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, 2002

                                       OR

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


                        Commission File Number 000-27437


                               PLANETRX.COM, INC.

             (Exact name of registrant as specified in its charter)


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

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


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


Indicate by check mark whether the Registrant (1) has filed all reports required
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days: Yes [X] No [ ]


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

       Class                                  Outstanding at November 13, 2002
       -----                                  --------------------------------

Common Stock, $0.0001 par value                         62,192,739


<PAGE>


<TABLE>
<CAPTION>

                                Table of Contents


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

    Item 1.         Financial Statements                                                                        1

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

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

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

                    Notes to Financial Statements (unaudited)                                                   4

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

    Item 3.         Quantitative and Qualitative Disclosures About Market Risk                                  8

    Item 4.         Controls and Procedures

PART II.            OTHER INFORMATION

    Item 1.         Legal Proceedings                                                                           9

    Item 2.         Changes in Securities and Use of Proceeds                                                   9

    Item 3.         Defaults Upon Senior Securities                                                             9

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

    Item 5.         Other Information                                                                           10

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

SIGNATURE                                                                                                       11
</TABLE>

<PAGE>




                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

                               PLANETRX.COM, INC.
                          (A Development Stage Company)
                                 Balance Sheets
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                           September 30,              December 31,
                                                                               2002                       2001
                                                                            (Unaudited)
                                                                       ----------------------    ------------------------
<S>                                                                     <C>                             <C>
ASSETS
Current assets:
      Cash and cash equivalents                                           $     96                  $   --
      Deposits and refunds receivable                                           30
      Prepaid assets                                                            10
                                                                                --                  ---------
         Total current assets                                                  136                      --

      Property and equipment, net                                                1
                                                                                 -                  ---------
         Total assets                                                     $    137                  $   --
                                                                          ========                  =========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                    $    158                  $   42
      Accrued salaries and related benefits                                    464                     154
      Accrued expenses                                                          56
                                                                                --                  -------
         Total liabilities                                                     678                     196

Commitments and contingencies (Note 5)

Stockholders' equity:
      Preferred Stock: issuable in series, $0.0001 par value;
      5,000 shares authorized; no shares issued and outstanding                 --                     --
      Common Stock: $0.0001 par value; 200,000 shares authorized;
      62,193 and 33,822 shares issued and outstanding at September 30,
      2002 and December 31, 2001, respectively                                   5                      3
      Additional paid-in capital                                               602                     --
      Subscriptions receivable                                                  (2)                    (3)
      Deficit accumulated during the development stage                      (1,146)                  (196)
                                                                            ------                   ----
         Total stockholders' equity                                           (541)                  (196)
                                                                              ----                   ----
         Total liabilities and stockholders' equity                       $    137                  $  --
                                                                          ========                  =====
</TABLE>

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

                                       1

<PAGE>


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

<TABLE>
<CAPTION>
                                                                                                                      Cumulative
                                                  Period                                                                 From
                                              From Inception                                                          Inception
                                             (August 3, 2001)                                                       (August 3, 2001)
                                            through September       Three Months Ended       Nine Months Ended          through
                                                   30,                September 30,            September 30,         September 30,
                                            -------------------    ---------------------    ---------------------    ---------------
                                                   2001                    2002                     2002                 2002
                                            -------------------    ---------------------    ---------------------    ---------------
<S>                                         <C>                     <C>                     <C>                      <C>
Net revenue                                  $     --                $     --                $      --               $   --


Operating expenses:
   Salaries and related benefits                   61                      39                      310                   464
   Professional fees                               --                      44                      315                   340
   Non cash stock compensation
      expense (income)                             --                     (15)                     246                   246
   General and administrative                      16                      53                       79                    96
                                                ----------------         ------------------    ------------------    ----------
      Total operating expenses                     77                     121                      950                 1,146
                                                ----------------         ------------------    ------------------    ----------
Net loss available to common                 $    (77)               $   (121)              $     (950)              $(1,146)
shareholders

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

Weighted average shares used to compute
basic and diluted net loss per share           38,206                  62,143                   53,087
                                            ================         =================      ================


</TABLE>

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

                                       2

<PAGE>


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

<TABLE>
<CAPTION>
                                                                   Period
                                                                    From                                              Period
                                                                 Inception                                             From
                                                                 (August 3,                                         Inception
                                                                   2001)                                            (August 3,
                                                             through September       Nine Months Ended                2001)
                                                                    30,                September 30,          through September 30,
                                                             -------------------    ---------------------     ----------------------
                                                                    2001                    2002                       2002
                                                             -------------------    ---------------------     ----------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>                       <C>                        <C>
      Net loss                                               $  (    77 )            $  (  950)                   $  (1,146)
      Adjustments to reconcile net loss to change in cash
         Depreciation                                                                        1                            1
         Non cash stock compensation                                                       246                          246
         Changes in assets and liabilities:
                  Deposits                                                              (    5  )                    (    5  )
                  Prepaid assets                                                        (   10  )                    (   10  )
                  Accounts payable & accrued expenses                16                    112                          154
                  Accrued salaries and related benefits              61                    310                          464
                                                             ----------------      ------------------        --------------------

                           Net cash used in operating
                            activities                              --                  (  296  )                    (  296  )

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

CASH FLOWS FROM FINANCING ACTIVITIES:
      Net proceeds from issuance of common stock                    --                     394                          394
                                                             ----------------        --------------                  ------------
Increase in cash and cash equivalents                               --                      96                          96
Cash and cash equivalents at beginning of period                    --                      --                          --
                                                             ----------------       ----------------         --------------------
Cash and cash equivalents at end of period                   $      --               $      96                   $      96
                                                             ================       ================         ==================
Non cash effect of merger, assumption of certain
  net liabilities (Note 1)                                                                  36                          36

</TABLE>

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

                                       3

<PAGE>

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

1.       The Company and Basis of Presentation

The Company

On May 31, 2002  PlanetRx.com  ("PlanetRx"  or the  "Company"),  a public  shell
company,  merged with Paragon Homefunding,  Inc.,  ("Paragon") a privately held,
development stage company based in Ponte Vedra Beach,  Florida,  that intends to
enter  the  financial  services  market  through  acquisitions.  For  accounting
purposes, the transaction has been treated as a recapitalization of Paragon with
Paragon  viewed as the  acquirer  in a  reverse  acquisition.  As a result,  the
financial  statements  presented  before the merger  are those of  Paragon.  The
historical  stockholders'  equity  of  Paragon  prior  to the  merger  has  been
retroactively  restated  for the  equivalent  number of shares  received  in the
merger by Paragon  after  giving  effect to the  difference  in par value of the
PlanetRx's and Paragon's stock with the difference  recorded as paid-in capital.
Also,  as a result of the merger,  Paragon  also  assumed  approximately  $36 of
PlanetRx's net  liabilities.  Paragon was  incorporated in Delaware on August 3,
2001.  We are a  development  stage  company that has recorded no revenue  since
inception.  Accordingly,  we have no operating  history and prior periods do not
allow for comparison to the periods presented.  These financial  statements have
been prepared in accordance with Statement of Financial Accounting Standards No.
7, "Accounting and Reporting by Development Stage Enterprises," to recognize the
fact  that  the  Company  is  devoting  substantially  all  of  its  efforts  to
establishing a new business and planned principal operations have not commenced.

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

Pursuant to the merger, a wholly-owned subsidiary of the Company merged with and
into Paragon, and the Company issued approximately 55,561 shares of common stock
to the Paragon stockholders  equaling 90% of the total outstanding shares of the
Company's  common  stock  immediately  after the merger.  There could be further
dilution  of this  interest  following  the merger in the event that the Company
issues  additional  shares  of common  stock.  As a  result,  the then  existing
stockholders  of the Company saw their  ownership stake reduced from 100% to 10%
of the outstanding common stock. As a result of the merger, Paragon also assumed
approximately  $36 of  PlanetRx's  net  liabilities.  Paragon's  management  has
assumed control of the Company.  Paragon has no operating history and we give no
assurance  when or if we will ever  commence  operations.  Thus,  our ability to
continue to exist will depend on a number of factors,  including  the ability to
secure adequate sources of capital as well as locating and funding  acquisitions
of suitable companies.

The  accompanying   unaudited   condensed   financial   statements  reflect  all
adjustments,  which include only normal  recurring  adjustments,  which,  in the
opinion of  management,  are necessary for the fair  statement of the results of
operations for the periods shown. The results of operations for such periods are
not  necessarily  indicative  of the results to be expected  for the full fiscal
year or any future period. The information  included in this Form 10-Q should be
read in conjunction with the 2001 audited financial statements and notes thereto
as filed with the Securities and Exchange  Commission.  The independent auditors
report  accompanying  the Company's 2001 audited  financial  statement  contains
a qualification regarding the Company's ability to continue as a going concern.

2.       Net Loss per Share

Basic net loss per share is  computed  by  dividing  the net loss  available  to
common  stockholders  for the period by the weighted average number of shares of
common  stock  outstanding  during  the  period.  Diluted  net loss per share is
computed  using  the  weighted  average  number  of  common  shares  and  common
equivalent  shares  if  dilutive.   Common  equivalent  shares  consist  of  the
incremental  common  shares  issuable  upon the  exercise  of stock  options and
warrants  (using the treasury stock method),  and the common shares  outstanding
subject to repurchase.  The periods  presented  below exclude common  equivalent
shares,   as  the  effect  of  such  shares  on  a  weighted  average  basis  is
anti-dilutive.  As of September 30, 2002,  unexercised options to purchase up to
10,000 common shares were outstanding which, if exercised,  could potentially be
dilutive.

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                Period
                                            From Inception
                                           (August 3,2001)         Three Months            Nine Months
                                               through                 Ended                  Ended
                                            September 30,           September 30,          September 30,
                                          -------------------    -------------------    ------------------
                                                 2001                   2002                  2002
                                          -------------------    -------------------    ------------------
<S>                                             <C>                      <C>                     <C>
Numerator: Net loss available to common   $  (         77  )     $  (       121   )     $  (       950  )
shareholders

Denominator: Weighted average
  common  shares                                   38,206                62,143                 53,087
                                          ----------------      ----------------        ---------------
Basic and diluted net loss per share      $  (         --  )     $  (        --   )     $  (      0.02  )
                                          ================       ================       ===============
</TABLE>

3.       Accrued Salaries and related Benefits

The Company has entered into employment  agreements with its executive officers.
All executive  officers have elected to defer receipt of the salaries,  benefits
and other items due them pursuant to such contracts  until the Company  acquires
sufficient  operating  capital through the  acquisition of operating  companies,
fundraising  or both.  During the three  months  ended  September  30,  2002 the
Company recorded  approximately  $107 of income in connection the resignation of
an  executive  officer  who elected not to receive  amounts  previously  accrued
during 2002. At September 30, 2002 and December 31, 2001 the Company had accrued
$464 and $154 pursuant to these contracts, respectively.

4.       Stockholders' Equity

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

In March 2002 the Company and the founding  shareholders issued 16,432 shares of
restricted and unrestricted common stock to its Chief Executive Officer, John W.
Brink in connection with his employment  agreement.  As a result of the issuance
of 5,477  shares of  unrestricted  stock the Company  recorded  $200 of non-cash
stock compensation in March 2002. Of the restricted  shares,  8,216 were to vest
over  time  with the value of the stock  award  amortized  over the  appropriate
vesting  period.  The remaining  2,739  restricted  shares were to vest upon the
Company's initial acquisition,  with a compensation charge recorded based on the
market value of the stock at the time of the  acquisition.  On July 16, 2002 Mr.
Brink resigned as Chief Executive Officer of the Company. In connection with his
resignation he rescinded and cancelled the above  mentioned  stock grant as well
as all  options  that he had been  granted.  In  accordance  with  Statement  of
Financial  Accounting  Standards  Board No. 25,  "Accounting for Stock Issued to
Employees",  the Company  recorded $61 of income in order to reverse the effects
of amounts  previously  recorded  as expense  for the  amortization  of unvested
restricted  stock  forfeited by Mr.  Brink.  Also,  pursuant to the terms of the
merger  agreement,  the shares given to Mr.  Brink by the founding  shareholders
were  returned  to  them  and  the  remaining  shares  were  reallocated  to the
shareholders that existed at the time of the merger described above.

In July  2002  the  Company  issued  459  shares  of  common  stock  to  certain
consultants  as  consideration  for their  services.  As a result,  the  Company
recorded  approximately  $46 of non cash  compensation  expense during the three
months ended September 30, 2002.

                                       5

<PAGE>
5.       Commitments and Contingencies

On March 27, 2001, SDR Investors,  LP filed a lawsuit against PlanetRx,  certain
underwriters  of the  Company's  initial  public  offering in October  1999 (the
"IPO"),  and  certain  former and current  directors  of the  Company.  Named as
additional defendants in the suit, which was filed in the United States District
Court for the Southern District of New York, are The Goldman Sachs Group,  Inc.,
BancBoston  Robertson  Stephens,  Inc., Merrill Lynch,  Pierce,  Fenner & Smith,
Incorporated,  and Salomon Smith Barney,  Inc., each of which was an underwriter
of the IPO;  William  J.  Razzouk  and  Christos  M.  Cotsakos,  who are  former
directors  of the  Company;  and David M.  Beirne and Michael  Moritz,  who were
current  directors of the Company at the time the complaint  was filed,  but are
now former  directors  of the Company.  Between  April 19, 2001 and May 4, 2001,
five virtually identical additional complaints were filed. One of the additional
complaints also names as defendants  Hambrecht & Quist LLC,  William Blair & Co.
LLC,  Bear  Stearns & Co.,  Inc.,  additional  underwriters  of the IPO,  Morgan
Stanley Dean Witter & Co.  Incorporated  and Credit  Suisse First Boston  Corp.,
which were not underwriters of the IPO, and Steve  Valenzuela,  a former officer
of the Company.  The suits generally allege that the defendants violated federal
securities  laws  by not  disclosing  certain  actions  allegedly  taken  by the
underwriter defendants in connection with the IPO. The suits allege specifically
that  the  underwriter  defendants,  in  exchange  for the  allocation  to their
customers of shares of the Company's common stock sold in the IPO, solicited and
received from their customers  undisclosed  commissions on transactions in other
securities and required  their  customers to purchase  additional  shares of the
Company's  common stock in the  aftermarket at  pre-determined  prices that were
above  the  IPO  price.  The  suits  seek   unspecified   monetary  damages  and
certification of a plaintiff class consisting of all persons who acquired shares
of the Company's common stock between October 6, 1999, and December 6, 2000. The
Action,  which is being  coordinated with several hundred other nearly identical
actions  filed  against other  companies  before one judge in the U.S.  District
Court for the  Southern  District  of New York.  A motion to dismiss  addressing
issues common to the companies and individuals  sued in this action was filed on
July 15,  2002.  As of the date  hereof,  the  Company is unable to predict  the
outcome of the suit and its ultimate effect, if any, on the Company's  financial
condition, results of operations or cash flows.

On June 19, 2001,  vTraction,  Inc.  filed a complaint for breach of contract in
the Chancery Court of Tennessee for the Thirtieth  Judicial  District at Memphis
alleging that the Company  entered into an oral agreement with vTraction to sell
certain  equipment  and  later  reneged,  and  claiming  damages  in  an  amount
including, but not limited to, the difference between the price agreed to in the
alleged oral  contract and the market  price of the  equipment.  The Company has
filed an answer  asserting the affirmative  defenses of failure of consideration
and statute of frauds and denying the existence of an oral  contract.  As of the
date  hereof,  the  Company is unable to predict the outcome of the suit and its
ultimate  effect,  if any,  on the  Company's  financial  condition,  results of
operations or cash flows.

6.      Subsequent Events

On October 14, 2002 the Company  entered  into an  Agreement  and Plan of Merger
pursuant to which a wholly owned  subsidiary  will merge into Mortgage  Express,
Inc., ("Mortgage  Express"),  which will result, if the Merger is consummated in
Mortgage  Express  becoming  our  wholly  owned  subsidiary.   Mortgage  Express
originated over $400 million in loans for 2001,  conducts  business in 25 states
and has  over 180  employees.  This  agreement  provides  that  all of  Mortgage
Express's shares of common stock will  automatically  convert into 53,330 shares
of common stock of PlanetRx,  or approximately  46.2% of PlanetRx's common stock
after the merger.

In connection  with the merger,  we will also issue two promissory  notes to the
principal of Mortgage Express. One is a collateralized  non-recourse  promissory
note in the amount of $1,800 subject to adjustment based on the anticipated sale
of real estate, which is owned by Mortgage express. This note will be payable on
the  earlier  of the third  anniversary  of the date of the note or the date the
real estate is sold.  Payment of the note is  collateralized  by the real estate
and the sole recourse of the holder in the event of  non-payment  is to the real
estate.  The second promissory note will be approximately  $1,200 and is subject
to adjustment  based on the amount of certain  marketable  securities  and other
current  assets of Mortgage  Express at the time of  closing.  This note will be
payable in four equal quarterly installments beginning on March 31, 2003.

The closing of the merger is subject to various customary conditions,  including
among  other  things,  the  receipt  of  permits  and  approvals  required  from
appropriate state banking and lending regulatory authorities. The Company cannot
predict when this  transaction  will close, if the conditions to closing will be
fulfilled, or if the transaction will close at all.

On October 31, 2002 the Company  entered into a non-binding  letter of intent to
acquire a company in the  financial  services  field.  The proposed  transaction
contemplates,  among other  things,  that the Company  will issue  approximately
600,000  unregistered  shares of common  stock to the  seller.  The  Company  is
currently  negotiating  the terms of definitive  agreements and  determining the
ultimate  structure  of, and  consideration  in, the  transaction.  There are no
assurances that this transaction will be entered into or closed.

                                       6

<PAGE>

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

Forward Looking Statements

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

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

o        our ability to implement our business plan,

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

o        our ability to close the Agreement and Plan of Merger which we recently
         signed,

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

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

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

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

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

o        changes in the demand for our services,

o        the degree and nature of our competition,

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

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

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

History and Recent Events

Paragon was  incorporated  in Delaware in August 2001 and our  headquarters  are
located in Ponte Vedra Beach, Florida. We intend to enter the financial services
industry  through a series of  acquisitions  and  initially  plan to pursue  the
acquisition  of companies  who  originate or broker  residential  mortgages.  We
believe our acquisition  candidates  would be willing to be acquired in exchange
for  securities  of a publicly  traded  company and, as a result,  subsequent to
incorporation  Paragon began to pursue the acquisition of a public  company.  On
April 26, 2002, we announced that we had entered into a definitive  agreement to
merge with  Paragon.  Prior to  commencing  liquidation,  PlanetRx was a leading
online healthcare  destination for commerce,  content and community.  The merger
was completed on May 31, 2002. Pursuant to the merger, a wholly-owned subsidiary
of PlanetRx  merged with and into Paragon,  and

                                       7

<PAGE>

we issued shares of common stock to the Paragon stockholders equaling 90% of the
total  outstanding  shares of  PlanetRx's  common  stock  immediately  after the
merger. As a result,  PlanetRx's then existing  stockholders saw their ownership
stake reduced from 100% to 10% of the outstanding  common stock.  There could be
further  dilution  of this  interest  following  the merger in the event that we
issue  additional  shares of common  stock.  Paragon's  management  has  assumed
control of PlanetRx.  For accounting purposes,  the transaction has been treated
as a  recapitalization  of Paragon  with  Paragon  viewed as the  acquirer  in a
reverse acquisition.  As a result, the financial statements presented before the
merger are those of Paragon.

On October 14, 2002 we entered into an Agreement and Plan of Merger  pursuant to
which our  wholly  owned  subsidiary  will merge into  Mortgage  Express,  Inc.,
resulting in Mortgage  Express  becoming our wholly owned  subsidiary.  Mortgage
Express  originated over $400 million in loans for 2001, is conducts business in
25  states  and has over 180  employees.  This  agreement  provides  that all of
Mortgage  Express's  shares of common  stock  will  automatically  convert  into
53,329,735  shares  of  common  stock of  PlanetRx,  or  approximately  46.2% of
PlanetRx's common stock after the merger.

In connection  with the merger,  we will also issue two promissory  notes to the
principal of Mortgage Express. One is a secured, non-recourse promissory note in
the amount of $1,800,000, subject to adjustment based on the anticipated sale of
real estate,  which is owned by Mortgage  Express.  This note will be payable on
the  earlier  of the third  anniversary  of the date of the note or the date the
real  estate is sold.  Payment of the note is secured by the real estate and the
sole recourse of the holder in the event of  non-payment  is to the real estate.
The second  promissory note will be  approximately  $1,200,000 and is subject to
adjustment  based on the  amount  of  certain  marketable  securities  and other
current  assets of Mortgage  Express at the time of  closing.  This note will be
payable in four equal quarterly installments beginning on March 31, 2003.

The closing of the merger is subject to various customary conditions,  including
among  other  things,  the  receipt  of  permits  and  approvals  required  from
appropriate state banking and lending regulatory authorities.  We cannot predict
when we will close  this  transaction,  if the  conditions  to  closing  will be
fulfilled, and if we will close the transaction at all.

On October 31, 2002 we entered into a non-binding  letter of intent to acquire a
company in the financial services field. The proposed transaction  contemplates,
among other things, that we will issue approximately 600,000 unregistered shares
of  common  stock to the  seller.  We are  currently  negotiating  the  terms of
definitive   agreements  and   determining   the  ultimate   structure  of,  and
consideration  in, the transaction.  We cannot assure that this transaction will
be entered into or closed.

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

Results of Operations

Comparison  of the three  months  ended  September  30, 2002 and the period from
inception (August 3, 2001) to September 30, 2001

Net Revenue

Net revenues were zero the three months ended  September 30, 2002 and the period
from inception (August 3, 2001) to September 30, 2001.

Operating Expenses

Salaries,  wages and related expenses.  For the three months ended September 30,
2002 and the  period  from  inception  (August 3, 2001) to  September  30,  2001
salaries,  wages and related  expenses  were $39,000 and $61,000,  respectively.
These are  primarily  related to  salaries  accrued for the  executive  officers
pursuant to employment  agreements.  Such officers have elected to defer receipt
of the accrued amounts until we acquire  businesses with cash flow sufficient to
pay the amounts or when  sufficient  additional  capital is  secured.  The three
months  ended  September  30,  2002  was  favorably  impacted  when we  recorded
approximately  $107 of income in  connection  the  resignation  of an  executive
officer who elected not to receive amounts previously accrued during 2002.

                                       8

<PAGE>

Professional  fees. For the three months ended  September 30, 2002  professional
fees were $44,000 and primarily  relate to legal and accounting fees incurred in
connection with the audit of the year-end  financial  statements.  There were no
expenses for professional fees for the period from inception (August 3, 2001) to
September 30, 2001.

Non cash stock  compensation.  For the three  months  ended  September  30, 2002
income from non cash stock  compensation  was $15,000 and related  primarily  to
income recorded in connection with the resignation of an executive  officer.  In
July 2002 we recorded  $61,000 of income in order to reverse amounts  previously
expensed for the year-to-date  amortization of restricted stock granted in March
2002.  This  amount  was offset by $46,000  recorded  as expense  related to the
issuance of shares to certain consultants. For the period from inception (August
3, 2001) to  September  30,  2001 there  were no amounts  recorded  for non cash
compensation costs.

General and  Administrative  expenses.  For the three months ended September 30,
2002 and the period  from  inception  (August 3, 2001) to  September  30,  2001,
general and  administrative  expenses  were $53,000 and  $16,000,  respectively.
These amounts relate to the operation and  maintenance of the corporate  offices
as well as travel in support of the acquisition program.

Comparison  of the nine  months  ended  September  30,  2002 and the period from
inception (August 3, 2001) to 2001

Net Revenue

Net  revenues  were zero for the nine months  ended  September  30, 2002 and the
period from inception (August 3, 2001) to September 30, 2001.

Operating Expenses

Salaries,  wages and related  expenses.  For the nine months ended September 30,
2002 and the  period  from  inception  (August 3, 2001) to  September  30,  2001
salaries,  wages and related  expenses were $310,000 and $61,000,  respectively.
These are  primarily  related to  salaries  accrued for the  executive  officers
pursuant to  employment  agreements.  As discussed  above,  such amounts will be
deferred  until we  acquire  businesses  with  cash flow  sufficient  to pay the
amounts or when sufficient additional capital is secured.

Professional  fees.  For the nine months ended  September 30, 2002  professional
fees were $315,000 and primarily relate to legal and accounting fees incurred in
connection with the merger with Paragon. There were no expenses for professional
fees for the period from inception (August 3, 2001) to September 30, 2001.

Non cash stock  compensation.  For the nine months ended  September 30, 2002 non
cash stock  compensation costs were $246,000 and relate to the granting of stock
to  the  Chief  Executive  officer  and  certain  consultants,  as  well  as the
amortization  of a restricted  stock.  For the period from inception  (August 3,
2001)  to  September  30,  2001  there  were no  amounts  recorded  for non cash
compensation costs.

General and  Administrative  expenses.  For the nine months ended  September 30,
2002 and the period  from  inception  (August 3, 2001) to  September  30,  2001,
general and administrative  expenses were $79,000 and $16,000,  respectively and
relate to the operation and  maintenance of the corporate  offices and travel in
support of the acquisition program.

Liquidity and Capital Resources

We invest excess cash  predominantly in instruments  that are highly liquid,  of
high-quality  investment grade, and  predominantly  have maturities of less than
one year with the  intent to make such funds  readily  available  for  operating
purposes.  At September  30,  2002,  we had cash and cash  equivalents  totaling
approximately $96,000.

Net cash used in operating  activities was approximately  $296,000 since we were
formed  in  August  2001 and  primarily  represent  the  payment  of  legal  and
accounting fees. As discussed above, we have raised approximately  $394,000 from
the issuance of common stock to individual  investors.  As of September 30, 2002
all of our executive  officers have elected to defer receipt of any salaries and
bonuses until sufficient  additional capital is secured or we acquire a business
with sufficient cash flow to allow us to continue our existence.

We have entered into an Agreement and Plan of Merger to acquire a company in the
financial  services field and a non-binding  letter of intent to acquire another
company in the financial services field. The proposed transactions are described
above under the  heading  "History  and Recent  Events".  We cannot  assure that
either of these transactions will close.

                                       9

<PAGE>

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. Controls and Procedures

An evaluation was performed under the supervision and with the  participation of
our management,  including the Chief  Executive  Officer ("CEO") who is also the
Chief  Financial  Officer  ("CFO"),  of  the  effectiveness  of the  design  and
operation of our disclosure  controls and  procedures  within 90 days before the
filing date of this  quarterly  report.  Based on that  evaluation,  management,
including the CEO and CFO, concluded that our disclosure controls and procedures
were effective to ensure that  information  required to be disclosed by PlanetRx
in  reports  that it files  under  the  Exchange  Act are  recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission rules and forms. There have been no significant  changes in
our  internal  controls  or in other  factors  that could  significantly  affect
internal controls subsequent to their evaluation.

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On March 27, 2001, SDR Investors,  LP filed a lawsuit against PlanetRx,  certain
underwriters  of the  Company's  initial  public  offering in October  1999 (the
"IPO"),  and  certain  former and current  directors  of the  Company.  Named as
additional defendants in the suit, which was filed in the United States District
Court for the Southern District of New York, are The Goldman Sachs Group,  Inc.,
BancBoston  Robertson  Stephens,  Inc., Merrill Lynch,  Pierce,  Fenner & Smith,
Incorporated,  and Salomon Smith Barney,  Inc., each of which was an underwriter
of the IPO;  William  J.  Razzouk  and  Christos  M.  Cotsakos,  who are  former
directors  of the  Company;  and David M.  Beirne and Michael  Moritz,  who were
current  directors of the Company at the time the complaint  was filed,  but are
now former  directors  of the Company.  Between  April 19, 2001 and May 4, 2001,
five virtually identical additional complaints were filed. One of the additional
complaints also names as defendants  Hambrecht & Quist LLC,  William Blair & Co.
LLC,  Bear  Stearns & Co.,  Inc.,  additional  underwriters  of the IPO,  Morgan
Stanley Dean Witter & Co.  Incorporated  and Credit  Suisse First Boston  Corp.,
which were not underwriters of the IPO, and Steve  Valenzuela,  a former officer
of the Company. The complaints have been consolidated into a single action and a
consolidated   amended  complaint  has  been  filed.  The  consolidated  amended
complaint names PlanetRx, Mr. Razzouk, Mr. Cotsakos, Mr. Beirne, Mr. Moritz, Mr.
Valenzuela,  Goldman  Sachs,  Robertson  Stephens (as successor to  BancBoston),
BancBoston,  J.P.  Morgan (as  successor to Hambrecht & Quist LLC),  Hambrecht &
Quist LLC,  William Blair & Co. LLC, Bear Stearns & Co.,  Inc.,  Merrill  Lynch,
Pierce,  Fenner  &  Smith,  Incorporated  and  Salomon  Smith  Barney,  Inc.  as
defendants.  The action generally  alleges that the defendants  violated federal
securities  laws  by not  disclosing  certain  actions  allegedly  taken  by the
underwriter   defendants  in  connection   with  the  IPO.  The  action  alleges
specifically that the underwriter defendants,  in exchange for the allocation to
their  customers  of  shares  of the  Company's  common  stock  sold in the IPO,
solicited  and  received  from  their  customers   undisclosed   commissions  on
transactions  in other  securities  and  required  their  customers  to purchase
additional   shares  of  the  Company's  common  stock  in  the  aftermarket  at
pre-determined   prices  that  were  above  the  IPO  price.  The  action  seeks
unspecified  monetary damages and  certification of a plaintiff class consisting
of all persons who acquired shares of the Company's common stock between October
6, 1999, and December 6, 2000. The action is being  coordinated  with over three
hundred other nearly identical  actions filed against other companies before one
judge in the U.S. District Court for the Southern District of New York. A motion
to

                                       10

<PAGE>

dismiss  addressing issues common to the companies and individuals sued in these
actions  was filed on July 15,  2002.  As of the date  hereof,  we are unable to
predict  the  outcome  of the  suit  and its  ultimate  effect,  if any,  on the
Company's financial condition, results of operations, or cash flows.

On June 19, 2001,  vTraction,  Inc.  filed a complaint for breach of contract in
the Chancery Court of Tennessee for the Thirtieth  Judicial  District at Memphis
alleging that PlanetRx  entered into an oral  agreement  with  vTraction to sell
certain  equipment  and  later  reneged,  and  claiming  damages  in  an  amount
including, but not limited to, the difference between the price agreed to in the
alleged oral  contract and the market price of the  equipment.  We have filed an
answer asserting the affirmative defenses of failure of consideration and statue
of frauds and denying the existence of an oral contract.  As of the date hereof,
we are unable to predict the  outcome of the suit and its  ultimate  effect,  if
any, on the Company's financial condition, results of operations, or cash flows.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.  OTHER INFORMATION

None

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

(a)   Exhibits

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

(b)   Reports on Form 8-K

None

                                       11

<PAGE>


                                    SIGNATURE

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                             PLANETRX.COM, INC.

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




Date:   November 13, 2002


                                       12

<PAGE>


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

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

1. I have reviewed this quarterly report on Form 10-Q of PlanetRx.com, Inc.;

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

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

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:


     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  November 13, 2002               By: /s/ Steven A. Burleson
                                       ---------------------------------------
                                           Steven A. Burleson
                                           Chief Executive Officer and Principal
                                           Accounting Officer

                                       13

<PAGE>


                                  EXHIBIT INDEX

 Exhibit
Number                       Description of Exhibit
----------   ---------------------------------------------------------
    2        Agreement and Plan of Merger dated as of October 14, 2002, among
             PlanetRx.com, Inc., Paragon Homefunding, Inc., and Mortgage
             Express,Inc. The schedules and exhibits to thisdocument, which are
             listed in the table of contents of the document have been omitted
             from the filing






                                       14