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, 2000

                                       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 August 11, 2000 was 17,957,716.

<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                                       2
<PAGE>

                                  PEAPOD, INC.

                                 BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                            JUNE 30,       DECEMBER 31,
                                                                              2000             1999
                                                                         -------------    -------------
                                      ASSETS                              (UNAUDITED)
<S>                                                                      <C>              <C>
Current assets:
   Cash and cash equivalents .........................................   $      61,942    $       3,343
   Marketable securities .............................................              --            4,704
   Receivables, net of bad debt allowance of $251 and $232 as
     of June 30, 2000 and December 31, 1999 ..........................             669            1,478
   Merchandise inventory .............................................             643              458
   Prepaid expenses ..................................................             733              473
   Other current assets ..............................................           3,148              535
                                                                         -------------    -------------
      Total current assets ...........................................          67,135           10,991
Property and equipment:
   Computer equipment and software ...................................           7,640            6,737
   Service equipment and other .......................................           2,914            2,857
   Leasehold improvements ............................................           2,006            1,332
                                                                         -------------    -------------
Property and equipment, at cost ......................................          12,560           10,926
   Accumulated depreciation ..........................................          (5,600)          (4,290)
                                                                         -------------    -------------
Net property and equipment ...........................................           6,960            6,636
Restricted cash ......................................................           1,288            1,588
Non-current marketable securities ....................................              --            1,565
Other non-current assets .............................................           3,017               --
                                                                         -------------    -------------
      Total assets ...................................................   $      78,400    $      20,780
                                                                         =============    =============
                   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Accounts payable ..................................................   $       6,431    $       6,147
   Accrued compensation ..............................................             870              497
   Other accrued liabilities .........................................          10,551            1,897
   Current deferred revenue ..........................................             439              615
   Current obligations under capital lease ...........................             662              690
                                                                         -------------    -------------
      Total current liabilities ......................................          18,953            9,846
Deferred revenue .....................................................              --               95
Obligations under capital lease, less current portion ................             917            1,129
                                                                         -------------    -------------
      Total liabilities ..............................................          19,870           11,070
Redeemable preferred stock, $.01 par value; authorized 10,000,000
   shares; 726,371 shares of Series B convertible redeemable preferred
   stock issued at June 30, 2000 .....................................          64,428               --
Stockholders' equity (deficit):
   Commonstock, $.01 par value, 100,000,000 shares  authorized,
      18,406,605 and 18,320,578 shares issued at June 30, 2000
      and December 31, 1999 ..........................................             184              183
   Additional paid-in capital ........................................         134,388           71,698
   Note receivable from officer ......................................              --           (2,369)
   Accumulated other comprehensive income -
      unrealized holding loss on available-for-sale securities .......              --             (118)
   Accumulated deficit ...............................................        (138,597)         (58,513)
   Treasury stock, at cost, 453,640 and 141,749 shares at
      June 30, 2000 and December 31, 1999 ............................          (1,873)          (1,171)
                                                                         -------------    -------------
      Total stockholders' equity (deficit) ...........................          (5,898)           9,710
                                                                         -------------    -------------
      Total liabilities and stockholders' equity (deficit) ...........   $      78,400    $      20,780
                                                                         =============    =============
</TABLE>

                See accompanying notes to financial statements.

                                       3
<PAGE>

                                  PEAPOD, INC.

                            STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED JUNE 30,
                                                            ----------------------------
                                                                2000            1999
                                                            ------------    ------------
<S>                                                         <C>             <C>
Net sales ...............................................   $     22,732    $     17,073
Cost of sales ...........................................         17,574          12,903
                                                            ------------    ------------
Gross profit ............................................          5,158           4,170

Operating expenses:
   Fulfillment operations ...............................          7,796           5,017
   General and administrative ...........................          2,150           1,636
   Marketing and selling ................................          1,087           1,190
   System development and maintenance ...................          1,469             787
   Depreciation and amortization ........................            737             604
   Pre-opening costs ....................................             --             360
   Nonrecurring expenses ................................          1,490              --
                                                            ------------    ------------
      Total operating expenses ..........................         14,729           9,594
                                                            ------------    ------------

Operating loss ..........................................         (9,571)         (5,424)
Other income (expense):
   Investment income ....................................             16             586
   Interest expense .....................................           (218)            (87)
   Non-cash interest expense ............................           (616)             --
                                                            ------------    ------------
Net loss ................................................        (10,389)         (4,925)

Non-cash beneficial conversion feature on preferred stock        (56,953)             --
                                                            ------------    ------------
Net loss available to common stockholders ...............   $    (67,342)   $     (4,925)
                                                            ============    ============

Net loss per share available to common stockholders:
   Basic and diluted ....................................   $      (3.73)   $      (0.28)

Shares used to compute net loss per share:
   Basic and diluted ....................................     18,044,710      17,403,382
</TABLE>

                See accompanying notes to financial statements.

                                       4
<PAGE>

                                  PEAPOD, INC.

                            STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                             SIX MONTHS ENDED JUNE 30,
                                                            ----------------------------
                                                                2000            1999
                                                            ------------    ------------
<S>                                                         <C>             <C>
Net sales ...............................................   $     47,646    $     35,081
Cost of sales ...........................................         36,790          27,269
                                                            ------------    ------------
Gross profit ............................................         10,856           7,812

Operating expenses:
   Fulfillment operations ...............................         16,727           9,889
   General and administrative ...........................          4,189           3,190
   Marketing and selling ................................          2,427           2,428
   System development and maintenance ...................          2,658           1,510
   Depreciation and amortization ........................          1,401           1,078
   Pre-opening costs ....................................             --             640
   Nonrecurring expenses ................................          5,608              --
                                                            ------------    ------------
      Total operating expenses ..........................         33,010          18,735
                                                            ------------    ------------

Operating loss ..........................................        (22,154)        (10,923)
Other income (expense):
   Investment income (expense) ..........................            (87)          1,064
   Interest expense .....................................           (274)           (135)
   Non-cash interest expense ............................           (616)             --
                                                            ------------    ------------
Net loss ................................................        (23,131)         (9,994)

Non-cash beneficial conversion feature on preferred stock        (56,953)             --

                                                            ------------    ------------
Net loss available to common stockholders ...............   $    (80,084)   $     (9,994)
                                                            ============    ============

Net loss per share available to common stockholders:
   Basic and diluted ....................................   $      (4.42)   $      (0.58)

Shares used to compute net loss per share:
   Basic and diluted ....................................     18,125,842      17,296,539
</TABLE>

                See accompanying notes to financial statements.

                                       5
<PAGE>

                                  PEAPOD, INC.

                       STATEMENTS OF COMPREHENSIVE INCOME
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED JUNE 30,
                                                                     ---------------------------
                                                                       2000              1999
                                                                     --------          --------
<S>                                                                  <C>               <C>
Net loss .........................................................   $(10,389)         $ (4,925)

Other comprehensive income:
   Unrealized holding gain (loss) on available-for-sale
   securities ....................................................
      Unrealized holding loss arising during the period ..........         --              (247)
      Reclassification  adjustment for losses  realized during the
      period and included in net loss ............................         14                --
                                                                     --------          --------

Comprehensive loss ...............................................   $(10,375)         $ (5,172)
                                                                     ========          ========
</TABLE>

                See accompanying notes to financial statements.

                                       6
<PAGE>

                                  PEAPOD, INC.

                       STATEMENTS OF COMPREHENSIVE INCOME
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED JUNE 30,
                                                                     -------------------------
                                                                       2000            1999
                                                                     --------        --------
<S>                                                                  <C>             <C>
Net loss .........................................................   $(23,131)       $ (9,994)

Other comprehensive income:
   Unrealized holding gain (loss) on available-for-sale
   securities ....................................................
      Unrealized holding loss arising during the period ..........         (1)           (346)
      Reclassification  adjustment for losses  realized during the
      period and included in net loss ............................        119              --
                                                                     --------        --------

Comprehensive loss ...............................................   $(23,013)       $(10,340)
                                                                     ========        ========
</TABLE>

                See accompanying notes to financial statements.

                                       7
<PAGE>

                                  PEAPOD, INC.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        SIX MONTHS ENDED JUNE 30,
                                                                        -------------------------
                                                                          2000            1999
                                                                        --------        --------
<S>                                                                     <C>             <C>
Cash flows from operating activities:
   Net loss .........................................................   $(23,131)       $ (9,994)
   Adjustments to reconcile net loss to net cash used in
      operating activities:
      Depreciation and amortization .................................      1,401           1,078
      Non-cash interest expense .....................................        616              --
      Forgiveness of debt of officer, net of treasury stock purchased      1,668              --
      Loss on disposition of fixed assets ...........................          2              28
      Changes in operating assets and liabilities:
         (Increase) decrease in receivables, net ....................        809             960
         (Increase) decrease in merchandise inventory ...............       (185)           (219)
         (Increase) decrease in prepaid expenses ....................       (259)           (302)
         (Increase) decrease in other current assets ................       (889)            137
         (Increase) decrease in restricted cash .....................        301              --
         Increase (decrease) in accounts payable ....................        284              76
         Increase (decrease) in accrued compensation ................        372             559
         Increase (decrease) in other accrued liabilities ...........      8,654          (1,056)
         Increase (decrease) in deferred revenue ....................       (271)           (236)
                                                                        --------        --------
            Net cash used in operating activities ...................    (10,628)         (8,969)
Cash flows from investing activities:
   Property and equipment purchased .................................     (1,557)         (1,843)
   Purchases of marketable securities ...............................         --          (7,275)
   Sales of marketable securities ...................................      6,388          15,629
   Proceeds from sale of property and equipment .....................         --               5
                                                                        --------        --------
            Net cash provided by investing activities ...............      4,831           6,516
Cash flows from financing activities:
   Net proceeds from issuance of preferred stock and warrants .......     64,428              --
   Proceeds from issuance of stock upon exercise of warrants ........         --              50
   Proceeds from issuance of stock upon exercise of options and
      employee stock purchase plan ..................................        380           1,551
   Payments on capital lease obligations ............................       (412)           (402)
                                                                        --------        --------
            Net cash provided by financing activities ...............     64,396           1,199
                                                                        --------        --------
Net increase in cash and cash equivalents ...........................     58,599          (1,254)
Cash and cash equivalents at beginning of period ....................      3,343           4,341
                                                                        --------        --------
Cash and cash equivalents at end of period ..........................   $ 61,942        $  3,087
                                                                        ========        ========

Supplemental disclosure of cash flow information:
   Interest paid ....................................................   $    361        $    135
Supplemental disclosures of noncash investing and financing activity:
   Options exercised by sale of stock to the Company ................         --             262
   Equipment on capital leases ......................................        173           1,287
   Non-cash deferred financing costs ................................      5,357              --
</TABLE>

                See accompanying notes to financial statements.

                                       8
<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, 2000, 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, 1999,  which are included in the  Company's  Annual  Report on
     Form 10-K, as amended, filed with the Securities and Exchange Commission.

2.   RECLASSIFICATIONS.  Certain prior year balances have been  reclassified  to
     conform with the current year presentation.

3.   TERMINATION OF EMPLOYMENT.  The Company entered into a Separation Agreement
     with William  Malloy dated March 15, 2000.  Effective as of that date,  Mr.
     Malloy resigned from his position as President and Chief Executive  Officer
     and his  employment  agreement  was  terminated.  Under  the  terms  of the
     Separation  Agreement,  the Company paid Mr.  Malloy's salary through April
     30,  2000.  The options to  purchase  1,100,000  and 500,000  shares of the
     Company's  common  stock,  respectively,  which were granted to Mr.  Malloy
     pursuant to his employment agreement, were cancelled,  unexercised, and the
     option  agreements  relating to those option  grants were  terminated.  The
     $2,500,000 loan, which had been extended to Mr. Malloy in September of 1999
     for the purchase of 311,891 shares of Company common stock,  was cancelled,
     and the purchase of common stock was rescinded and  cancelled.  The Company
     recognized  a loss in the first  quarter  of  $1,584,000  representing  the
     difference  between the balance of the Note Receivable From Officer and the
     fair  market  value  of the  311,891  shares  on the  date  the  Separation
     Agreement was executed. Mr. Malloy returned those shares to the Company and
     they  became  treasury  stock on April  24,  2000.  Under  the terms of the
     Separation  Agreement,  Mr.  Malloy's  Severance  Agreement was terminated,
     except as to the Company's  obligation  to maintain  directors and officers
     liability  insurance  for Mr.  Malloy  for a  period  of  three  years.  In
     addition,  Mr. Malloy retains certain contractual rights to indemnification
     as a former  officer and director.  The terms of the  Separation  Agreement
     provide that Mr.  Malloy  continues  to be subject to an  agreement  not to
     compete with the Company or to solicit its  customers  and  employees for a
     year  following the  termination  of his employment and not to disclose the
     Company's proprietary  information.  Both the Company and Mr. Malloy signed
     general  releases of any and all existing  claims  related to Mr.  Malloy's
     employment by the Company.

4.   FINANCING  AND CHANGE IN CONTROL.  On June 30,  2000,  the  Company  issued
     preferred  securities and warrants under the terms of a purchase agreement,
     dated April 14, 2000, (the "Purchase  Agreement.")  with Koninklijke  Ahold
     N.V.  ("Ahold").  Pursuant  to the  terms of the  Purchase  Agreement,  the
     Company agreed to sell 726,371 shares of the Company's series B convertible
     redeemable  preferred  stock,  par  value  $.01 per  share  (the  "Series B
     Preferred  Stock"),  for an aggregate  purchase price of  $72,637,024,  and
     warrants (the  "Warrants") to purchase  32,894,270  shares of the Company's
     common stock.  The Series B Preferred Stock is initially  convertible  into
     19,369,873  shares of common stock,  which represents  approximately 51% of
     the Company's  common stock  outstanding  as of June 30, 2000. The Series B
     Preferred  Stock ranks senior to the common stock with respect to dividends
     and liquidation payments,  and has a liquidation  preference of $100.00 per
     share, plus all then accrued and unpaid  dividends.  The Series B Preferred
     Stock accrues cumulative  dividends,  payable quarterly,  at the rate of 8%
     per annum. The Series B Preferred  Stockholder is entitled to vote together
     with the  holders  of the  common  stock as a single  class on all  matters
     submitted  for a vote of holders of common  stock.  The Series B  Preferred
     Stock is redeemable for cash on the earlier of specified  redemption events
     or April 14, 2008, at a price per share equal to the liquidation value plus
     all accrued and unpaid  dividends.  In the case of a redemption event only,
     the  holder  of the  preferred  stock  has the  option  of not  having  the
     preferred  stock redeemed in connection  with such  redemption  event.  The
     difference  between the net  issuance  price and the  estimated  redemption
     value  of the  redeemable  preferred  stock  is  being  accreted  over  the
     eight-year period to redemption through charges to accumulated deficit. The
     Company may optionally redeem the outstanding  shares of Series B Preferred
     Stock at any time  after  April 14,  2008 at a  redemption  price per share
     equal to 103% of the $100 liquidation preference for the Series B Preferred
     Stock,  plus the amount of any accrued and unpaid  dividends as of the date
     of the redemption. The Warrants have an exercise price of $3.75, subject to
     adjustment,  and are  immediately  exercisable.  The  imputed  value of the
     warrants was calculated to be $56,953,000 using the Black Scholes Model and
     was recognized in the second  quarter as a form of a beneficial  conversion
     feature on the Series B Preferred  Stock  increasing the net loss available
     to common shareholders.

     On April 14, 2000, simultaneous with the signing of the Purchase Agreement,
     the Company  entered into a $20 million secured  revolving  credit facility
     with Ahold maturing in April 2003.  Pursuant to security agreements entered
     into in connection with

                                       9
<PAGE>

     the credit facility,  the Company's  obligations  under the credit facility
     are secured by a lien on all of the Company's personal property,  including
     its  intellectual  property.  In  connection  with the credit and  security
     agreements,  the Company  issued to Ahold warrants to purchase an aggregate
     of 3,666,667  shares of common stock at an initial exercise price of $3.00,
     subject to adjustment.  The imputed value of the warrants was calculated to
     be  $5,357,000  using the Black  Scholes  Model and will be  recognized  as
     non-cash  interest  expense over the life of the credit facility  ($616,000
     was recognized as non-cash  interest expense in the second quarter).  There
     are no  outstanding  borrowings  under the credit  facility  as of June 30,
     2000.

     If Ahold  exercises  any of its  warrants  prior to April 2003,  the credit
     facility will be reduced dollar-for-dollar for the exercise price received.
     Total warrants issued to Ahold, if exercised, would represent approximately
     24% of the common stock outstanding as of June 30, 2000.

5.   RESTRICTED CASH. The Company's  restricted cash represents  certificates of
     deposit  in  support  of the  Company's  letter  of  credit  and for  other
     purposes.

6.   NONRECURRING EXPENSES. Nonrecurring expenses totaled $5,608,000 for the six
     months  ended  June  30,  2000  and  result  from  severance   expenses  of
     $1,850,000,  which was incurred  primarily in connection  with Mr. Malloy's
     termination  of  employment  - see Note 3;  impaired  asset  write-offs  of
     $1,496,000  related  to  cancelled  and  deferred   initiatives;   expenses
     attributable  to a failed  financing  transaction  of  $1,037,000;  charges
     associated with licensing  obligations of $705,000;  and other nonrecurring
     expenses.

7.   LITIGATION.  On  March  16,  2000,  the  Company  issued  a  press  release
     announcing  that its CEO and  President  (Mr.  Malloy) was departing due to
     health  reasons,  and as a result,  a  previously  announced  $120  million
     financing had been terminated.  Subsequently, seven substantially identical
     cases  were  filed in federal  district  court in Chicago on various  dates
     between  March 17,  2000 and May 10,  2000.  In each  case,  Peapod and two
     individual  defendants (both of whom are officers of Peapod) have been sued
     for alleged  violations of Section 10(b) of the Securities  Exchange Act of
     1934 and SEC Rule 10b-5. The seven cases were consolidated on June 1, 2000.
     The consolidated  complaint alleges that Peapod misrepresented or failed to
     disclose certain facts relating to the Company's liquidity, cash resources,
     and cash  needs.  The  consolidated  complaint  is  brought  on behalf of a
     purported  class of purchasers  of Peapod's  common stock during the period
     from November 8, 1999 to and including March 16, 2000, and seeks to recover
     damages  in  an  unspecified  amount.   Although  the  Company  intends  to
     vigorously  defend against this complaint,  there can be no assurances that
     the outcome of these lawsuits  would not have a material  adverse effect on
     the Company's financial condition or results of operations.

                                       10
<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 net sales:

                                      THREE MONTHS ENDED     SIX MONTHS ENDED
                                            JUNE 30,              JUNE 30,
                                       -----------------     -----------------
                                        2000       1999       2000       1999
                                       ------     ------     ------     ------
Net sales ...........................     100%       100%       100%       100%
Cost of sales .......................      77         76         77         78
                                       ------     ------     ------     ------
Gross profit ........................      23         24         23         22

Operating expenses:
   Fulfillment operations ...........      34         29         35         28
   General and administrative .......       9          9          9          9
   Marketing and selling ............       5          7          5          7
   System development and maintenance       7          5          6          4
   Depreciation and amortization ....       3          4          3          3
   Pre-opening costs ................      --          2         --          2
   Nonrecurring expenses ............       7         --         11         --
                                       ------     ------     ------     ------
      Total costs and expenses ......      65         56         69         53
                                       ------     ------     ------     ------
Operating loss ......................     (42)       (32)       (46)       (31)

Other income (expense):
   Investment income.................       *          3          *          3
   Interest expense..................      (1)         *         (1)         *
   Non-cash interest expense.........      (3)        --         (1)        --
                                       ------     ------     ------     ------
Net loss                                  (46)%      (29)%      (49)%      (28)%
                                       ======     ======     ======     ======

* - Less than 1%

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
----------------------------------------------------------------

     Net sales. Net sales, which are the sales of groceries and related products
to customers,  subscription, service and other fees paid by customers and retail
partners,  and fees from consumer goods companies for  interactive  advertising,
promotion  and  research  services,  increased  by 33% from  $17,073,000  in the
quarter ended June 30, 1999 to $22,732,000 in the quarter ended June 30, 2000.

     Revenues from the sales of groceries  increased 43% from $14,787,000 in the
quarter ended June 30, 1999 to  $21,170,000  in the quarter ended June 30, 2000.
Orders  increased  from 128,200 in the quarter ended June 30, 1999 to 183,700 in
the quarter ended June 30, 2000,  while  average order size remained  unchanged.
Fees paid by customers  and retail  partners  decreased  from  $1,922,000 in the
quarter  ended June 30, 1999 to  $1,628,000  in the quarter ended June 30, 2000.
This decrease is  attributable  to lower fees paid by retail supply partners and
reduced  customer fees,  consistent with our centralized  fulfillment  strategy.
Fees from consumer goods  companies for interactive  advertising,  promotion and
research were $364,000 in the quarter ended June 30, 1999. Because of a focus on
completing  financing  transactions in 2000, the Company temporarily reduced its
interactive   advertising,   promotion  and  research  efforts  and  accordingly
recognized  a net $66,000  revenue  reversal.  Customers,  measured as customers
transacting  within the last 12 months,  increased  51% from  89,900 at June 30,
1999 to 135,700 at June 30, 2000.

     Cost of sales.  Cost of sales is the cost of groceries  and other  products
sold to customers.  Cost of sales increased 36% from  $12,903,000 in the quarter
ended June 30, 1999 to  $17,574,000  in the  quarter  ended June 30,  2000.  The
increase results from the 43% increase in grocery sales during the quarter,  and
was partially  offset by improved  product  margins in  centralized  fulfillment
centers.

     Fulfillment  operations.  Fulfillment  operations  expenses include (i) the
direct costs relating to the picking,  packing and delivery of customer  orders,
(ii) salaries and overhead expenses of each fulfillment  center,  (iii) salaries
and overhead expenses for

                                       11
<PAGE>

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 55% from $5,017,000
for the quarter ended June 30, 1999 to $7,796,000 for the quarter ended June 30,
2000.  This  increase is  attributable  to the  increase in the direct  costs of
picking,  packing and  delivering  as a result of the 43%  increase in volume of
orders and to higher  fulfillment  costs incurred while the Company builds scale
in its centralized fulfillment centers.

     At June 30, 2000, the Company fulfilled customer orders from 23 fulfillment
centers across nine metropolitan  markets covering  8,731,000  households.  This
compares to 32 fulfillment centers across eight metropolitan markets at June 30,
1999 covering 7,392,100 households.

     General and  administrative.  General and  administrative  expenses,  which
include corporate staff, accounting and human resource functions,  and occupancy
expenses,  increased  31% from  $1,636,000 in the quarter ended June 30, 1999 to
$2,150,000  in the  quarter  ended June 30,  2000.  The  increase  is  primarily
attributable  to an increase in compensation  related  expenses as the Company's
corporate  structure has expanded  within the areas of executive  management and
operations planning.

     Marketing and selling.  Marketing and selling  expenses include the cost of
customer  acquisition  and retention  marketing,  such as radio  advertising and
direct  mail,  as well  as  certain  costs  relating  to  public  relations  and
interactive marketing services. The Company expenses all such costs as incurred.
Marketing and selling  expenses  decreased by 9% from $1,190,000 for the quarter
ended June 30, 1999 to  $1,087,000  for the quarter  ended June 30,  2000.  This
decrease  is  primarily  attributable  to the  Company's  decision to scale back
activity within the interactive marketing services area during the quarter ended
June 30, 2000.

     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  87% from $787,000 for the quarter
ended June 30, 1999 to  $1,469,000  for the  quarter  ended June 30,  2000.  The
increase is  attributable  to  compensation  expenses  and outside  services for
additional  resources to support the Company's new warehouse  management  system
implementation, to develop and support the Company's website technology, and for
additional  resources to support the  Company's  24/7  centralized  distribution
center operations.

     Depreciation and amortization.  Depreciation and amortization increased 22%
from  $604,000  for the quarter  ended June 30, 1999 to $737,000 for the quarter
ended  June 30,  2000.  This  increase  primarily  results  from  equipment  and
leasehold improvements in centralized distribution centers opened in 1999.

     Pre-opening  costs.  During the quarter  ended June 30,  1999,  pre-opening
costs of $360,000 were incurred  related to a  centralized  distribution  center
which opened in June 1999. No such costs were incurred in the quarter ended June
30, 2000.

     Nonrecurring  expenses.  Nonrecurring  expenses totaled  $1,490,000 for the
quarter ended June 30, 2000 and primarily  result from charges  associated  with
licensing  obligations  of $705,000 and impaired  asset  write-offs  of $664,000
related to cancelled and deferred initiatives.

     Other income  (expense).  Other income (expense)  includes interest paid on
capital  leases,  interest on  borrowings  and  investment  income and  expense.
Investment  income for the quarter ended June 30, 1999 was $586,000  compared to
investment  income of $16,000 for the quarter ended June 30, 2000 due to reduced
invested  principal.  Interest  expense  increased  from $87,000 for the quarter
ended June 30,  1999 to  $218,000  in the  quarter  ended  June 30,  2000 and is
attributed to borrowings under the Company's credit facility and greater leasing
activity  utilized  in the new  centralized  distribution  facilities.  Non-cash
interest  expense  totaled  $616,000  for the  quarter  ended June 30,  2000 and
consists  of  additional  interest  expense  attributed  to  warrants  issued in
connection  with the term note and the  credit  facility.  The  warrant  expense
related  to  the  credit  facility  will  continue  to be  recognized  over  the
three-year  term of the  credit  facility.  No  non-cash  interest  expense  was
incurred during the same period last year.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
--------------------------------------------------------------

     Net sales.  Net sales  increased by 36% from  $35,081,000 for the six-month
period ended June 30, 1999 to  $47,646,000  for the six-month  period ended June
30, 2000.

     Revenues  from the sales of groceries  and related  products  increased 44%
from $30,529,000 for the six-month period ended June 30, 1999 to $44,020,000 for
the six-month period ended June 30, 2000.  Orders increased from 263,400 for the
six-month  period ended June 30, 1999 to 389,300 for the six-month  period ended
June 30, 2000 while average order size  decreased 2%. Fees paid by customers and
retail partners  decreased from  $3,982,000 for the six-month  period ended June
30, 1999 to  $3,371,000  for the  six-month  period  ended June 30,  2000.  This
decrease  is  attributable  to lower  fees paid by retail  supply  partners  and
reduced  customer  fees,  consistent  with our  centralized  fulfillment  center
strategy.  Fees from  consumer  goods  companies  for  interactive  advertising,
promotion and research decreased from $570,000 for the six months ended June 30,
1999 to $255,000 for the six

                                       12
<PAGE>

months ended June 30, 2000, as interactive marketing activities were scaled back
in the first half of the year, related to a focus on the financing  transaction,
resulting in a delay in recognizing revenue for existing  interactive  marketing
contracts.  Customers, measured as customers transacting with the Company within
the last 12 months,  increased  51% from  89,900 at June 30,  1999 to 135,700 at
June 30, 2000.

     Cost of  sales.  Cost of  sales  increased  35%  from  $27,269,000  for the
six-month  period ended June 30, 1999 to  $36,790,000  for the six-month  period
ended June 30, 2000. The increase results from the 44% increase in grocery sales
during  the period  and was  partially  offset by  improved  product  margins in
centralized fulfillment centers.

     Fulfillment operations.  Fulfillment operations expenses increased 69% from
$9,889,000 for the six-month  period ended June 30, 1999 to $16,727,000  for the
six-month  period  ended June 30, 2000.  This  increase is  attributable  to the
increase in the direct costs of picking,  packing and  delivering  given the 48%
increase in volume of orders and to higher  fulfillment costs incurred while the
Company builds scale in its centralized fulfillment centers.

     General and administrative.  General and administrative  expenses increased
31% from  3,190,000 for the  six-month  period ended June 30, 1999 to $4,189,000
for the  six-month  period  ended  June 30,  2000.  The  increase  is  primarily
attributable  to an increase in compensation  related  expenses as the Company's
corporate  structure has expanded  within the areas of executive  management and
operations planning.

     Marketing and selling.  Marketing and selling expenses decreased  nominally
from  $2,428,000 for the six-month  period ended June 30, 1999 to $2,427,000 for
the six-month period ended June 30, 2000. The Company expenses all such costs as
incurred.

     System  development  and  maintenance.  System  development and maintenance
expenses  increased  76% from  $1,510,000  for the  six-month  period ended June
30,1999 to $2,658,000 for the six-month period ended June 30, 2000. The increase
is  attributable to  compensation  expenses and outside  services for additional
resources   to  support  the   Company's   new   warehouse   management   system
implementation, to develop and support the Company's website technology, and for
additional  resources to support the  Company's  24/7  centralized  distribution
center operations.

     Depreciation and amortization.  Depreciation and amortization increased 30%
from  $1,078,000 for the six-month  period ended June 30, 1999 to $1,401,000 for
the six-month period ended June 30, 2000. This increase  primarily  results from
equipment and leasehold improvements in centralized  distribution centers opened
in 1999.

     Pre-opening Expense. During the six months ended June 30, 1999, pre-opening
costs of $640,000  were incurred  related to  centralized  distribution  centers
opened in the first and second  quarters of 1999. No such costs were incurred in
the six months ended June 30, 2000.

     Non-recurring  Expenses.  Non-recurring expenses totaled $5,608,000 for the
six-month  period ended June 30,  2000,  and result from  severance  expenses of
$1,850,000, which were primarily in connection with William Malloy's termination
of employment - see Notes to Financial Statements;  impaired asset write-offs of
$1,496,000 related to cancelled and deferred initiatives;  expenses attributable
to a  failed  financing  transaction  of  $1,037,000;  charges  associated  with
licensing obligations of $705,000; and other nonrecurring expenses.

     Other income (expense). Investment income decreased from $1,064,000 for the
six-month  period  ended June 30, 1999 to a charge of $87,000 for the  six-month
period ended June 30, 2000 due to reduced invested principal and realized losses
incurred  from  the sale of  investments  prior to  maturity.  Interest  expense
increased from $135,000 for the six-month period ended June 30, 1999 to $274,000
for the  six-month  period  ended June 30, 2000 and is  attributed  to borrowing
under the Company's credit facility and greater leasing activity utilized in the
new  centralized  distribution  facilities.  Non-cash  interest  expense totaled
$616,000 for the six-month period ended June 30, 2000 and consists of additional
interest expense  attributed to warrants issued in connection with the term note
and the credit facility. The warrant expense related to the credit facility will
continue to be recognized  over the three-year term of the credit  facility.  No
non-cash interest expense was incurred during the same period last year.

LIQUIDITY AND CAPITAL RESOURCES

     Cash used in operating  activities  increased from  $8,969,000 in the first
six months of 1999 to  $10,628,000  in the first six months of 2000.  As of June
30,  2000,  the  Company  had  $61,942,000  in cash  and  cash  equivalents  and
$1,288,000  in  restricted  cash.  The Company uses its working  capital to fund
ongoing  operations,  marketing  programs,  geographic  expansion and to further
develop its products and services.

     On June 30, 2000,  the Company  issued  preferred  securities  and warrants
under the terms of a purchase  agreement,  dated April 14, 2000,  (the "Purchase
Agreement.") with Koninklijke Ahold N.V. ("Ahold"). Pursuant to the terms of the
Purchase

                                       13
<PAGE>

Agreement,  the Company agreed to sell 726,371 shares of the Company's  series B
convertible  redeemable preferred stock, par value $.01 per share (the "Series B
Preferred Stock"), for an aggregate purchase price of $72,637,024,  and warrants
(the  "Warrants") to purchase  32,894,270  shares of the Company's common stock.
The Series B Preferred Stock is initially  convertible into 19,369,873 shares of
common stock,  which represents  approximately 51% of the Company's common stock
outstanding as of June 30, 2000. The Series B Preferred  Stock has a liquidation
preference of $100.00 per share, plus all then accrued and unpaid dividends. The
Series B Preferred Stock accrues cumulative dividends, payable quarterly, at the
rate of 8% per annum.  The Warrants have an exercise price of $3.75,  subject to
adjustment, and are immediately exercisable.

     On April 14, 2000, simultaneous with the signing of the Purchase Agreement,
the Company  entered into a $20 million secured  revolving  credit facility with
Ahold  maturing in April 2003,  with  interest from the date of borrowing at the
higher of (i) the rate,  which is 1/2 of 1% in excess of the Federal Funds Rate;
and (ii),  the Prime  Lending  Rate,  plus a 2% base rate  margin.  Pursuant  to
security  agreements  entered into in connection with the credit  facility,  the
Company's  obligations under the credit facility are secured by a lien on all of
the  Company's  personal  property,  including  its  intellectual  property.  In
connection with the credit and security agreements,  the Company issued to Ahold
warrants to purchase an  aggregate  of  3,666,667  shares of common  stock at an
initial exercise price of $3.00, subject to adjustment. There are no outstanding
borrowings under the credit facility as of June 30, 2000.

     If Ahold  exercises  any of its  warrants  prior to April 2003,  the credit
facility  will be reduced  dollar-for-dollar  for the exercise  price  received.
Total warrants issued to Ahold, if exercised,  would represent approximately 24%
of the common stock outstanding as of June 30, 2000.

     The Company  believes that the recent equity  investment by Ahold  provides
the Company with adequate capital resources for the foreseeable future.

     The Company  believes that  inflation has not had a material  effect on its
operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     During 1998, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities,"  as amended,  which is effective  for all
fiscal  years  beginning  after  June 15,  2000.  SFAS  No.  133  establishes  a
comprehensive  standard  for  the  recognition  and  measurement  of  derivative
instruments and hedging activities.  The Company does not expect the adoption of
the new standard to have a material effect on its financial position, liquidity,
or results of operations.

     Financial  Accounting  Standards Board  Interpretation No. 44 (FIN No. 44),
"Accounting  for  Certain   Transactions   Involving  Stock   Compensation,"  an
interpretation  of Accounting  Principles Board Opinion No. 25, is effective for
financial  statements  beginning  after  July 1,  2000.  FIN No. 44  establishes
accounting   and  reporting   standards   for   transactions   involving   stock
compensation.  The  Company  does  not  believe  that  FIN No.  44  will  have a
significant impact on its financial statements.

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting Bulletin No. 101, "Revenue  Recognition in Financial  Statements," as
amended,  which is effective no later than the fourth  fiscal  quarter of fiscal
2000. The Company does not expect the adoption of this accounting  pronouncement
to have a significant impact on its results of operations, financial position or
cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company does not have any derivative  financial  instruments as of June
30, 2000. The Company has a $20,000,000  credit  facility with interest from the
date of borrowing at the higher of (i) the rate, which is 1/2 of 1% in excess of
the Federal Funds Rate;  and (ii),  the Prime Lending Rate,  plus a 2% base rate
margin. No such borrowings existed at June 30, 2000.

                                       14
<PAGE>

                                     PART II
                                OTHER INFORMATION

ITEM 1. LITIGATION

     On March 16, 2000, the Company issued a press release  announcing  that its
CEO and President  (Mr.  Malloy) was departing due to health  reasons,  and as a
result,  a previously  announced  $120 million  financing  had been  terminated.
Subsequently, seven substantially identical cases were filed in federal district
court in Chicago on various  dates  between  March 17, 2000 and May 10, 2000. In
each case,  Peapod and two individual  defendants  (both of whom are officers of
Peapod) have been sued for alleged violations of Section 10(b) of the Securities
Exchange Act of 1934 and SEC Rule 10b-5.  The seven cases were  consolidated  on
June 1 2000. The consolidated  complaint  alleges that Peapod  misrepresented or
failed to disclose  certain  facts  relating to the  Company's  liquidity,  cash
resources,  and cash needs. The consolidated complaint is brought on behalf of a
purported  class of purchasers  of Peapod's  common stock during the period from
November 8, 1999 to and including  March 16, 2000, and seeks to recover  damages
in an  unspecified  amount.  Although the Company  intends to vigorously  defend
against this  complaint,  there can be no  assurances  that the outcome of these
lawsuits  would not have a material  adverse  effect on the Company's  financial
condition or results of operations.

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

The  Company  held its annual  meeting of  stockholders  on June 30,  2000.  The
following  are the items that were voted  thereon by holders of common stock and
the voting results thereof:

1.   Four Class III Directors were elected:

                                                                      BROKER
     NOMINEE                   FOR                  WITHHOLD          NON-VOTES
     -------                   ---                  --------          ---------
     Trygve E. Myhren          16,968,917           117,971             - 0 -
     Robert S. Goodale         16,967,707           119,181             - 0 -
     Drayton McLane            16,966,029           120,859             - 0 -
     William J. Grize          16,970,102           116,786             - 0 -

2.   The  transaction  with Ahold and the  issuance of the  Preferred  Stock and
     Warrants were approved:

                                                                      BROKER
     FOR                       AGAINST              ABSTAIN           NON-VOTES
     ---                       -------              -------           ---------
     12,868,930                 61,158               48,358           4,108,442

3.   Amendment No. 2 to the Restated Certificate of Incorporation was approved:

                                                                      BROKER
     FOR                       AGAINST              ABSTAIN           NON-VOTES
     ---                       -------              -------           ---------
     12,775,558                138,840               64,048           4,108,442

4.   Amendment  No.  3 to the  Restated  Certificate  of  Incorporation  was not
     approved:

                                                                      BROKER
     FOR                       AGAINST              ABSTAIN           NON-VOTES
     ---                       -------              -------           ---------
     12,827,998                 85,239               65,209           4,108,442

5.   The Year 2000 Long Term Incentive Plan was approved:

                                                                      BROKER
     FOR                       AGAINST              ABSTAIN           NON-VOTES
     ---                       -------              -------           ---------
     12,642,196                261,706               74,544           4,108,442

                                       15
<PAGE>

6.   The  ratification of KPMG LLP as the independent  auditors of Peapod,  Inc.
     was approved:

                                                                      BROKER
     FOR                       AGAINST              ABSTAIN           NON-VOTES
     ---                       -------              -------           ---------
     16,999,570                 47,499               39,819             - 0 -

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.  Factors that would cause actual  results to differ
materially from Peapod's current expectations  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 Ahold
and the with the Company's  retail partners and interactive  marketing  services
and  research  customers;  (3) the  Company's  ability  to  execute  its  growth
strategies,  including effectively  implementing both a centralized  fulfillment
distribution  model and a fast-pick  center  model;  (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.

     The date of the Company's 2001 annual meeting of  stockholders  has changed
by more than 30 days from last  year's  annual  meeting  of  stockholders.  As a
result, in order to be considered for inclusion in the Company's proxy materials
for the 2001 annual meeting of  stockholders,  any stockholder  proposal must be
addressed to Peapod, Inc., 9933 Woods Drive, Skokie,  Illinois 60077, Attention:
Secretary, and must be received by no later than February 2, 2001. The Company's
by-laws  set  forth  additional   requirements  and  procedures   regarding  the
submission by stockholders of matters for  consideration at an annual meeting of
stockholders. A stockholder proposal or nomination intended to be brought before
the 2001  annual  meeting  must be received  by the  Secretary  in writing on or
before March 2, 2001. A  nomination  or proposal  that does not comply with such
requirements and procedures will be disregarded.

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

     On April 28, 2000, the Company filed a Form 8-K announcing that the Company
     had entered into the  Purchase  Agreement.  Under the  Purchase  Agreement,
     subject  to  certain  conditions,  including  stockholder  approval  of the
     transaction,  the  Company  agreed to issue  and sell to  Ahold,  and Ahold
     agreed to purchase  from the Company,  for an aggregate  purchase  price of
     $72,637,024  (the "Purchase  Price"),  726,371 shares (the "Shares") of the
     Company's series B convertible  redeemable  preferred stock, par value $.01
     per share, and warrants (the "Warrants") to purchase  32,894,270  shares of
     the Company's  common stock.  On June 30, 2000, the Company's  stockholders
     approved the  transaction and the Company issued the Shares and Warrants to
     Ahold in exchange for payment of the Purchase Price.

     On May 12,  2000,  the Company  filed a Form 8-K  announcing  that Marc van
     Gelder  accepted an offer of  employment  with the Company as its President
     and Chief  Executive  Officer.  The  principal  terms of Mr.  van  Gelder's
     employment were outlined in the Form 8-K.

                                       16
<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, 2000                          /s/ Dan Rabinowitz
                                         ---------------------------------------
                                         Dan Rabinowitz
                                         Chief Financial Officer

                                       17