company filed a
complaint against Pfizer, Inc. in California State Court in San Mateo County,
seeking contract damages in the amount of $3.0 million and other damages in
excess of $5.0 million. Because of Pfizer's failure and refusal to honor the
exclusive sponsorship agreement, the Company is treating the agreement as
terminated.

Note 5--Restructuring

     In the quarter ended September 30, 2000, in connection with management's
plan to reduce costs and improve operating efficiencies, the Company 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, the Company expects to record a charge in the fourth
quarter of fiscal 2000 of approximately $762,000 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.

     Total cash outlays associated with the restructuring are expected to be
$1.7 million. The remaining $1.3 million of restructuring costs consists of non-
cash charges primarily for asset write-offs. During the third quarter, $175,000
of cash was used for restructuring costs. The majority of the remaining cash
outlays of $1.5 million, which includes certain bonuses under the bonus program
adopted by the Company in May 2000, are expected to occur in the fourth quarter
of 2000.

<PAGE>

                              PLANETRX.COM, INC.
                    Notes to Condensed Financial Statements
                                  (unaudited)

     Restructuring activity for third quarter of 2000 was as follows:
<TABLE>
<CAPTION>
                             Severance and Benefits    Facilities     Total
--------------------------------------------------------------------------------
<S>                          <C>                       <C>            <C>
Provision for third
 quarter 2000                $1,686,000                $1,289,000     $2,975,000
Amount utilized in
 third quarter 2000             175,000                         -        175,000
--------------------------------------------------------------------------------
Balance at September 30,
 2000                        $1,511,000                $1,289,000     $2,800,000
================================================================================
</TABLE>

Note 6--Warrant for services

     During the third quarter of 2000, the Company issued warrants to a company
to purchase 150,000 shares of Common Stock at $0.84 in exchange for services in
conjunction with the allergy health channel sponsorship agreement. 75,000 shares
are exercisable in March 2001 and 75,000 shares are exercisable in March 2002.
The warrants expire in September 2002. These options are subject to variable
accounting, with fair value remeasurements at the end of each quarterly
reporting period. During the quarter ended September 30, 2000, the Company
recorded cost of net revenue expense related to these grants of $8,000. At
September 30, 2000, all of these warrants were outstanding.

Note 7--Reserve stock split

     The Company intends to ask our shareholders and board of directors to
approve a 1-for-8 reverse stock split. Share information for the nine months
ended September 30, 2000 and 1999 have not been retroactively adjusted to
reflect the reverse stock split.

Note 8--Advertising Agreements

     In December 1998, the Company entered into a marketing agreement with
America Online. This agreement terminated on August 31, 2000. The Company paid
$9.0 million in 2000 and 1999 related to this marketing agreement.

     In September 2000, the Company restructured its advertising agreement with
iVillage, Inc. Under the terms of the new agreement, the Company will continue
to be provided with a specific number of advertising impressions through
December 31, 2000. In consideration, the Company agreed to pay iVillage
approximately $500,000 in September 2000 and approximately $500,000 in October
2000. To date, the Company has paid $3.7 million and has recognized $3.4 million
of advertising expense related to this marketing agreement.

Note 9--Employee Bonus Program

     In May 2000, the Company adopted a bonus program for certain employees. At
September 30, 2000, $3.3 million was accrued for certain bonuses under this
bonus program, all of which was subsequently paid in October 2000.

Note 10--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 $500,000 plus
accrued interest. These amounts forgiven were treated as compensation expense by
the Company.

Note 11--Equity Financing Agreement

     In July 2000, the Company signed a definitive agreement for up to $50.0
million, subject to shareholder approval, in equity financing from Alpha Venture
Capital Inc., a member of the Alpha Group of Funds. The financing is in the form
of an equity line that can be utilized based on a formula relating to the
trading volume and price of the Company's Common Stock subject to certain terms
and conditions. Upon each financing drawdown, the proceeds will be allocated to
Common Stock and Common Stock.
<PAGE>

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


This Report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including, without limitation, statements regarding the Company's
expectations, beliefs, intentions or future strategies that are signified by the
words "expects", "anticipates", "intends", "believes", or similar language. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. Actual results could
differ materially from those projected in the forward-looking statements. In
evaluating the Company's business, prospective investors should carefully
consider the information set forth below under the caption "Risk Factors" in
addition to the other information set forth herein. The Company cautions
investors that its business and financial performance are subject to substantial
risks and uncertainties.

Overview

     PlanetRx.com is an online healthcare destination for commerce, content and
community. Our e-commerce website, www.PlanetRx.com, which we launched on March
18, 1999, provides a convenient, private and informative shopping experience for
health and personal care products. We offer 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, incorporate content that addresses a
variety of health-related topics. In addition, we own and operate 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, are
linked to the PlanetRx.com website.

     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 expect to record 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.

     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. In September 2000, we filed a complaint against Pfizer, Inc. in
California State Court in San Mateo County, seeking contract damages in the
amount of $3.0 million and other damages in excess of $5.0 million. Because of
Pfizer's failure and refusal to honor the exclusive sponsorship agreement, we
are treating the agreement as terminated.

     In December 1998, we entered into a marketing agreement with America
Online. This agreement terminated on August 31, 2000. We paid $9.0 million in
2000 and 1999 related to this marketing agreement.

     In September 2000, we restructured our sponsorship agreement with iVillage,
Inc. Under the terms of the new agreement, we will continue to be provided with
a specific number of advertising impressions through December 31, 2000. In
consideration, we agreed to pay iVillage approximately $1.0 million during
September through December, 2000. We paid $9.0 million during the year ended
December 31, 1999 and recognized $1.1 million and $800,000 in advertising
expense and content acquisition expense, respectively, during that same period.

     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. There can be no
assurances that we will be able to draw on the equity line.  Even if we are able
to completely draw on the equity line, we expect that it will be necessary to
take additional financing and cost saving steps in order to continue to develop
our business.
<PAGE>

Results of Operations

     The following table sets forth unaudited quarterly statement of operations
data for the five quarters ended September 30, 2000. This unaudited quarterly
information has been derived from our unaudited financial statements and
reflects all adjustments, which, in the opinion of management, are necessary for
the fair presentation 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.


                              PlanetRx.com, Inc.
                   Condensed Quarterly Results of Operations
                           (unaudited, in thousands)

<TABLE>
<CAPTION>
                                                                            Quarter Ended
                                      ----------------------------------------------------------------------------------------------
                                       September 30,          June 30,         March 31,         December 31,         September 30,
                                           2000                 2000             2000                1999                 1999
                                      ----------------------------------------------------------------------------------------------
<S>                                   <C>             <C>                <C>                 <C>                 <C>
Net revenue:
    e-commerce                               $ 9,078            $ 8,132             $ 7,813             $ 4,564             $ 2,670
    Sponsorship                                  864              1,303                 960                 537                 411
                                      --------------  -----------------  ------------------  ------------------  -------------------
                                               9,942              9,435               8,773               5,101               3,081
Cost of net revenue:
    e-commerce                                 8,705              7,825               7,245               4,260               2,535
    Sponsorship                                    8                209                 156                   -                  65
                                      --------------  -----------------  ------------------  ------------------  -------------------
                                               8,713              8,034               7,401               4,260               2,600
                                      --------------  -----------------  ------------------  ------------------  -------------------
Gross profit                                   1,229              1,401               1,372                 841                 481
Operating expenses:
    Marketing and sales                       13,350             20,638              28,704              28,330              17,240
    Product development                        4,117              5,217               6,595               5,686               4,006
    General and administrative                 4,513              2,532               2,327               1,874               2,208
    Amortization of intangible assets         10,215             10,215              10,215               8,926                 547
    Stock-based compensation                     389              2,861               4,268               8,192               3,301
    Contract termination and
      severance charges                            -              4,466                   -                   -                   -
    Restructuring charges                      2,975                  -                   -                   -                   -
                                      --------------  -----------------  ------------------  ------------------  -------------------
            Total operating expenses          35,559             45,929              52,109              53,008              27,302
                                      --------------  -----------------  ------------------  ------------------  -------------------
Operating loss                               (34,330)           (44,528)            (50,737)            (52,167)            (26,821)
Interest income (expense), net                   290                615               1,101                 963                 112
                                      --------------  -----------------  ------------------  ------------------  -------------------
Net loss                                    $(34,040)          $(43,913)           $(49,636)           $(51,204)           $(26,709)
                                      ==============  =================  ==================  ==================  ===================
</TABLE>

Net Revenue

     Net revenues were $9.9 million and $28.2 million for the three and nine
months ended September 30, 2000, respectively, which represents increases of
$6.9 million and $24.3 million, when compared with the corresponding periods in
1999.  E-commerce revenues increased to $9.1 million and $25.0 million for the
three and nine months ended September 30, 2000, respectively, which represents
increases of $6.4 million and $21.7 million from the corresponding periods in
1999.  Sponsorship revenues increased to
<PAGE>

$864,000 and $3.1 million for the three and nine months ended September 30,
2000, respectively, which represents increases of $453,000 and $2.5 million from
the corresponding periods in 1999.

Cost of Net Revenue

     Cost of revenues were $8.7 million and $24.1 million for the three and nine
months ended September 30, 2000, respectively, as compared to $2.6 million and
$3.3 million in the corresponding periods in 1999. Gross margins on e-commerce
were approximately 4% and 5% for the three and nine months ended September 30
2000, respectively, as compared to gross margins of 5% and 2% in the
corresponding periods of 1999.   We expect that our e-commerce margins will
fluctuate in the future as we continue with our customer acquisition programs.
Our sponsorship margin was 99% and 88% for the three and nine months ended
September 30, 2000, as compared to sponsorship margins of 84% and 83% for the
three and nine months ended September 30, 1999, respectively. The increase in
sponsorship gross margin is attributable to the termination of the ESI marketing
agreement in June 2000.

Operating Expenses

     Marketing and Sales. Marketing and sales expenses were $13.4 million for
the quarter ended September 30, 2000 as compared to $17.2 million for the
quarter ended September 30, 1999. The decrease from the corresponding quarter in
the prior year is directly attributable to decreased marketing and promotional
programs and decreased headcount. For the nine months ended September 30, 2000,
marketing and sales expense were $62.7 million as compared to $26.9 million for
the nine months ended September 30, 1999. The increase from prior year is due
primarily to increased marketing and promotional expenses and increased
headcount.

     Product Development.  Product development expenses were $4.1 million for
the quarter ended September 30, 2000 as compared to $4.0 million for the quarter
ended September 30, 1999.  For the nine months ended September 30, 2000, product
development expense were $15.9 million as compared to $7.3 million for the nine
months ended September 30, 1999. This increase is related to the maintenance of
our websites and internal systems and related increased headcount.

     General and Administrative. General and administrative expenses were $4.5
million for the quarter ended September 30, 2000 as compared to $2.2 million for
the quarter ended September 30, 1999.  For the nine months ended September 30,
2000, general and administrative expenses were $9.4 million as compared to $4.6
million for the nine months ended September 30, 1999. This increase is primarily
related to increases in headcount, employee bonuses, and professional service
fees.

     Amortization of Intangible Assets.  Amortization of intangible assets was
$10.2 million and $30.6 million in the third quarter and first nine months of
2000, respectively. 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. The fair value of the intangible assets
associated with the domain names is amortized over their estimated useful lives,
which is two years, while the intangible assets associated with YourPharmacy.com
are being amortized over five years. During the year ended December 31, 2000, we
will analyze these assets to determine if an impairment in carrying value has
occurred.

     Stock-Based Compensation. We recorded the recapture of deferred stock-based
compensation of approximately $10.2 million for the three months ended September
30, 2000, in connection with stock options forfeited during the period. Our
stock-based compensation expense totaled approximately $389,000 and $7.5 million
for the third quarter and first nine months of 2000, respectively, as compared
to $3.3 million and $7.6 million for the corresponding periods of 1999. The
remaining deferred stock compensation balance of approximately $4.7 million will
be amortized through 2004.

     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 three and nine
months ended September 30, 2000 increased over the corresponding periods of 1999
due to higher interest-bearing asset balances in 2000.
<PAGE>

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 September 30, 2000, we had
cash and cash equivalents and investments in marketable debt securities totaling
$25.2 million compared to $116.7 million at December 31, 1999.

     We have sustained losses since inception and expect to continue to incur
losses for the foreseeable future. We have incurred net losses of $7,000 for the
year ended 1996, $137,000 for the year ended 1997, $4.1 million for the year
ended 1998, $98.0 million for the year ended December 31, 1999 and $127.6
million for the nine months ended September 30, 2000. In July 2000, we signed a
common stock purchase agreement for up to $50.0 million in equity financing. We
anticipate that draws under this agreement will be sufficient to meet our
anticipated working capital and capital expenditure requirements for the next 12
months. However, there is no assurance that we will be able to meet the
conditions required for drawing funds from the equity line, and we may need to
raise additional funds. We cannot be certain that additional financing will be
available on favorable terms when required, or at all.

     Net cash used in operating activities was $81.3 million during the nine
months ended September 30, 2000, primarily a result of quarterly net losses as
well as increases in inventories and decreases in accounts payable, partially
offset by decreases in prepaid expenses and other assets and non-cash charges
for depreciation and amortization. Net cash used in operating activities was
approximately $44.2 million during the nine months ended September 30, 1999,
primarily a result of quarterly 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 $53.6 million
during the nine months ended September 30, 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 approximately $9.2 million during the nine months ended
September 30, 1999, primarily consisting of the acquisition of equipment and
systems, including computer equipment and fixtures and furniture. Cash used in
investing activities during the nine months ended September 30, 1999 also
included the purchases of short-term investments.

     Net cash provided by financing activities was approximately $1.3 million
during the nine months ended September 30, 2000, and primarily consisted of net
proceeds from equipment financing, partially offset by  repurchases of Common
Stock and principal payments on notes payable and capital lease obligations. Net
cash provided by financing activities was approximately $96.7 million during the
nine months ended September 30, 1999, primarily consisting of net proceeds of
approximately $85.3 million from the issuance of preferred and common stock.

     As of September 30, 2000, our principal commitments consisted of
obligations outstanding under operating leases and marketing agreements with
certain web portals aggregating approximately $7.0 million through 2005.

     In July 2000, we signed a common stock purchase agreement for up to $50.0
million in equity financing from Alpha Venture Capital Inc.  However, there is
no assurance that we will be able to meet the conditions required for drawing
funds from the equity line, and currently expect that we may need to raise
additional funds.  If we raise additional funds through the issuance of equity,
equity-related or debt securities, such securities may have rights, preferences
or privileges senior to those of the rights of our common stock and our
stockholders may experience additional dilution.  We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.

Recent Accounting Pronouncements

     In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 is effective
for the fourth quarter of years ending after December 31, 1999. We will adopt
SAB 101 in the quarter ending December 31, 2000 and do not expect such adoption
to have a significant impact on our results of operations, financial position or
cash flows.

     In July and September 2000, the Emerging Issues Task Force released Issue
No. 00-10 ("EITF 00-10"), "Accounting for Shipping and Handling Revenues and
Costs". EITF 00-10 notes that amounts billed, if any, for shipping and handling
should be included in revenue. If shipping and handling costs are
<PAGE>

significant and are not included in costs of sales, a company should
disclose both the amount of such costs and which line item on the income
statement includes that amount. EITF 00-10 is effective for the Company's fourth
quarter of 2000. We will adopt the pronouncement in the quarter ending December
31, 2000, and do not expect such adoption to have a significant impact on our
results of operations, financial position, or cash flows.

     In May 2000, the Emerging Issues Task Force released Issue No. 00-14 ("EITF
00-14"), "Accounting for Certain Sales Incentives". EITF 00-14 is effective for
our fourth quarter of 2000. We will adopt the pronouncement in the quarter
ending December 31, 2000, and do not expect such adoption to have a significant
impact on our results of operations, financial position, or cash flows.

ADDITIONAL FACTORS THAT MAY EFFECT FUTURE RESULTS

     In addition to the factors discussed in the "Overview" and "Liquidity and
Capital Resources" sections of this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in our annual report on Form
10-K for our fiscal year ended December 31, 1999, as filed with SEC, the
following factors may affect our future results.

Risks Related to Our Business

     If our common stock price remains under $1.00, or if we otherwise fail to
comply with Nasdaq rules, our common stock is likely to be delisted from the
Nasdaq National Market, which could eliminate the trading market for our common
stock

     If the market price for our common stock remains below $1.00 per share and
we are no longer listed on the Nasdaq National Market, our common stock may be
deemed to be penny stock. If our common stock is considered penny stock, it
would be subject to rules that impose additional sales practices on broker-
dealers who sell our securities. For example, broker-dealers must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Also, a disclosure schedule
must be prepared prior to any transaction involving a penny stock and disclosure
is required about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Monthly
statements are also required to be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in
penny stock. Because of these additional obligations, some brokers may be
unwilling to effect transactions in penny stocks. This could have an adverse
effect on the liquidity of our common stock and your ability to sell the common
stock covered by this prospectus.

     On September 15, 2000, we received a notice from Nasdaq that our common
stock has failed to maintain a minimum bid price of $1.00 over the last 30
consecutive trading days as required for continued listing on the Nasdaq
National Market. The notice states that if at any time prior to December 14,
2000, the closing bid price of our common stock is not sustained at $1.00 or
more for at least 10 consecutive trading days, our common stock will be delisted
at the opening of business on December 18, 2000. If the bid price of our common
stock is sustained at $1.00 or more for at least 10 consecutive trading days,
Nasdaq will reevaluate our compliance with the listing qualifications.

     Our issuance of common stock to Alpha Venture Capital, or the subsequent
resale of those shares by Alpha Venture Capital, in either case at a discount to
the market price, may depress the trading price of our common stock. In
addition, Alpha Venture Capital is not required to honor our drawdown requests
during any period in which our common stock is not listed on the Nasdaq National
Market.

We may implement a reverse stock split to increase the price of our common stock
to comply with Nasdaq listing requirements, which may cause the market to reduce
the trading volume and price for our common stock.

     To maintain the listing requirements of Nasdaq, we intend to ask our
shareholders to approve a 1 for-8 reverse stock split that would increase the
price of our common stock above $1.00 per share. Even if
<PAGE>

the shareholders approve the reverse stock split, our board of directors will
have discretion not to implement the reverse split if it is no longer necessary
to meet the Nasdaq requirements. The market sometimes views reverse stock splits
negatively. If the market views our reverse split negatively, it could hurt the
trading volume and price of our common stock after the reverse split, which
could affect your ability to resell any shares you acquire in our company. To
the extent the trading volume and price are negatively affected, we may not be
able to draw down all of the $50.0 million under the common stock purchase
agreement with Alpha Venture Capital because the amount we can draw down is
limited by trading volume and price. Also, the reverse stock split may result in
fractional shares, which we would be required to redeem with cash in an amount
that cannot be determined at this time.

If Alpha Venture Capital acquires from us all of the shares offered by this
prospectus, it will likely own the majority of our common stock.

     Based on the number of shares of common stock issued and outstanding as of
September 30, 2000, if Alpha Venture Capital acquires from us all 100,000,000
shares offered by this prospectus, it will own approximately 66.2% of our voting
stock after the acquisition. Accordingly, Alpha Venture Capital may gain
effective control over our company through its ability to control the election
of a majority of directors and all other matters that require action by our
stockholders.

We may need additional capital in the future and additional financing may not be
available

     We currently anticipate that our available cash resources combined with the
maximum drawdown under the stock purchase agreement with Alpha Venture Capital
will be sufficient to meet our anticipated working capital and capital
expenditure requirements for at least the next 12 months. However, if our stock
price and trading volume decline from current levels, we may not be able to draw
down all $50.0 million, or any monies at all, under the common stock purchase
agreement. In addition, business and economic conditions may not make it
feasible to draw down under the common stock purchase agreement at every
opportunity, and drawdowns are only available every 10 trading days. We may need
to raise additional capital to fund our current operating requirements or to
develop new and to enhance existing services to respond to competitive
pressures.

     If we raise funds by issuing equity, equity-related or debt securities,
these securities may have rights, preferences and privileges that are senior to
our existing common stock. In addition, the issuance of these securities may
cause immediate and substantial dilution to our existing stockholders.

     We may not be able to obtain additional financing on terms favorable to us,
if at all. If adequate funds are not available or are not available on terms
favorable to us, we may not be able to effectively execute our business plan.

We have a history of losses and we anticipate future losses and negative cash
flow

     Since our inception, we have incurred significant losses and negative cash
flow, and we expect operating losses and negative cash flow to continue for the
foreseeable future. We incurred net losses of $7,000 for the year ended 1996,
$137,000 for the year ended 1997, $4.1 million for the year ended 1998, $98.0
million for the year ended December 31, 1999 and $127.6 million for the nine
months ended September 30, 2000. As of September 30, 2000, we had an accumulated
deficit of $230.9 million. We expect to incur additional costs and expenses
related to:

  .  marketing and customer acquisition and other promotional activities;

  .  the continued development of the PlanetRx.com website, our computer network
     and the systems that we use to process customers' orders and payments;
<PAGE>

  .  the continued development of relevant, healthcare-related content on the
     PlanetRx.com website;

  .  the development of marketing and distribution relationships with strategic
     business partners; and

  .  the establishment and development of relationships in the healthcare
     industry

     Our ability to become profitable depends on our ability to generate and
sustain substantially higher revenues while maintaining reasonable expense
levels. If we do achieve profitability, we cannot be certain that we would be
able to sustain or increase profitability on a quarterly or annual basis in the
future.

Our limited operating history makes forecasting future results difficult

  We were incorporated on March 31, 1995 and began substantial operations in
September 1998. Our PlanetRx.com website was launched on March 18, 1999. As a
result of our limited operating history, it is difficult to accurately forecast
our revenues and we have limited meaningful historical financial data upon which
to base planned operating expenses. We base our current and future expense
levels on our operating plans and estimates of future revenues and our expenses
are to a large extent fixed. Our revenues and operating results are difficult
for us to forecast because we operate with substantially no backlog. As a
result, we may be unable to adjust our spending in a timely manner to compensate
for any unexpected revenue shortfall. This inability could cause our net losses
in a given quarter to be greater than expected.

If our marketing efforts are not successful, our business may be harmed

     We have significantly reduced our spending related to traditional media
advertising and have restructured several of our online media arrangements. As a
result, the current level of marketing and advertising may not be successful or
consumers may not find our marketing efforts compelling. If our marketing
efforts are not successful, our business and operating results will be harmed.

The loss of any of our key personnel, or our failure to attract and retain other
highly qualified personnel in the future, could result in an inability to manage
our operations

     The loss of the services of one or more of our key personnel could
seriously disrupt our business. Our future success also depends upon the
continued service of our executive officers and on our ability to attract and
retain key personnel. Competition for these individuals is intense, and we may
not be able to attract, assimilate or retain additional highly qualified
personnel in the future. In the past six months our chairman, chief financial
officer and chief technology officer resigned to pursue other opportunities.

Additionally, we have announced that we intend to relocate our company
headquarters to Memphis, Tennessee. This relocation may affect our ability to
retain key personnel and to attract new talent. Except for Michael Beindorff,
our Chief Executive Officer, none of our officers or key employees is bound by
an employment agreement. Our relationships with these officers and key employees
are at will. We do not have "key person" life insurance policies covering any of
our employees.

We are dependent on strategic relationships with pharmaceutical companies to
provide sponsorship revenue. If litigation or governmental interference affects
the pharmaceutical companies' operations, our relationships may be adversely
affected

     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.  In September 2000, we filed a complaint against Pfizer, Inc. in
California State Court in San Mateo County, seeking contract damages in the
amount of $3.0 million and other damages in excess of $5.0 million. Because of
Pfizer's failure and refusal to honor the exclusive sponsorship agreement, we
are treating the agreement as terminated.
<PAGE>

     In December 1999, we entered into an agreement with another major
pharmaceutical manufacturer to develop a unique website for allergy sufferers.
In March 2000, we entered into an agreement with another major pharmaceutical
manufacturer to develop a unique website for arthritis sufferers. We plan to
enter into similar agreements with other third parties in connection with the
expansion of other PlanetRx.com communities. Payments by these companies to us
for services that we provide to them may be at risk in future periods if these
companies become subject to subsequent events.

Our changing operations have placed a significant burden on our management
system and resources, and any inability to manage this growth could result in
higher operating costs and lower gross margins

     We have changed our operations significantly since our inception and the
launch of our PlanetRx.com website in March 1999. The number of our employees
increased from three on December 31, 1998 to 295 on September 30, 2000. Our
growth has placed a significant strain on our management systems and resources,
which could result in slower revenue growth, increased operating costs and lower
gross margins. In the second quarter 2000, we reduced our workforce by
approximately 15% in an effort to reduce our overall operating expenses. In
August 2000, we announced our intent to relocate the company's headquarters from
South San Francisco, California to Memphis, Tennessee, which may affect our
ability to retain key managers. We cannot be certain that our current and
planned personnel, systems, procedures and controls will be adequate to support
our future operations, that management will be able to hire, train, retain,
motivate and manage required personnel or that our management will be able to
successfully identify, manage and exploit existing and potential market
opportunities.

     Our ability to successfully offer products and services and implement our
business strategy in a rapidly evolving market requires an effective planning
and management process. We also expect that we will need to continue to improve
our transaction-processing, operational, financial and managerial controls and
reporting systems and procedures as we grow. Some of our senior management have
no prior management experience at public companies, and many of our executive
officers have no prior management experience in the healthcare industry.

Online sales of prescription drugs, non-prescription drugs, personal care
products and medical supplies may not achieve market acceptance, which could
result in slower revenue growth, loss of revenues and increased operating losses

     If we do not attract and retain a high volume of online customers to our
website at a reasonable cost, our business and operating results will be
adversely affected. The online market for our products is in its infancy. We may
not be able to convert a large number of consumers from traditional shopping
methods to online shopping for prescription drugs, non-prescription drugs,
personal care products and medical supplies. Specific factors that could prevent
widespread consumer acceptance of the online sales of our products include:

  .  shipping charges and delivery times associated with online purchases;

  .  delays and other inefficiencies associated with processing orders for
     prescription products covered by insurance;

  .  lack of reimbursement of customer prescriptions by some healthcare
     payors;

  .  inability to serve the acute care needs of customers, including
     emergency prescription drugs and other urgently needed products;

  .  pricing that does not meet customer expectations;

  .  customer concerns about the security of online transactions and the


<PAGE>

     privacy of their personal health information;

  .  product damage from shipping or shipments of wrong or expired products
     from our suppliers, resulting in a failure to establish customers' trust
     in buying our products online;

  .  delays in responses to customer inquiries; and

  .  difficulties in returning or exchanging products.

If we fail to attract repeat customers, we may not be able to increase our
revenues

     We believe, due to our limited operating history, we have not established a
material amount of repeat business from regular customers. While our websites
are designed to encourage repeat business, we do not yet have sufficient
historical data on how successful this strategy will be. Therefore, it is
difficult to forecast what our revenues from repeat customers will be or our
overall revenue trends.

We expect our quarterly financial results to fluctuate

     We expect our revenues and operating results to vary significantly from
quarter to quarter due to a number of factors, including:

  .  our ability to attract visitors to the PlanetRx.com website and to convert
     those visitors into customers;

  .  our ability to satisfy customer demand, retain existing customers and
     attract new customers at a reasonable cost;

  .  the frequency and size of any repeat customer orders;

  .  the nature and amount of publicity for us or our competitors;

  .  changes in the growth rate of Internet usage and online purchasing;

  .  the mix of products sold by us;

  .  our ability to maintain adequate inventory levels;

  .  changes in our pricing policies or the pricing policies of our online and
     traditional competitors;

  .  purchasing patterns, including holiday purchasing patterns and the
     purchasing of seasonal products such as sunscreen and allergy medications;

  .  costs related to potential acquisitions of technologies or businesses.

     We currently expect that a majority of our revenues for the foreseeable
future will come from orders of prescription drugs, non-prescription drugs,
personal care products and medical supplies on our PlanetRx.com website as well
as from sponsors on our satellite websites. The volume and timing of orders are
difficult to predict because the online market for these products is in its
infancy. Our operating expenses are largely based on anticipated revenue trends
and a high percentage of our expenses are fixed in the short term. As a result,
a delay in generating or recognizing revenue for any reason could cause
significant variations in our operating results from quarter to quarter and
could result in greater than expected operating losses.

     Because our operating results fluctuate and are difficult to predict, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.In some


<PAGE>

future quarter, our operating results may fall below the expectations of public
market analysts and investors. In this event, the price of our common stock may
fall.

We may be unable to significantly expand our customer base because of limited
insurance reimbursement coverage for prescription drugs that we sell

     We currently have limited access to insurance reimbursement coverage for
our prescription products. The majority of purchases in the prescription drug
market are paid for by third-party payors. A disproportionate dependence on
purchases of prescriptions without reimbursement may limit our penetration of
the prescription drug market, and may thus have an adverse impact on our
business.

Our relationship with Express Scripts, Inc. has been restructured and Express
Scripts is a significant stockholder

     In June 2000, we completed an agreement with Express Scripts, Inc. to
restructure our relationship under the agreement executed in August 1999. While
we are, subject to exceptions, the preferred internet pharmacy for Express
Scripts for a term of five years with the right to participate in its pharmacy
network for five years, Express Scripts has no obligation to market or promote
PlanetRx. Therefore, we may not be able to convert Express Scripts members into
PlanetRx customers as quickly as anticipated under the original agreement or at
all.

     Additionally, while our relationship with Express Scripts significantly
broadens our ability to provide prescription medication to consumers with
insurance reimbursement plans, it may not allow all of our potential customers
to purchase these medications from us and receive insurance reimbursement.

     Due to Express Scripts' percentage of ownership of our common stock, it
will be able to influence all matters requiring approval by our stockholders,
including the approval of mergers or other business combinations.

If we are not able to maintain existing contracts or obtain additional contracts
with insurance companies and pharmacy benefit managers, our customers may not be
able to obtain reimbursement for purchases of prescription products, which would
impair our ability to expand our customer base

     To obtain reimbursement on behalf of our customers for the prescription
products that they purchase on our website, we need to obtain contracts with
numerous insurance companies and pharmacy benefit managers.

     Our ability to obtain additional contracts with other insurance companies
and pharmacy benefit managers, or retain our existing contracts for an extended
period of time, is uncertain. Many of these companies are in the early stages of
evaluating the impact of the Internet and online pharmacies on their businesses.
Many of these companies may delay their decisions to contract with online
pharmacies or may decide to or have decided to develop their own Internet
capabilities or enter into relationships with online pharmacies that may compete
with us. In addition, many insurance companies have existing contracts with
chain drugstores and pharmacy benefit managers that have established or have
announced their intentions to establish online pharmacies.

     In addition, it is likely that some insurance companies and pharmacy
benefit managers will contract with only one or a limited number of online
pharmacies. If our online competitors obtain these contracts and we do not, we
would be at a competitive disadvantage.

     Even if we are successful in gaining widespread access to insurance
reimbursement, each insurance application must be processed individually, which
will raise the costs of processing prescription orders and may delay our order
processing time, which may be harmful to our business. In addition, if customers
do not initially embrace our online insurance coverage procedure, we may remain
dependent on that portion of the market that is willing to pay cash for their
prescriptions.


<PAGE>

We may not be able to compete successfully against current and future
competitors

     We do business in a market that is highly competitive, and we expect
competition to intensify in the future. Increased competition is likely to
result in price reductions, reduced gross margins and loss of market share, any
of which could harm our net revenue and results of operations. We currently or
potentially compete with a variety of companies, many of which have
significantly greater financial, technical, marketing and other resources. Our
competitors include:

  .  various online stores that sell prescription drugs as well as over-the-
     counter drug and health, wellness, beauty and personal care items;

  .  chain drugstores;

  .  independent drugstores and pharmacies;

  .  mass-market retailers;

  .  warehouse clubs; and

  .  pharmacy benefit managers that sell prescription drugs directly.

     Most traditional drugstores have operated for a longer period of time, have
greater financial resources, have established marketing relationships with
leading manufacturers and advertisers and have secured greater presence in
distribution channels. Some of these companies may also commence or expand their
presence on the Internet. We also compete with hospitals, HMOs and mail order
prescription drug providers, all of whom are or may begin offering products and
services, as well as healthcare related information similar to our content, over
the Internet. Finally, we are aware of numerous other smaller entrepreneurial
companies that are focusing significant resources on developing and marketing
products and services that will compete directly with those offered at
PlanetRx.com.

     We may face a significant competitive challenge from alliances entered into
by our competitors. For instance, one of our direct online competitors,
drugstore.com, has relationships that give them access to major pharmacy benefit
managers. Our competitors may continue to gain access to major pharmacy benefit
managers, major HMOs or chain drugstores. The combined resources of these
partnerships could pose a significant competitive challenge to PlanetRx.com and
could prevent these pharmacy benefit managers, HMOs or chain drugstores from
also entering into relationships with us and could limit our ability to
penetrate the prescription drug market.

     We believe the principal factors on which we will compete include:

  .  recognition of the PlanetRx.com brand;

  .  product selection;

  .  personalized services;

  .  convenience and ease of use;

  .  price;

  .  accessibility;

  .  customer service;

  .  quality of interactive tools;


<PAGE>
  .  quality of content; and

  .  reliability and speed of fulfillment for products ordered.

     We will have no control over how successful our competitors are in
addressing these factors. In addition, our online competitors can duplicate many
of the products or services and much of the content that we offer, with little
difficulty.

Our gross margins may be affected by downward price pressure on pharmaceutical
drugs

     Third-party payors are increasingly challenging the price and cost-
effectiveness of medical products and services. While we may be successful in
gaining widespread access to insurance reimbursement, the efforts of third-party
payors to contain costs will place downward pressures on gross margins from
sales of prescription drugs. We cannot be certain that our products or services
will be considered cost effective or that adequate third-party reimbursement
will be available to enable us to maintain price levels sufficient to realize
adequate profit margins on prescription drugs. Our failure to realize adequate
profit margins on prescription drugs would harm our business.

We depend on a limited number of suppliers and third-party carriers; if they do
not perform, we will not be able to effectively ship orders

     To generate the significant customer traffic, volume of purchases and
repeat purchases that we believe are crucial to obtaining sufficient revenues,
we must develop and maintain customer trust in the timing and accuracy of our
product deliveries.  We purchase a substantial majority of our prescription and
over-the-counter products from one vendor, McKesson.  We have a multi-year
agreement with McKesson that requires us to purchase 80% of our prescription
drugs, non-prescription drugs, home healthcare products, sundries and health and
beauty aids from McKesson.  However, if McKesson were unwilling or unable to
supply products to us in sufficient quantities and in a timely manner, we may
not be able to secure alternative suppliers on acceptable terms in a timely
manner, or at all.  Although our agreement with McKesson has a multi-year term,
it can be terminated by us or by McKesson upon 60 days' notice.

     In addition to McKesson, we use other suppliers, particularly with respect
to our other product categories. These suppliers may not continue to sell
products to us on existing terms and we may not be able to establish new or
extend current fulfillment terms on a timely or acceptable basis or at all.
Negotiating and implementing relationships with additional vendors or
distributors may take substantial time and resources. If we cannot develop and
maintain relationships with vendors that allow us to obtain sufficient
quantities of products on acceptable commercial terms, our business may be
harmed.

     We also rely on third-party carriers for product shipments, including
shipments to and from our distribution facilities.  We are therefore subject to
the risks, including employee strikes and inclement weather, associated with our
carriers' ability to provide delivery services to meet our fulfillment and
shipping needs.  Failure to deliver products to our customers in a timely and
accurate manner would harm our reputation and our business and results of
operations.

Pharmacy or prescription processing errors could produce liability and
significant negative publicity

     Mistakes relating to the dispensing of prescription drugs could produce
liability and negative publicity that would be adverse to our business.
Pharmacies occasionally make mistakes relating to prescriptions, dosage and
other aspects of the medication dispensing process.  We expect that sales of
pharmaceutical products will account for a significant percentage of our
revenues.  Because we distribute these products directly to the customer, we are
the most visible participant in the medication distribution chain.  While we do
carry product liability insurance, it may be insufficient to cover potential
claims.

If a regulatory body alleges that we have engaged in the practice of
medicine, we may be subject to significant liabilities
<PAGE>
     The practice of medicine requires licensing under applicable state law.  It
is not our intent to practice medicine and we have structured our websites and
our business to avoid violation of state licensing requirements.  However, a
state regulatory authority could at some time allege that some portion of our
business violates these statutes.  An allegation that we practice medicine could
result in significant costs or liabilities.  Further, any liability based on a
determination that we engaged in the unlawful practice of medicine may be
excluded from coverage under the terms of our general liability insurance
policy.

Information provided by our pharmacists or on our PlanetRx.com website or
satellite websites may result in liability or negative publicity

     In the event that our websites or our pharmacists provide erroneous or
misleading information to our customers, we may be subject to liability or
negative publicity that could have an adverse impact on our business.  Our
pharmacists are required by law to offer counseling to our customers about
medication, dosage, delivery systems, common side effects and other information
deemed to be significant by the pharmacists.  Our pharmacists may have a duty to
warn customers regarding any potential adverse effects of a prescription drug if
the warning could reduce or negate these effects.  This counseling is in part
accomplished through e-mail, our toll-free telephone service and inserts
included with the prescription, which may increase the risk of miscommunication
because the customer is not personally present or may not have provided all
relevant information to the pharmacist.

     We also post product and health-related information on our PlanetRx.com
website and related satellite websites.  Moreover, because visitors to our
satellite sites post content unedited by us, this content could give rise to
liability for us.  This creates the potential for claims to be made against us
for negligence, personal injury, wrongful death, product liability, malpractice,
invasion of privacy or other legal theories based on our product or service
offerings.  To the extent that our content is perceived as promoting one product
over another, our reputation could be harmed.  Because online pharmacies are in
an early stage of development, the amount of negative publicity that we or the
online pharmacy industry receive could be disproportionate in relation to the
negative publicity received by traditional pharmacies.

     Although we carry general liability, product liability and professional
liability insurance, our insurance may not cover potential claims of this type
or may not be adequate to protect us from all liability that may be imposed.  In
addition, we could face severe negative publicity if we are sued on these or
other grounds, which could hurt the PlanetRx.com brand and prevent us from
attracting and retaining customers.  We cannot be certain that we will be able
to maintain general liability, product liability and professional liability
insurance in the future on acceptable terms or with adequate coverage against
potential liabilities.

We may be unable to accommodate increased consumer traffic on our website, which
would limit our ability to increase sales

     If we fail to accommodate increased traffic on our website, our business
may be seriously harmed. Our commerce revenues depend on the number of customers
who use our website to purchase products. We depend on the satisfactory
performance, reliability and availability of our websites, transaction
processing systems, network infrastructure, customer support center,
distribution and shipping systems.

     We may be required to add additional software and hardware and to further
develop and upgrade our existing technology, transaction-processing systems,
network infrastructure and distribution facilities to accommodate increased
traffic on our websites and increased sales volume.  Our inability to scale our
systems may cause unanticipated system disruptions, slower response times,
degradation in levels of customer service or impaired quality and speed of order
fulfillment.  We may be unable to effectively upgrade and expand our
transaction-processing systems to accommodate increases in the use of our
websites.

We may suffer systems failures on our websites which could result in negative
publicity and reduce the volume of products sold
<PAGE>

     Any system failure that results in the unavailability of our websites or
reduced order fulfillment performance could result in negative publicity and
reduce the volume of products sold, which would negatively affect our business.
The satisfactory performance, reliability and availability of our websites,
transaction processing systems and network infrastructure are critical to our
reputation and our ability to attract and retain customers and to maintain
adequate customer service levels.

     In addition, because we outsource some aspects of our system, the cause of
system interruptions may be outside of our control, and therefore we may not be
able to correct any problem in a timely manner or at all.  For example, we rely
substantially on Cybercash to handle many of the elements of our transaction
processing.

If we are unable to attract and train adequate numbers of customer service
personnel, we may not be able to provide sufficient customer service

     Our business depends in part on our ability to maintain superior customer
service.  If we are unable to attract and train adequate numbers of customer
service personnel, our efforts to establish our brand may be harmed and our
business results may be impaired.  We will need to commit significant additional
financial resources to attract and train customer service personnel in order to
provide our customers with high quality customer service.

We face the risk of inventory theft and diversion, which could result in
increased operating costs

     Many of our products are valuable, and their small size and packaging
render them particularly susceptible to theft and diversion in the course of
fulfillment and distribution.  If the security measures we use at our
distribution center and during the distribution process do not prevent
significant inventory theft and diversion, our gross profit margins and results
of operations may be harmed.

If our online security measures fail, we could incur significant liabilities

     A significant barrier to online commerce is the secure transmission of
confidential information over public networks.  If any compromise of our
security occurs, it would injure our reputation, and could influence the success
of our business.

     We rely on encryption and authentication technology licensed from third
parties to effect secure transmission of confidential information, such as
personal health information. Advances in computer capabilities, new discoveries
in cryptography, or other developments may result in a breach of the techniques
we use to protect customer data.

     If third parties were able to penetrate our network security or otherwise
misappropriate our users' personal information, such as prescription or health
condition information, we could be subject to liability, including lawsuits.
This would be costly, divert the attention of our management and cause
significant harm to our reputation.

We are exposed to risks associated with credit card fraud, which may reduce
collections and discourage online transactions

     If we fail to adequately control fraudulent credit card transactions, our
revenues and results of operations would be harmed because we do not carry
insurance against this risk.  Under current credit card practices, we are liable
for fraudulent credit card transactions because we do not obtain a cardholder's
signature.

If one or more of our pharmacy licenses is not renewed, we may not be able to
ship our products into markets into which we currently deliver our products


<PAGE>

     We currently hold pharmacy licenses that allow us to ship into all U.S.
states and territories, and these licenses generally must be renewed on an
annual basis.  If one or more of these licenses is not renewed, for whatever
reason, our business and reputation would be significantly harmed.

Government regulation of the health care and pharmacy industries may expose us
to risks that we may be fined or exposed to civil or criminal liability, receive
negative publicity or be prevented from shipping products into one or more
states

     Our business is subject to extensive federal, state, and local regulations,
many of which are specific to pharmacies and the sale of over-the-counter drugs.
Many of these regulations are new and subject to varying interpretations, which
makes the task of assuring compliance difficult.  Noncompliance with one or more
of these regulations could result in substantial fines and other monetary
penalties, exclusion from participation in some networks, and/or criminal
sanctions which could adversely affect our business.

     We are also subject to laws and regulations regarding homeopathic drugs,
and we may face enforcement actions, lawsuits or claims asserting that we have
not complied with these laws and regulations.  As we expand our product and
service offerings, more of our products and services will likely be subject to
regulation by the FDA, which regulates drug advertising and promotion. Complying
with FDA regulations is time consuming, burdensome and expensive, and could
delay our introduction of new products and services.

     The U.S. House of Representatives Committee on Commerce and the General
Accounting Office are conducting a review of online pharmacies, including the
current laws that govern pharmacy operations, and the potential for abuses by
some online sites, focusing on those that do not require the submission of a
valid prescription issued by the customer's physician. In addition, in December
1999 the Clinton administration announced a proposal to eliminate illegal sales
of prescription drugs over the Internet by unlicensed website operators. If
approved by Congress, the proposal would, among other things, establish new
federal requirements for Internet pharmacies to ensure that they comply with
state and federal laws, create new civil penalties for the illegal sale of
pharmaceuticals, and authorize additional federal enforcement powers. We believe
that any regulations resulting from these investigations or the Clinton
administration's proposal or a similar proposal will likely result in increased
reporting and monitoring requirements, which could be burdensome and increase
our expenses. Other legislation and regulations currently being considered at
the federal and state level could affect our business, including legislation or
regulations relating to confidentiality of patients' records, including
electronic access and storage of such records, as well as the inclusion of
prescription drugs as a Medicare benefit. In addition, various state
legislatures are considering new legislation related to the regulation of
nonresident pharmacies. Compliance with new laws or regulations could increase
our expenses.

     The Health Insurance Portability and Accountability Act of 1996 mandates
the use of standard transactions, standard identifiers, security and other
provisions by the year 2000. Regulations to implement the standard transactions
and standard identifiers have been adopted and the security regulations are
expected before the end of the year 2000. We are designing our applications to
comply with the regulations and proposed regulations. However, until all of
these regulations become final, possible changes in these regulations could
cause us to use additional resources and lead to delays as we revise our website
and operations.

     Until recently, Health Care Financing Administration guidelines prohibited
transmission of Medicare eligibility information over the Internet.  We are also
subject to extensive regulation relating to the confidentiality and release of
patient records.  Additional legislation governing the distribution of medical
records exists or has been proposed at both the state and federal level.  It may
be expensive to implement security or other measures designed to comply with any
new legislation.  Moreover, we may be restricted or prevented from delivering
patient records electronically.  This could have an adverse impact on our
ability to gain and retain customers.


<PAGE>

Our facilities, systems and operations are vulnerable to natural disasters and
other unexpected problems

     Fire, flood, power loss, telecommunications failure, break-ins,
earthquakes, tornadoes and similar events could damage our communications
hardware and other computer hardware operations, which are located in South San
Francisco, California and our distribution center and pharmacy, which are
located in Memphis, Tennessee.  This could cause interruptions or delays in our
business, loss of data or render us unable to accept and fulfill customer
orders.  In addition, computer viruses, electronic break-ins or other similar
disruptions could harm our websites.  We have no formal disaster recovery plan
and our insurance may not adequately compensate us for losses that may occur due
to failures or interruptions in our systems.

We may be unable to protect the intellectual property rights upon which our
business relies, which could harm our competitiveness and cause customer
confusion

     We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success.  We rely
on trademark and copyright law, trade secret protection and confidentiality or
license agreements with our employees, customers, partners and others to protect
our proprietary rights.  These legal protections afford only limited protection
for our intellectual property and trade secrets.  We have filed applications for
United States trademark registrations for, among others, "PlanetRx.com." We may
be unable to secure this registration.  It is also possible that our competitors
or others will adopt service names similar to ours, thereby impedingour ability
to build brand identity and possibly leading to customer confusion. In addition,
there could be potential trade name or trademark infringement claims brought by
owners of other registered trademarks or trademarks that incorporate variations
of the term PlanetRx.com.  Any claims or customer confusion related to our
trademark, or our failure to obtain trademark registration, would negatively
affect our business.

     Effective trademark, service mark, copyright and trade secret protection
may not be available in every country in which we will sell our products and
services online.  Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights is
unclear.  Therefore, we may be unable to prevent third parties from acquiring
domain names that are similar to, infringe upon or otherwise decrease the value
of our trademarks and other proprietary rights.

     Litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets and domain names and to determine
the validity and scope of the proprietary rights of others.  If third parties
prepare and file applications in the United States that claim trademarks used or
registered by us, we may oppose those applications and be required to
participate in proceedings before the United States Patent and Trademark Office
to determine priority of rights to the trademark, which could result in
substantial costs to us.  Any litigation or adverse priority proceeding could
result in substantial costs and diversion of resources and could seriously harm
our business and operating results.  Our means of protecting our proprietary
rights may not be adequate, and our competitors could independently develop
similar technology.

We may not be able to acquire new domain names or maintain our existing ones

     Our strategy is dependent, in part, on our ability to use our satellite
websites and domain names to increase revenues.  We believe that operating
satellite websites with names like "diabetes.com" that consumers can easily
locate and that provide useful information will attract consumers to these
websites and, by having links to the PlanetRx.com website, will increase traffic
and revenue opportunities.  We currently hold the Internet domain name
"PlanetRx.com," as well as various other related names, including arthritis.com,
diabetes.com and cancer.com.  Domain names generally are regulated by Internet
regulatory bodies.  The regulation of domain names in the U.S. and in foreign
countries is subject to change.  Regulatory bodies could establish additional
top-level domains, appoint additional domain name registrars or modify the
requirements for holding domain names, which could result in the creation of
domain names similar to ours.  As a result, we may be unable to acquire or
maintain the "PlanetRx.com" domain name or our other domain names in all of the
countries in which we conduct business.


<PAGE>

     The relationship between regulations governing domain names and laws
protecting trademarks and similar proprietary rights is unclear.  Therefore, we
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our trademarks and other proprietary
rights.

We may face costly product liability claims by consumers

     The products we carry, including prescription drugs, non-prescription drugs
and dietary supplements, are particularly susceptible to product liability
claims.  Any claim of product liability by a consumer against us, regardless of
merit, could be costly and could divert the attention of our management.  It
could also create negative publicity, which would harm our business.  Although
we maintain product liability insurance, it may not be sufficient to cover a
claim if one is made.

We may be found to infringe proprietary rights of others, which could result in
significant liabilities

     Third parties may claim infringement by us with respect to past, current or
future proprietary rights.  We expect that participants in our markets will be
increasingly subject to infringement claims as the number of services and
competitors in our industry segment grows.  Any infringement claim, whether
meritorious or not, could be time-consuming, result in costly litigation or
require us to enter into royalty or licensing agreements.  These royalty or
licensing agreements might not be available on terms acceptable to us or at all.

If we engage in any acquisitions, we will incur a variety of costs, and the
anticipated benefits of the acquisition may never be realized

     If appropriate opportunities present themselves, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. If we do undertake any transaction of this sort, the
process of integrating an acquired business, technology, service or product may
result in unforeseen operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available for ongoing
development of our business.  Moreover, the anticipated benefits of any
acquisition may fail to be realized.  Future acquisitions could result in
potentially dilutive issuances of equity securities, the incurrence of debt,
contingent liabilities and/or amortization expenses related to goodwill and
other intangible assets, which could adversely affect our business, results of
operations and financial condition.

     In addition, recent proposed changes in the Financial Accounting Standards
Board rules for merger accounting may affect our ability to make acquisitions or
be acquired.  For example, elimination of the "pooling" method of accounting for
certain mergers could increase the amount of goodwill that we would be required
to account for if we merge with another company, which would have an adverse
financial impact on our reported financial results and possibly the market price
of our common stock.  Further, accounting rule changes that reduce the
availability of write-offs for in-process research and development costs in
connection with an acquisition could result in the capitalization and
amortization of these costs and negatively impact results of operations in
future periods.

We are influenced by officers, directors and entities affiliated with them who
own a significant portion of our outstanding voting securities

     Based upon shares outstanding as of August 31, 2000, executive officers,
directors and entities affiliated with them beneficially own approximately 45.9%
of our outstanding common stock.  These stockholders, if acting together, would
be able to significantly influence all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers or
other business combination transactions.

Antitakeover provisions applicable to us could preclude an acquisition, even if
an acquisition would be beneficial to our stockholders


<PAGE>
     Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders.

We depend on continued use of the Internet and growth of the online drugstore
market

     Our future revenues and profits, if any, substantially depend upon the
widespread acceptance and use of the Internet as an effective medium of business
and communication by our target customers.  Rapid growth in the use of and
interest in the Internet has occurred only recently.  As a result, acceptance
and use may not continue to develop at historical rates, and a sufficiently
broad base of consumers may not adopt, and continue to use, the Internet and
other online services as a medium of commerce.

     In addition, the Internet may not be accepted as a viable long-term
commercial marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements.  Our success will depend, in
large part, upon third parties maintaining the Internet infrastructure to
provide a reliable network backbone with the speed, data capacity, security and
hardware necessary for reliable Internet access and services.

     Further, the online market for drugstore products is in its infancy.  The
market is significantly less developed than the online market for books,
auctions, music, software and numerous other consumer products.  Even if use of
the Internet and electronic commerce continues to increase, the rate of growth,
if any, of the online drugstore market could be significantly less than the
online market for other products.  Our rate of revenue growth could therefore be
significantly less than other online merchants.

If we do not respond to rapid technological changes, our services could become
obsolete and our business would be seriously harmed

     As the Internet and online commerce industry evolve, we must license
leading technologies useful in our business, enhance our existing services,
develop new services and technology that address the increasingly sophisticated
and varied needs of our prospective customers and respond to technological
advances and emerging industry standards and practices on a cost-effective and
timely basis. We may not be able to successfully implement new technologies or
adapt our website, proprietary technology and transaction-processing systems to
customer requirements or emerging industry standards. If we are unable to do so,
it could adversely impact our ability to build the PlanetRx.com brand and
attract and retain customers.

Risks Related to Regulation of Internet Commerce

If we are required to charge taxes on purchases, we may have to increase prices,
which could lead to a loss of sales, or could result in increased net losses

     We do not collect sales or other similar taxes in respect of goods sold by
PlanetRx.com, except from purchasers located in California and Tennessee.
However, one or more additional states may seek to impose sales tax collection
obligations on out-of-state companies which engage in or facilitate online
commerce, and a number of proposals have been made at the state and local level
that would impose additional taxes on the sale of goods and services through the
Internet.  These proposals, if adopted, could substantially impair the growth of
e-commerce, and could adversely affect our ability to derive financial benefit
from our commercial activities.  Additionally, the imposition of these taxes
would force online retailers to manage a more complex transaction processing
system.

Government regulation of the Internet and data transmission over the Internet
could affect our operations

     Our customers regularly provide us with confidential information, such as
personal health information and credit card numbers.  Laws and regulations
directly applicable to communications or commerce over the Internet are becoming
more prevalent.  A recent session of the United States Congress resulted in
legislation governing children's privacy, copyrights, taxation and the
transmission of sexually explicit
<PAGE>

material. The European Union recently enacted its own privacy regulations. Laws
governing the Internet, however, remain largely unsettled, even in areas where
there has been some legislative action. It may take years to determine whether
and how existing laws such as those governing intellectual property, privacy,
libel and taxation apply to the Internet. In addition, the growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws, both in the United States and abroad, that
may impose additional burdens on companies conducting business online. The
adoption or modification of laws or regulations relating to the Internet could
adversely affect our business.

We may face potential liability for invasion of privacy

     We have a policy against using personally identifiable information obtained
from users of our online personal service infrastructure without the user's
permission.  In the past, the Federal Trade Commission has investigated
companies that have used personally identifiable information without permission
or in violation of a stated privacy policy.  If we use this information without
permission or in violation of our policy, we may face potential liability for
invasion of privacy for compiling and providing information to our corporate
customers and strategic partners.

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, 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.


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     From time to time the Company is subject to legal proceedings and claims in
the ordinary course of business, including claims of alleged infringement of
trademarks, copyrights and other intellectual property rights.  The Company is
not currently aware of any legal proceedings or claims that the Company believes
will have, individually or in the aggregate, a material adverse effect on the
Company's financial position or results of operations.


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.

ITEM 5. OTHER INFORMATION

On August 28, 2000, the Company's Chief Financial Officer, Steve Valenzuela,
resigned to pursue other interests.


<PAGE>

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

(a)  Exhibits

     See Exhibit Index.

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter covered by this
     Form 10-Q.


<PAGE>

                                   SIGNATURES

  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.
                       (Registrant)

                     By: /s/  Michael Beindorff
                         ----------------------
                       Michael Beindorff
                       Chairman of the Board of Directors,
                       principal financial officer and
                       principal accounting officer



Date: November 14, 2000


<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 to date
        incorporated herein by reference to Exhibit 3.2 to the Company's
        Registration Statement on Form S-1 (File No. 333-82485).

3.2*    Bylaws of the Registrant incorporated herein by reference to Exhibit 3.4
        to the Company's Registration Statement on Form S-1 (File No. 333-
        82485).

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*   Employment Agreement between Registrant and William J. Razzouk, dated
        November 11, 1998.

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

10.7*   Real Property Lease between Registrant and Belz Devco LP, dated October
        16, 1998.

10.8*   Real Property Sublease between Registrant and Rader Companies, dated May
        5, 1999.

10.9*   Real Property Sublease between Registrant and Cellegy Pharmaceuticals,
        Inc., dated November 6, 1998.

10.10+* Supply Agreement between Registrant and McKesson U.S. Health Care,
        dated January 14, 1999.

10.11*  Asset Acquisition Agreement between Registrant and NetHealth.com, Inc.

10.12*  Internet Domain and Trademark Assignment Agreement between Registrant
        and Epicenter Communications, Inc.

10.13*  Series A Stock Purchase Agreement between Registrant and the Investors
        named on Schedule thereto, dated September 15, 1998.

10.14*  Series B Stock Purchase Agreement between Registrant and the Investors
        named on Schedule thereto, dated January 15, 1999.

10.15*  Series C Stock Purchase Agreement between Registrant and the Investors
        named on Schedule thereto, dated June 3, 1999.
<PAGE>

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

10.17+* Agreement between Registrant and Express Scripts, Inc. dated August 31,
        1999.

10.18+* Agreement between Registrant and Express Scripts, Inc. dated June 19,
        2000.

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

23.2*   Consent of Counsel. Reference is made to Exhibit 5.1 to the Company's
        Registration Statement on Form S-1 (File No. 333-82485).

24.1*   Power of Attorney.

27.1    Financial Data Schedule for EDGAR filing.

--------
* Previously filed as an exhibit to the Registration Statement on Form S-1
  (File No. 333-82485) of PlanetRx.com, Inc.

+ 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.