<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-22557
PEAPOD, INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-4118175
-------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
9933 Woods Drive, Skokie, Illinois 60077
(Address of principal executive offices) (ZIP Code)
Registrant's Telephone Number: (847) 583-9400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
--- ---
The number of shares outstanding of the registrant's common stock, $0.01
par value, as of August 11, 1997 was 16,671,517.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
PEAPOD, INC.
BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
----------- ------------
(audited) (unaudited)
<S> <C> <C>
Assets
------
Cash and cash equivalents......................................... $ 13,039 $ 65,787
Receivables, net of bad debt allowance of $42 and $134 as of
December 31, 1996 and June 30, 1997, respectively............... 535 2,471
Prepaid expenses.................................................. 449 250
Other current assets.............................................. 189 348
----------- -----------
Total current assets............................................ 14,212 68,856
Property and equipment:
Computer equipment and software................................. 2,493 3,712
Service equipment and other..................................... 764 828
----------- -----------
Property and equipment, at cost................................... 3,257 4,540
Accumulated depreciation........................................ (1,247) (1,816)
----------- -----------
Net property and equipment........................................ 2,010 2,724
Other assets...................................................... 306 639
----------- -----------
Total assets.................................................... $ 16,528 $ 72,219
=========== ===========
Liabilities and Owners' Equity
------------------------------
Current liabilities:
Accounts payable................................................ $ 3,370 $ 3,225
Accrued compensation............................................ 1,079 1,234
Other accrued liabilities....................................... 875 1,931
Current deferred service fees................................... 1,200 2,397
Current obligations under capital lease......................... 333 596
----------- -----------
Total current liabilities..................................... 6,857 9,383
Deferred service fees............................................. 929 846
Obligations under capital lease, less current obligations......... 340 526
----------- -----------
Total liabilities............................................... 8,126 10,755
Owners' equity:
Partners' capital (note 2)...................................... 8,402 -
Preferred Stock, $.01 par value, 5,000,000 shares authorized,
none issued and outstanding................................... - -
Common Stock, $.01 par value, 50,000,000 shares authorized,
16,671,517 shares issued and outstanding at June 30, 1997..... - 167
Additional paid-in-capital...................................... - 62,449
Accumulated deficit............................................. - (1,152)
----------- -----------
Total owners' equity.......................................... 8,402 61,464
----------- -----------
Total liabilities and owners' equity............................ $ 16,528 $ 72,219
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PEAPOD, INC.
STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
-------------------------------- --------------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Grocery sales, net of returns...................... $ 5,025 $ 10,177 $ 10,009 $ 19,394
Interactive marketing services..................... 207 565 402 990
Member and retailer services....................... 1,190 3,909 2,345 6,971
----------- ----------- ----------- -----------
Total revenues.................................. 6,422 14,651 12,756 27,355
Costs and expenses:
Groceries sold, net of returns..................... 5,025 10,177 10,009 19,394
Grocery operations................................. 1,660 4,324 3,214 8,227
General and administrative......................... 575 1,663 1,063 2,490
Marketing and selling.............................. 923 1,008 1,534 2,244
System development and maintenance................. 334 303 689 679
Depreciation and amortization...................... 150 378 268 590
----------- ----------- ----------- -----------
Total costs and expenses........................ 8,667 17,853 16,777 33,624
----------- ------------ ----------- -----------
Operating loss......................................... (2,245) (3,202) (4,021) (6,269)
Other income (expense):
Interest expense................................... (16) (30) (35) (45)
Interest income.................................... 149 201 167 336
----------- ------------ ----------- -----------
Net loss............................................... $ (2,112) $ (3,031) $ (3,889) $ (5,978)
=========== =========== =========== ===========
Pro forma net loss per share........................... $ (0.16) $ (0.22) $ (0.30) $ (0.45)
=========== =========== =========== ===========
Shares used in computing pro forma net loss per share.. $12,806,794 13,713,655 12,806,794 13,262,730
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PEAPOD, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1996 1997
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................. $(3,889) $(5,978)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................... 268 590
Shares issued for services rendered......................... 111 533
Changes in operating assets and liabilities:
(Increase) decrease in receivables....................... (153) (1,936)
(Increase) decrease in prepaid expenses.................. 4 101
(Increase) decrease in other current assets.............. 177 (60)
Increase (decrease) in accounts payable.................. 9 (145)
Increase (decrease) in accrued compensation.............. 185 155
Increase (decrease) in other accrued liabilities......... (127) 1,056
Increase (decrease) in deferred service fees............. 1,516 1,114
------- -------
Net cash used in operating activities.............. (1,899) (4,570)
Cash flows from investing activities:
Property and equipment purchased..................................... (226) (658)
Capitalized software development costs............................... - (355)
------- -------
Net cash used in investing activities.............. (226) (1,013)
Cash flows from financing activities:
Proceeds from issuance of equity instruments, net of
issuance costs................................................... 16,440 58,449
Proceeds from issuance of common shares upon exercise of
options and warrants............................................. - 57
Repayment of subordinated debentures................................. (125) -
Payments on capital lease obligations................................ (92) (175)
------- -------
Net cash provided by financing activities.......... 16,223 58,331
Net increase in cash..................................................... 14,098 52,748
Cash and cash equivalents at beginning of period......................... 2,466 13,039
------- -------
Cash and cash equivalents at end of period............................... $16,564 $65,787
======= =======
Supplemental disclosure of cash flows information - interest paid........ $ 30 $ 30
Supplemental disclosure of noncash investing and financing
activity - equipment on capital leases............................... 357 625
</TABLE>
<PAGE>
Peapod, Inc.
Notes to Financial Statements
(unaudited)
1. Basis of Presentation. The unaudited interim financial statements included
herein have been prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain notes and
other information normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the interim financial statements presented in
this quarterly report on Form 10-Q in accordance with such rules and
regulations. In the opinion of the Company's management, the accompanying
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to state fairly the financial position of
the Company as of June 30, 1997, and the results of its operations and cash
flows for the periods indicated. The results of operations for the three
and six months ended June 30, 1997 are not necessarily indicative of the
results to be expected for the full year.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto of the Company and Peapod LP for the
period from December 5, 1996 through December 31, 1996 and the year ended
December 31, 1996, respectively, which are included in the Company's
Registration Statement on Form S-1 (No. 333-24341) filed with the
Securities and Exchange Commission.
2. Conversion. Peapod, Inc. ("Company") is the successor to a business
originally founded in 1989 as a Delaware corporation and operated since
1992 through an Illinois limited partnership ("Peapod LP"). In December
1996, the Company was incorporated in Delaware. In a conversion (the
"Conversion") that was effected on May 31, 1997 (i) all of the equity
interests in Peapod LP were transferred to the Company in exchange for
12,656,417 shares of Common Stock, (ii) Peapod LP was dissolved, (iii) all
of the assets and liabilities of Peapod LP were transferred to the Company
and (iv) outstanding options and warrants for equity interests in Peapod LP
were converted into options and warrants for shares of Common Stock. The
transfer of the assets and liabilities of Peapod LP to the Company have
been recorded by the Company at the historical carrying values of Peapod
LP. On June 16, 1997 ("Offering Date"), the Company closed an initial
public offering of 4,000,000 shares of Common Stock at $16.00 per share
generating net proceeds of $58.4 million.
The balance sheet as of December 31, 1996 presents the historical results
of Peapod LP.
3. Earnings Per Share. The pro forma net loss per share is computed based on
the weighted average number of shares outstanding during the period,
assuming the Conversion occurred at January 1, 1996.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock, stock warrants and stock options issued during the
twelve months immediately preceding the Offering Date (using the treasury
stock method and an initial public offering price per share of $16.00) have
been included in the calculation of Common Stock as if they were
outstanding for the entire period presented. Other common equivalent shares
from stock options and warrants are excluded from the computation because
their effect is antidilutive.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
The following table sets forth certain unaudited financial information from
the Statements of Operations as a percentage of revenue:
<TABLE>
<CAPTION>
Percentage of total revenues
---------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
--------------------------------- -----------------------------
1996 1997 1996 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Grocery sales, net of returns......... 78.2 % 69.5 % 78.5 % 70.9 %
Interactive marketing services........ 3.2 3.8 3.1 3.6
Member and retailer services.......... 18.6 26.7 18.4 25.5
----------- ----------- ---------- ----------
Total revenues...................... 100.0 100.0 100.0 100.0
Costs and expenses:
Groceries sold, net of returns........ 78.2 69.5 78.5 70.9
Grocery operations.................... 25.8 29.5 25.2 30.0
General and administrative............ 9.0 11.3 8.3 9.1
Marketing and selling................. 14.4 6.9 12.0 8.2
System development and maintenance.... 5.2 2.1 5.4 2.5
Depreciation and amortization......... 2.3 2.6 2.1 2.2
----------- ----------- ---------- ----------
Total costs and expenses............ 134.9 121.9 131.5 122.9
----------- ----------- ---------- ----------
Operating loss.......................... (34.9) (21.9) (31.5) (22.9)
Other income (expense):
Interest expense...................... (0.2) (0.2) (0.3) (0.2)
Interest income....................... 2.3 1.4 1.3 1.2
----------- ----------- ---------- ----------
Net loss................................ (32.8)% (20.7)% (30.5)% (21.9)%
=========== =========== ========== ==========
</TABLE>
Comparison of Three Months Ended June 30, 1997 and June 30, 1996
- ----------------------------------------------------------------
Grocery sales, net of returns. Grocery sales, net of returns, which are
the actual costs of groceries purchased by members, increased by 102.5% from
$5,025,000 in the quarter ended June 30, 1996 to $10,177,000 in the quarter
ended June 30, 1997. This increase is principally due to a 104.8% increase in
the number of orders offset slightly by a decline in average order size.
Average order size tends to be smaller in newer markets. The total number of
orders increased from 45,500 in the quarter ended June 30, 1996 to 93,200 in the
quarter ended June 30, 1997. Total membership at June 30, 1996 and 1997 was
17,700 and 51,500, respectively, an increase of 191.0%. Increases in the
Company's membership base resulted largely from the introduction of the Peapod
service in six new markets since June 30, 1996 (Columbus, Boston, Houston,
Atlanta, Dallas and Austin), as well as increased penetration in its two then
existing markets (Chicago and San Francisco/San Jose).
Interactive marketing services. Revenues from interactive marketing
services include fees from consumer goods companies for interactive advertising,
promotion and research services. Fees from such services increased by 172.9%
from $207,000 in the quarter ended June 30, 1996 to $565,000 in the quarter
ended June 30, 1997. The increase is primarily due to an increasing number of
interactive marketing services clients during the period.
Member and retailer services. Revenues from member and retailer services
include subscription, service and other fees paid by members and retail partners
related to Peapod's online shopping and delivery operations. Fees from such
services increased 228.5% from $1,190,000 in the quarter ended June 30, 1996 to
$3,909,000 in the quarter ended June 30, 1997. This increase is primarily
attributable to (i) fees paid by new retailers and additional fees paid by
existing retailers, (ii) higher grocery volumes and order quantities and (iii)
the increasing size of the Company's membership base.
Groceries sold, net of returns. The Company purchases groceries for its
account on behalf of its members. The actual cost of groceries are subsequently
charged to the members. Groceries sold, net of returns increased from
$5,025,000 in the quarter ended June 30, 1996 to $10,177,000 in the quarter
ended June 30, 1997 commensurate with the increase in grocery sales, net of
returns.
<PAGE>
Grocery operations. Grocery operations expenses include (i) the direct
costs relating to the shopping, packing and delivery of member orders, (ii)
salaries and overhead expenses of each fulfillment center, (iii) salaries and
overhead expenses for each metropolitan market and (iv) salaries and overhead
expenses for certain field support functions such as recruiting, training,
database merchandising and customer support. Grocery operations expenses
increased 160.5% from $1,660,000 in the quarter ended June 30, 1996 to
$4,324,000 in the quarter ended June 30, 1997. The increase is primarily
attributable to (i) salaries and overhead expenses of new fulfillment centers,
(ii) the direct costs of shopping, packing and delivering the increased volume
of member orders, (iii) salaries and overhead expenses for six new markets, (iv)
salaries and overhead expenses for customer support functions to support
increases in the Company's membership base and (v) new recruiting and training
functions created to assist in the rapid opening of new markets and new
fulfillment centers.
At June 30, 1997, Peapod fulfilled member orders from 59 fulfillment
centers across eight metropolitan markets compared to 15 fulfillment centers
across two metropolitan markets at June 30, 1996. Two metropolitan markets and
17 fulfillment centers were added in the quarter ended June 30, 1997 compared to
no new metropolitan markets and one fulfillment center added in the quarter
ended June 30, 1996.
General and administrative. General and administrative expenses, which
include corporate staff, accounting and human resource functions, increased
189.2% from $575,000 in the quarter ended June 30, 1996 to $1,663,000 in the
quarter ended June 30, 1997. The increase resulted primarily from an increase in
compensation-related expenses to support the Company's growth, and from
occupancy expenses related to the centralization of field support functions and
the planned relocation of the Company's headquarters.
Marketing and selling. Marketing and selling expenses include the cost of
member acquisition and retention marketing, such as radio advertising and direct
mail, as well as certain costs relating to interactive marketing services. The
Company expenses all such costs as incurred. Marketing and selling expenses
increased by 9.2% from $923,000 in the quarter ended June 30, 1996 to $1,008,000
in the quarter ended June 30, 1997.
System development and maintenance. System development and maintenance
expenses, which include new product development as well as the maintenance and
enhancement of existing systems, decreased 9.3% from $334,000 in the quarter
ended June 30, 1996 to $303,000 in the quarter ended June 30, 1997. In 1996,
Peapod began work on version 5.0 of its end-user software. In the quarter ended
June 30, 1997, the Company capitalized $204,000 of these development costs
compared to no capitalized development costs in the quarter ended June 30, 1996.
Depreciation and amortization. Depreciation and amortization increased
152.0% from $150,000 in the quarter ended June 30, 1996 to $378,000 in the
quarter ended June 30, 1997. This increase is the result of changes in the
depreciable lives of certain capital assets already in service and equipment
added to support additional members, fulfillment centers and employees.
Other income (expense). Other income (expense) includes interest paid on
subordinated debentures, notes payable and capital leases and interest earned on
cash balances. Interest expense increased from $16,000 in the quarter ended
June 30, 1996 to $30,000 in the quarter ended June 30, 1997. Interest income
increased from $149,000 in the quarter ended June 30,
<PAGE>
1996 to $201,000 in the quarter ended June 30, 1997, resulting from the
investment of proceeds from the issuance of equity in both 1996 and 1997.
Comparison of Six Months Ended June 30, 1997 and June 30, 1996
- --------------------------------------------------------------
Grocery sales, net of returns. Grocery sales, net of returns increased by
93.8% from $10,009,000 in the first half of 1996 to $19,394,000 in the first
half of 1997. This increase was principally due to a 94.0% increase in the
number of orders and a slight increase in average order size. The total number
of orders increased from 91,800 in the first half of 1996 to 178,100 in the
first half of 1997. Total membership at June 30, 1996 and 1997 was 17,700 and
51,500, respectively, an increase of 191.0%. Increases in the Company's
membership base resulted largely from the introduction of the Peapod service
in six new markets since June 30, 1996 (Columbus, Boston, Houston, Atlanta,
Dallas and Austin), as well as increased penetration in its two then existing
markets (Chicago and San Francisco/San Jose).
Interactive marketing services. Revenues from interactive marketing
services increased by 146.3% from $402,000 in the first half of 1996 to $990,000
in the first half of 1997. The increase is primarily due to an increasing number
of interactive marketing services clients during the period.
Member and retailer services. Revenues from member and retailer services
increased 197.3% from $2,345,000 in the first half of 1996 to $6,971,000 in the
first half of 1997. This increase is primarily attributable to (i) fees paid by
new retailers and additional fees paid by existing retailers, (ii) higher
grocery volumes and order quantities and (iii) the increasing size of the
Company's membership base.
Groceries sold, net of returns. Groceries sold, net of returns increased
from $10,009,000 in the first half of 1996 to $19,394,000 in the first half of
1997 commensurate with the increase in grocery sales, net of returns.
Grocery operations. Grocery operations expenses increased 156.0% from
$3,214,000 in the first half of 1996 to $8,227,000 in the first half of 1997.
The increase is primarily attributable to (i) salaries and overhead expenses of
new fulfillment centers, (ii) the direct costs of shopping, packing and
delivering member orders relating to the increased volume of orders, (iii)
salaries and overhead expenses for six new markets, (iv) salaries and overhead
expenses for customer support functions to support increases in the Company's
membership, and (v) new recruiting and training functions created to assist in
the rapid opening of new markets and new fulfillment centers.
At June 30, 1997, Peapod fulfilled member orders from 59 fulfillment
centers across eight metropolitan markets compared to 15 fulfillment centers
across two metropolitan markets at June 30, 1996. Four metropolitan markets and
31 fulfillment centers were added in the six months ended June 30, 1997 compared
to no new metropolitan markets and one fulfillment center added in the first
half of 1996.
General and administrative. General and administrative expenses increased
134.2% from $1,063,000 in the first half of 1996 to $2,490,000 in the first half
of 1997. The increase resulted primarily from an increase in compensation-
related expenses to support the Company's growth,
<PAGE>
and from occupancy expenses related to the centralization of field support
functions and the planned relocation of the Company's headquarters.
Marketing and selling. Marketing and selling expenses increased by 46.3%
from $1,534,000 in the first half of 1996 to $2,244,000 in the first half of
1997. The increase is principally due to additional acquisition marketing
related to six new markets, and additional marketing staff to support the growth
in interactive marketing services and other marketing initiatives.
System development and maintenance. System development and maintenance
expenses decreased 1.5% from $689,000 in the first half of 1996 to $679,000 in
the first half of 1997. In 1996, Peapod began work on version 5.0 of its end-
user software. In the first half of 1997, the Company capitalized $355,000 of
these development costs compared to no capitalized development costs in the
first half of 1996.
Depreciation and amortization. Depreciation and amortization increased
120.1% from $268,000 in the first half of 1996 to $590,000 in the first half of
1997. This increase is the result of changes in the depreciable lives of
certain capital assets already in service and equipment added to support
additional members, fulfillment centers and employees.
Other income (expense). Interest expense increased from $35,000 in the
first half of 1996 to $45,000 in the first half of 1997. Interest income
increased from $167,000 in the first half of 1996 to $336,000 in the first half
of 1997 resulting from the investment of proceeds from the issuance of equity in
both 1996 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities increased from $1,996,000 in the first
half of 1996 to $4,570,000 in the first half of 1997. The increase in cash used
in operating activities is primarily attributable to increased net losses from
operations and increased receivables balances, partially offset by increases in
accounts payable and accrued liabilities. As of June 30, 1997, the Company had
$65,787,000 in cash and cash equivalents. In 1997, the Company sold equity
which generated aggregate net proceeds of $58,506,000, including $58,358,000 net
proceeds from the Company's initial public offering of Common Stock in June 1997
(the "IPO"). The Company intends to use the net proceeds from the IPO primarily
for expansion into new geographic markets and further penetration in existing
markets. The Company uses its working capital to fund ongoing operations,
marketing programs and geographic expansion and to further develop its products
and services.
The Company anticipates that amounts available under existing sources of
liquidity, cash flows from operations and the net proceeds from the IPO will be
sufficient to fund the Company's operations and capital requirements for the
foreseeable future. However, no assurance can be given that changing business
circumstances will not require additional capital for reasons that are not
currently anticipated or that the necessary capital will then be available to
the Company on favorable terms or at all.
The Company believes that inflation has not had a material effect on its
operations.
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matter to Vote of Security Holders.
In a conversion (the "Conversion") that was effected on May 31, 1997,
(i) all of the equity interests in Peapod LP, an Illinois limited
partnership, were transferred to the Company in exchange for
12,656,417 shares of Common Stock, (ii) Peapod LP was dissolved, (iii)
all of the assets and liabilities of Peapod LP were transferred to the
Company and (iv) outstanding options and warrants for equity interests
in Peapod LP were converted into options and warrants for shares of
Common Stock.
By unanimous written consent of the sole stockholder of the Company in
lieu of a special meeting, dated May 7, 1997, such stockholder
approved the Company's Amended and Restated Certificate of
Incorporation (the "Restated Charter").
By unanimous written consent of the sole stockholder of the Company in
lieu of a special meeting, dated as of May 14, 1997, such stockholder
(i) approved an amendment to the Restated Charter changing the name of
the Company to "Peapod, Inc." (ii) established the number of directors
constituting the whole Board of Directors of the Company, and (iii)
elected the following directors to the Company's Board of Directors:
Andrew B. Parkinson, Thomas L. Parkinson, Tasso H. Coin, Steven M.
Friedman, Trygve E. Myhren, and Seth L. Pierrepont.
By unanimous written consent of the sole stockholder of the Company in
lieu of a special meeting, dated May 29, 1997, such stockholder (i)
approved the Company's 1997 Long-Term Incentive Plan (ii) approved the
classification of the Company's Board of Directors into three classes
as follows: Messrs. Andrew B. Parkinson and Tasso H. Coin as Class I
directors (which class will stand for election at the annual meeting
of stockholders to be held in 1998); Messrs. Thomas L. Parkinson and
Seth L. Pierrepont as Class II directors (which class will stand for
election at the annual meeting of stockholders to be held in 1999);
and Messrs. Steven M. Friedman and Trygve E. Myhren as Class III
directors (which class will stand for election at the annual meeting
of stockholders to be held in 2000).
By unanimous written consent of the sole stockholder of the Company in
lieu of a special meeting, dated May 30, 1997, such stockholder
approved the Company's Employee Stock Purchase Plan.
<PAGE>
Item 5. Other Information
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995. Certain statements in this report relative to markets for
the Company's products and trends in the Company's operations or
financial results, as well as other statements including words such as
"anticipate," "believe," "plan," "estimate," "expect," "intend" or
other similar expressions, constitute "forward-looking statements"
under The Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are contained in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and in
other portions of this report. Such forward-looking statements are
subject to known and unknown risks, uncertainties and other factors
which may cause actual results to be materially different from those
contemplated by the forward-looking statements. Such factors include,
among other things: (1) the developing nature of the markets for the
Company's services and the rapid technological change relating
thereto; (2) the Company's relationship with its retail partners and
its interactive marketing services and research customers; (3) the
Company's ability to execute its growth strategies; (4) the extent to
which the Company is able to attract and retain key personnel; (5)
competition; (6) general economic conditions; (7) regulations; and (8)
the risk factors or uncertainties listed from time to time in the
Company's filings with the Securities and Exchange Commission.
Item 6. Exhibits and Reports on form 8-K.
(a) Exhibits - The Exhibits filed with this report are listed on the
attached Exhibit Index.
(b) Reports on Form 8-K - The Registrant filed no Current Reports on
Form 8-K for the quarter ended June 30, 1997.
<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.
Peapod, Inc.
------------------------------
(Registrant)
August 14, 1997 /s/ John C. Walden
-----------------------------
John C. Walden
Executive Vice President-
Finance and Business
Development
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
2-- Conversion Agreement and Plan of Reorganization (incorporated by
reference to Exhibit 10.1 to the Registrant's Registration
Statement on Form S-1 No. 333-24341 (the "Common Stock
Registration Statement"))
3.1-- Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Common Stock
Registration Statement)
3.2-- Restated By-Laws of the Company (incorporated by reference to
Exhibit 3.2 of the Common Stock Registration Statement)
4.1-- Form of Stockholders Rights Plan (incorporated by reference to
Exhibit 4.1 of the Common Stock Registration Statement)
4.2-- Form of Certificate of Designation of Series A Junior
Participating Preferred Stock (incorporated by reference to
Exhibit 4.2 of the Common Stock Registration Statement)
10.4-- Form of Employment Agreement between the Company and Andrew B.
Parkinson (incorporated by reference to Exhibit 10.4 of the
Common Stock Registration Statement)
10.5-- Form of Employment Agreement between the Company and Thomas L.
Parkinson (incorporated by reference to Exhibit 10.5 of the
Common Stock Registration Statement)
10.6-- Form of Employment Agreement between the Company and John C.
Walden (incorporated by reference to Exhibit 10.6 of the
Common Stock Registration Statement)
10.7-- Form of Employment Agreement between the Company and Timothy M.
Dorgan (incorporated by reference to Exhibit 10.7 of the
Common Stock Registration Statement)
10.8-- Form of Employment Agreement between the Company and John A.
Furton (incorporated by reference to Exhibit 10.8 of the
Common Stock Registration Statement)
10.9-- Form of Severance Agreement between the Company and each of
Andrew B. Parkinson, Thomas L. Parkinson, John C. Walden,
Timothy M. Dorgan and John A. Furton. (incorporated by
reference to Exhibit 10.9 of the Common Stock Registration
Statement)
<PAGE>
10.10 -- Amended and Restated Investors Agreement, dated April 1,
1997, among the Company and certain investors (incorporated
by reference to Exhibit 10.10 of the Common Stock
Registration Statement)
10.11 -- Unitholders Agreement among Peapod LP, the General Partner
and certain investors, as amended (incorporated by reference
to Exhibit 10.11 of the Common Stock Registration Statement)
10.12 -- Form of Parkinson Registration Rights Agreement among the
Company, Andrew B. Parkinson and Thomas L. Parkinson
(incorporated by reference to Exhibit 10.12 of the Common
Stock Registration Statement)
10.13 -- Form of Tasso H. Coin Registration Rights Agreement between
the Company and Tasso H. Coin (incorporated by reference to
Exhibit 10.13 of the Common Stock Registration Statement)
10.14 -- Form of 1997 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.14 of the Common Stock Registration
Statement)
10.15 -- Form of Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.15 of the Common Stock Registration
Statement)
10.16 -- Form of Indemnification Agreement between the Company and
each of its directors and executive officers (incorporated
by reference to Exhibit 10.16 of the Common Stock
Registration Statement)
11-- Statement re: computation of per share earnings
27 -- Financial Data Schedule
<PAGE>
EXHIBIT 11
Peapod, Inc.
Statement Regarding Computation of Net Loss per Share
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss $(2,112,000) $(3,031,000) $(3,889,000) $(5,978,000)
=========== =========== =========== ===========
Weighted average Common
Shares outstanding 12,526,812 13,433,673 12,526,812 12,982,748
Additional shares pursuant
to SAB 83 computation 279,982 279,982 279,982 279,982
----------- ----------- ----------- -----------
Shares used in computing
pro forma net loss
per share 12,806,794 13,713,655 12,806,794 13,262,730
=========== =========== =========== ===========
Pro forma net loss per
share $ (0.16) $ (0.22) $ (0.30) $ (0.45)
=========== =========== =========== ===========
</TABLE>
Note: The pro forma net loss per share is computed assuming the Conversion
occurred at January 1, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of June 30, 1997 and the statements of operations for the three and six
months ended June 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 65,787 65,787
<SECURITIES> 0 0
<RECEIVABLES> 2,605 2,605
<ALLOWANCES> 134 134
<INVENTORY> 0 0
<CURRENT-ASSETS> 68,856 68,856
<PP&E> 4,540 4,540
<DEPRECIATION> 1,816 1,816
<TOTAL-ASSETS> 72,219 72,219
<CURRENT-LIABILITIES> 9,383 9,383
<BONDS> 0 0
0 0
0 0
<COMMON> 167 167
<OTHER-SE> 61,297 61,297
<TOTAL-LIABILITY-AND-EQUITY> 72,219 72,219
<SALES> 10,177 19,394
<TOTAL-REVENUES> 14,651 27,355
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 17,853 33,624
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30 45
<INCOME-PRETAX> (3,031) (5,978)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,031) (5,978)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,031) (5,978)
<EPS-PRIMARY> (.22) (.45)
<EPS-DILUTED> (.22) (.45)
<FN>
1. These financial statements should be read in conjunction with the Company's
Form S-1 (No. 333-24341) filed with the SEC.
2. See the Company's Form S-1 (No. 333-24341) for a description of the
Conversion from Peapod LP to the Company effected on May 31, 1997.
3. On June 16, 1997 the Company closed an initial public offering of 4,000,000
shares of Common Stock at $16.00 per share.
4. SEC Staff Accounting Bulletin No. 83 has been applied in calculating EPS.
</FN>
</TABLE>
