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 September 30, 1998
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)
(847) 583-9400
(Registrant's telephone number, including area code)
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 [ X ] No [ ]
The number of shares outstanding of the registrant's common stock,
$0.01 par value ("Common Stock") as of October 22, 1998 was 17,129,949.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
<TABLE>
PEAPOD, INC.
BALANCE SHEETS
(in thousands, except for share data)
<CAPTION>
September 30, December 31,
1998 1997
----------------- -----------------
(unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 8,783 $54,079
Marketable securities.............................................. 33,318 8,798
Receivables, net of bad debt allowance of $358 and $352 as
of September 30, 1998 and December 31, 1997, respectively........ 1,415 1,195
Prepaid expenses................................................... 621 444
Other current assets............................................... 811 228
----------------- -----------------
Total current assets................................................... 44,948 64,744
Property and equipment:
Computer equipment and software.................................... 5,700 4,499
Service equipment and other........................................ 1,615 1,053
----------------- -----------------
Property and equipment, at cost......................................... 7,315 5,552
Accumulated depreciation........................................... (3,545) (2,301)
----------------- -----------------
Net property and equipment.............................................. 3,770 3,251
Capitalized software development costs.................................. 1,284 998
Goodwill, net of accumulated amortization of $203 and $174
as of September 30, 1998 and December 31, 1997, respectively......... 87 117
----------------- -----------------
Total assets.................................................. $50,089 $69,110
================= =================
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable................................................... $ 2,953 $ 7,514
Accrued compensation............................................... 973 1,258
Other accrued liabilities.......................................... 1,204 926
Current deferred service fees...................................... 1,821 1,969
Current obligations under capital lease............................ 622 727
----------------- -----------------
Total current liabilities..................................... 7,573 12,394
Deferred service fees................................................... 652 1,212
Obligations under capital lease, less current obligations............... 340 701
----------------- -----------------
Total liabilities............................................. 8,565 14,307
Stockholders' equity:
Preferred stock, $.01 par value, authorized 5,000,000
shares, none issued and outstanding............................. -- --
Common stock, $.01 par value, 50,000,000 shares authorized,
17,124,920 and 16,852,557 shares issued and outstanding at
September 30, 1998 and December 31, 1997, respectively........ 171 169
Additional paid-in capital......................................... 63,906 63,148
Accumulated other comprehensive income -
Unrealized gain on available for sale securities.............. 151 --
Accumulated deficit................................................ (22,077) (8,495)
Treasury stock, at cost, 84,127 and 2,000 shares at September 30,
1998 and December 31, 1997, respectively........................... (627) (19)
----------------- -----------------
Total stockholders' equity.................................... 41,524 54,803
================= =================
Total liabilities and stockholders' equity.................... $50,089 $69,110
================= =================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PEAPOD, INC.
STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)
(unaudited)
Three months ended September 30,
-------------------------------------------
------------------ ------------------
1998 1997
------------------ ------------------
<S> <C> <C>
Revenues:
Net product sales......................................... $ 13,057 $ 10,208
Member and retailer services.............................. 2,306 2,784
Interactive marketing services............................ 263 614
Licensing services........................................ 50 --
------------------ ------------------
Total revenues....................................... 15,676 13,606
Costs and expenses:
Cost of goods sold........................................ 12,295 9,599
Fulfillment operations.................................... 4,735 4,020
General and administrative................................ 1,523 1,053
Marketing and selling..................................... 1,243 1,857
System development and maintenance........................ 999 378
Depreciation and amortization............................. 529 366
------------------ ------------------
Total costs and expenses............................. 21,324 17,273
------------------ ------------------
Operating loss................................................. (5,648) (3,667)
Other income (expense):
Interest expense.......................................... (44) (13)
Interest income........................................... 609 866
================== ==================
Net loss....................................................... $ (5,083) $ (2,814)
================== ==================
Net loss per share:
Basic..................................................... $ (0.30) $ (0.17)
Diluted................................................... $ (0.30) $ (0.17)
Shares used to compute net loss per share:
Basic..................................................... 17,075,309 16,856,070
Diluted................................................... 17,075,309 16,856,070
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PEAPOD, INC.
STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)
(unaudited)
Nine months ended September 30,
-------------------------------------------
----------------- ------------------
1998 1997
----------------- ------------------
<S> <C> <C>
Revenues:
Net product sales......................................... $ 42,999 $ 29,601
Member and retailer services.............................. 7,695 8,525
Interactive marketing services............................ 1,225 1,604
Licensing services........................................ 150 --
----------------- ------------------
Total revenues....................................... 52,069 39,730
Costs and expenses:
Cost of goods sold........................................ 40,454 27,761
Fulfillment operations.................................... 14,942 12,177
General and administrative................................ 4,521 3,348
Marketing and selling..................................... 3,781 4,353
System development and maintenance........................ 2,430 1,057
Depreciation and amortization............................. 1,501 956
----------------- ------------------
Total costs and expenses............................. 67,629 49,652
----------------- ------------------
Operating loss................................................. (15,560) (9,922)
Other income (expense):
Interest expense.......................................... (132) (58)
Interest income........................................... 2,111 1,188
================= ==================
Net loss....................................................... $ (13,581) $ (8,792)
================= ==================
Net loss per share:
Basic..................................................... $ (0.80) $ (0.62)
Diluted................................................... $ (0.80) $ (0.62)
Shares used to compute net loss per share:
Basic..................................................... 16,954,079 14,279,385
Diluted................................................... 16,954,079 14,279,385
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PEAPOD, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended September 30,
----------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Net loss $ (5,083) $ (2,814)
Other comprehensive income:
Unrealized gain on available for sale securities 176 --
-------------- --------------
Comprehensive loss $ (4,907) $ (2,814)
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PEAPOD, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Nine Months Ended September 30,
--------------------------------------
1998 1997
--------------- ------------------
<S> <C> <C>
Net loss $ (13,581) $ (8,792)
Other comprehensive income:
Unrealized gain on available for sale securities 151 --
--------------- ------------------
Comprehensive loss $ (13,430) $ (8,792)
=============== ==================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PEAPOD, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30,
--------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $(13,581) $ (8,792)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.............................. 1,501 956
Stock issued for services rendered......................... 45 533
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net................ (220) (1,897)
(Increase) decrease in prepaid expenses................ (177) (567)
(Increase) decrease in other current assets............ (583) (23)
Increase (decrease) in accounts payable................ (4,561) 782
Increase (decrease) in accrued compensation............ (285) 344
Increase (decrease) in other accrued liabilities....... 278 959
Increase (decrease) in deferred service fees........... (708) 1,295
---------------- ----------------
Net cash used in operating activities.............. (18,291) (6,410)
Cash flows from investing activities:
Property and equipment purchased............................... (1,637) (1,183)
Capitalized software development costs......................... (514) (565)
Net purchases of marketable securities........................ (24,369) (6,058)
---------------- ----------------
Net cash used in investing activities.............. (26,520) (7,806)
Cash flows from financing activities:
Proceeds from issuance of stock, net of offering costs......... -- 58,286
Proceeds from issuance of stock upon exercise of options....... 107 57
Payments on capital lease obligations.......................... (592) (367)
---------------- ----------------
Net cash provided by (used in) financing activities (485) 57,976
---------------- ----------------
Net increase (decrease) in cash.................................... (45,296) 43,760
Cash and cash equivalents at beginning of period................... 54,079 13,039
================ ================
Cash and cash equivalents at end of period......................... $ 8,783 $56,799
================ ================
Supplemental disclosure of cash flows information--interest paid $ 117 $ 61
Supplemental disclosures of noncash investing and financing activity:
Options exercised by sale of stock to the Company........ 608 19
Equipment on capital leases.............................. 126 907
================ ================
</TABLE>
See accompanying notes to financial statements.
<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 September 30, 1998, and the results of its operations and
cash flows for the periods indicated. The results of operations for the
periods covered 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 for the year ended
December 31, 1997, which are included in the Company's Annual Report on
Form 10-K 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 approximately $58.1 million.
3. Earnings Per Share. The Company applies SFAS No. 128, Earnings Per Share,
in computing earnings per share. Basic net loss per share is computed using
the weighted average number of common shares outstanding. Diluted net loss
per share is computed using the weighted average number of common shares
outstanding and equivalent shares based on the assumed exercise of stock
options and warrants (using the treasury stock method) unless
anti-dilutive.
4. Reclassifications. Certain prior year balances have been reclassified to
conform with the current year presentation.
<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 total revenues:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
------------ ----------- ------------ ------------
1998 1997 1998 1997
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Net product sales....................... 83 % 75 % 83 % 75 %
Member and retailer services............ 15 20 15 21
Interactive marketing services.......... 2 5 2 4
Licensing services...................... * -- * --
------------ ----------- ------------ ------------
Total revenues..................... 100 100 100 100
Costs and expenses:
Cost of goods sold...................... 79 70 78 70
Fulfillment operations.................. 30 29 28 31
General and administrative.............. 10 8 9 8
Marketing and selling................... 8 14 7 11
System development and maintenance...... 6 3 5 3
Depreciation and amortization........... 3 3 3 2
------------ ----------- ------------ ------------
Total costs and expenses........... 136 127 130 125
------------ ----------- ------------ ------------
Operating loss............................... (36) (27) (30) (25)
Other income (expense):
Interest expense........................ * * * *
Interest income......................... 4 6 4 3
============ =========== ============ ============
Net loss..................................... (32) % (21) % (26) % (22) %
============ =========== ============ ============
* - Less than 1%
</TABLE>
Comparison of Three Months Ended September 30, 1998 and September 30, 1997
Net product sales. Net product sales, which is revenue from the sale of
groceries and other products to members, increased by 28% from $10,208,000 in
the quarter ended September 30, 1997 to $13,057,000 in the quarter ended
September 30, 1998. This increase was primarily due to a 20% increase in the
number of orders, from 93,700 in the quarter ended September 30, 1997 to 112,300
in the quarter ended September 30, 1998, and a 7% increase in the average order
size for the same time period. Membership, measured as customers transacting
within the last 12 months, increased 18% from 84,000 members at September 30,
1997 to 98,900 at September 30, 1998. Increases in the Company's membership base
and orders resulted largely from increased market penetration.
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 decreased 17% from $2,784,000 in the quarter ended September 30,
1997 to $2,306,000 in the quarter ended September 30, 1998. This decrease is
primarily attributable to an absence of market openings and related fees in the
quarter ended September 30, 1998 compared to the openings of two new markets in
the quarter ended September 30, 1997. Market opening fees, paid by retailers,
are recognized over the period in which a new market opens. Discounts on
groceries purchased by the Company from retailers, which were previously
included in member and retailer services, have been reclassified as a reduction
in cost of goods sold.
Interactive marketing services. Revenues from interactive marketing
services consist of fees from consumer goods companies for interactive
advertising, promotion and research services. Fees from such services decreased
by 57% from $614,000 in the quarter ended September 30, 1997 to $263,000 in the
quarter ended September 30, 1998. The decrease is due to a reduction in the
number and size of interactive marketing programs during the period, which may
have resulted from the Company's decision to limit acquisition spending and
geographic growth during 1998.
Licensing services. Revenues from licensing services include the
license and related maintenance and service fees received for the Company's
proprietary software. In the quarter ended September 30, 1998, $50,000 has been
recognized for maintenance fees relating to the licensing of the Company's
software to Coles-Myer, Ltd. No such fees were recognized in the quarter ended
September 30, 1997.
Cost of goods sold. Cost of goods sold includes the cost of groceries
and other products purchased on behalf of its members, net of returns and
discounts. Cost of goods sold increased 28% from $9,599,000 in the quarter ended
September 30, 1997 to $12,295,000 in the quarter ended September 30, 1998,
commensurate with the growth in net product sales.
Fulfillment operations. Fulfillment 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. Fulfillment operations
expenses increased 18% from $4,020,000 in the quarter ended September 30, 1997
to $4,735,000 in the quarter ended September 30, 1998, and at a slower rate than
the increase in number of orders. The change is primarily attributable to
increases in direct costs of shopping, packing and delivering the increased
volume of member orders, and increases in salaries and overhead expenses for
fulfillment centers; offset in part by decreases in telecommunication costs.
At September 30, 1998, Peapod fulfilled member orders from 36
fulfillment centers across seven metropolitan markets serving 6,400,400
households. This compares to 57 fulfillment centers across eight metropolitan
markets at September 30, 1997 covering 6,605,000 households. The evolution of
the Company's fulfillment model has resulted in economies of scale as
fulfillment centers have been consolidated into more centralized facilities or
dedicated facilities. The Atlanta market ceased operations in January 1998.
General and administrative. General and administrative expenses, which
include corporate staff, accounting, finance, human resources, occupancy and
business development departments, increased 45% from $1,053,000 in the quarter
ended September 30, 1997 to $1,523,000 in the quarter ended September 30, 1998.
The increase is primarily attributable to occupancy, professional fees and
compensation related expenses to support the centralized fulfillment model and
Company's growth.
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 public relations and the sale
of interactive marketing services. The Company expenses all such costs as
incurred. Marketing and selling expenses decreased by 33% from $1,857,000 in the
quarter ended September 30, 1997 to $1,243,000 in the quarter ended September
30, 1998. The decrease is primarily attributable to the Company's decision to
limit marketing expenditures during 1998 while focusing on initiatives to
centralize fulfillment operations and modify its service model.
System development and maintenance. System development and maintenance
expenses, which include new product development as well as the maintenance and
enhancement of existing systems, increased 164% from $378,000 in the quarter
ended September 30, 1997 to $999,000 in the quarter ended September 30, 1998.
The increase is primarily attributable to increased compensation expenses and
consulting fees to support the Company's growth and its software licensing
initiative. In addition, $210,000 of development costs were capitalized in the
third quarter of 1997 related to the next version of the Company's consumer
software compared to $51,000 of such costs in the third quarter of 1998.
Depreciation and amortization. Depreciation and amortization increased
45% from $366,000 in the quarter ended September 30, 1997 to $529,000 in the
quarter ended September 30, 1998. This increase is the result of amortization of
capitalized software development costs, equipment added to support new members
and employees and changes in the depreciable lives of certain capital assets
already in service.
Other income (expense). Other income (expense) includes interest paid
on capital leases and interest earned on cash balances and marketable securities
resulting from the investment of proceeds from the issuance of equity in both
1996 and 1997. Interest expense increased from $13,000 in the quarter ended
September 30, 1997 to $44,000 in the quarter ended September 30, 1998. Interest
income decreased from $866,000 in the quarter ended September 30, 1997 to
$609,000 in the quarter ended September 30, 1998.
Comparison of Nine Months Ended September 30, 1998 and September 30, 1997
Net product sales. Net product sales increased by 45% from $29,601,000
in the nine months ended September 30, 1997 to $42,999,000 in the nine months
ended September 30, 1998. This increase was primarily due to a 37% increase in
the number of orders, from 271,700 in the nine months ended September 30, 1997
to 372,700 for the same period in 1998 and a 7% increase in the average order
size.
Member and retailer services. Revenues from member and retailer
services decreased 10% from $8,525,000 in the nine months ended September 30,
1997 to $7,695,000 in the nine months ended September 30, 1998. This decrease is
primarily attributable to an absence of market openings and the related fees in
the nine months ended September 30, 1998 compared to the openings of two new
markets in the nine months ended September 30, 1997.
Interactive marketing services. Revenues from interactive marketing
services decreased by 24% from $1,604,000 in the nine months ended September 30,
1997 to $1,225,000 in the nine months ended September 30, 1998. The decrease is
due to a reduction in the number and size of interactive marketing programs
during the period, which may have resulted from the Company's decision to limit
acquisition spending and geographic growth during 1998.
Licensing services. In the nine months ended September 30, 1998,
$150,000 has been recognized for maintenance fees relating to the licensing of
the Company's software to Coles-Myer, Ltd. No such fees were recognized in the
nine months ended September 30, 1997.
Cost of goods sold. Cost of goods sold increased 46% from $27,761,000
in the nine months ended September 30, 1997 to $40,454,000 in the nine months
ended September 30, 1998, commensurate with the growth in net product sales.
Fulfillment operations. Fulfillment operations expenses increased 23% from
$12,177,000 in the nine months ended September 30, 1997 to $14,942,000 in the
nine months ended September 30, 1998. The increase is primarily attributable to
(i) the direct costs of shopping, packing and delivering the increased volume of
member orders; (ii) increases in salaries and overhead expenses for fulfillment
centers; and (iii) salaries and overhead expenses for customer support functions
to support increases in the Company's membership base.
General and administrative. General and administrative expenses
increased 35% from $3,348,000 in the nine months ended September 30, 1997 to
$4,521,000 in the nine months ended September 30, 1998. The increase is
primarily attributable to occupancy, professional fees and compensation related
expenses to support the centralized fulfillment model and Company's growth.
Marketing and selling. Marketing and selling expenses decreased by 13%
from $4,353,000 in the nine months ended September 30, 1997 to $3,781,000 in the
nine months ended September 30, 1998. The decrease is primarily attributable to
the Company's decision to limit marketing expenditures during 1998 while
focusing on initiatives to centralize fulfillment operations and modify its
service model.
System development and maintenance. System development and maintenance
expenses increased 130% from $1,057,000 in the nine months ended September 30,
1997 to $2,430,000 in the nine months ended September 30, 1998. The increase is
primarily attributable to increased compensation expenses to support the
Company's growth and its software licensing initiative. In addition, $565,000 of
development costs were capitalized in the first nine months of 1997 related to
the next version of the Company's consumer software compared to $514,000 of such
costs in the first nine months of 1998.
Depreciation and amortization. Depreciation and amortization increased
57% from $956,000 in the nine months ended September 30, 1997 to $1,501,000 in
the nine months ended September 30, 1998. This increase is the result of
amortization of capitalized software development costs, equipment added to
support new members and employees and changes in the depreciable lives of
certain capital assets already in service.
Other income (expense). Interest expense increased from $58,000 in the
nine months ended September 30, 1997 to $132,000 in the nine months ended
September 30, 1998. Interest income increased 78% from $1,188,000 in the nine
months ended September 30, 1997 to $2,111,000 in the nine months ended September
30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities increased from $6,410,000 in the
first nine months of 1997 to $18,291,000 in the first nine months of 1998. The
increase in cash used in operating activities was primarily attributable to
decreases in accounts payable early in 1998, increased net losses and decreases
in deferred service fees. As of September 30, 1998, the Company had $8,783,000
in cash and cash equivalents and $33,318,000 in marketable securities. In 1997,
the Company sold equity which generated aggregate net proceeds of $58,846,000,
including $58,120,000 net proceeds from the Company's initial public offering of
Common Stock in June 1997 (the "IPO"). The Company uses its working capital to
fund ongoing operations, marketing programs, to further develop its products and
services and geographic expansion.
The Company anticipates that existing cash and marketable securities
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.
YEAR 2000
The Company has evaluated the impact of the Year 2000 issue on its
business and does not expect to incur significant costs associated with Year
2000 compliance or that Year 2000 issues will have a material impact on the
Company's business, results of operations or financial condition. The Company's
proprietary software systems and applications are currently Year 2000 compliant.
Certain operating systems of third party vendors on which certain Company
software resides are not yet Year 2000 compliant. However, these vendors have
indicated to the Company that Year 2000 compliant upgrades are either available,
or will be available shortly, and the Company intends to install these upgrades
in the first half of 1999. Certain third-party software for which the Company
pays maintenance fees is not yet Year 2000 compliant, but the Company has made
provisions to upgrade these third-party software systems in the first half of
1999. With respect to its grocery retail partners, to the extent that any of the
Company's retail partners' computer systems are not Year 2000 compliant, the
Company has established alternative procedures for obtaining relevant retailer
information at a minimal cost to the Company.
PART II
OTHER INFORMATION
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 other
suppliers, 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 following exhibits are filed herewith or are incorporated
herein:
Exhibit
No. Description
27 -- Financial Data Schedule
(b) Reports on Form 8-K - The Registrant filed no Current Reports on Form 8-K
during the quarter ended September 30, 1998.
<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)
October 30, 1998
/s/ Dan Rabinowitz
--------------------
Dan Rabinowitz
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<MULTIPLIER> 1,000
<CIK> 0001036992
<NAME> PEAPOD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 8,783
<SECURITIES> 33,318
<RECEIVABLES> 1,415
<ALLOWANCES> (358)
<INVENTORY> 0
<CURRENT-ASSETS> 44,948
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0
0
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</TABLE>
