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, 1999

                                       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 November 3, 1999 was 18,156,560.

<PAGE>
<TABLE>
<CAPTION>
                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.           Financial Statements.

                                  PEAPOD, INC.
                                 BALANCE SHEETS
                        (in thousands, except share data)

                                                                          September 30,       December 31,
                                                                               1999               1998
                                                                          -----------------  -----------------
                                  Assets                                    (unaudited)
<S>                                                                             <C>                <C>
Current assets:
     Cash and cash equivalents..........................................        $ 3,549            $ 4,341
     Marketable securities..............................................          9,260             15,836
     Receivables, net of bad debt allowance of $203 and $287 as
       of September 30, 1999 and December 31, 1998......................          1,629              2,516
     Merchandise inventories............................................            268                --
     Prepaid expenses...................................................          1,235                186
     Other current assets...............................................            727                974
                                                                          -----------------  -----------------
          Total current assets..........................................         16,668             23,853
Property and equipment:
     Computer equipment and software....................................          5,134              4,010
     Service equipment and other........................................          4,127              2,147
                                                                          -----------------  -----------------
Property and equipment, at cost.........................................          9,261              6,157
     Accumulated depreciation...........................................         (3,739)            (2,252)
                                                                          -----------------  -----------------
Net property and equipment..............................................          5,522              3,905
Non-current marketable securities.......................................          3,562             15,213
                                                                          -----------------  -----------------
          Total assets..................................................        $25,752            $42,971
                                                                          =================  =================
                   Liabilities and Stockholders' Equity Current liabilities:
     Accounts payable...................................................        $ 4,104            $ 3,442
     Accrued compensation...............................................            989                802
     Other accrued liabilities..........................................          2,096              2,688
     Current deferred revenue...........................................            809              1,000
     Current obligations under capital lease............................            630                590
                                                                          -----------------  -----------------
          Total current liabilities.....................................          8,628              8,522
Deferred revenue........................................................            152                448
Obligations under capital lease, less current portion...................          1,058                395
                                                                          -----------------  -----------------
          Total liabilities.............................................          9,838              9,365
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,
            17,982,317 and 17,245,828 shares issued at  September 30, 1999
            and December 31, 1998.......................................            180                172
     Additional paid-in capital.........................................         69,056             64,319
     Note receivable from officer.......................................         (2,494)               --
     Accumulated other comprehensive income -
          unrealized gain (loss) on available-for-sale securities.......           (250)                83
     Accumulated deficit................................................        (49,407)           (30,060)
     Treasury stock, at cost, 141,749 and 117,476 shares at September 30,
         1999 and December 31, 1998.....................................         (1,171)              (908)
                                                                          -----------------  -----------------
          Total stockholders' equity....................................         15,914             33,606
                                                                          =================  =================
          Total liabilities and stockholders' equity....................        $25,752            $42,971

                                                                          =================  =================
</TABLE>

       See accompanying  notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>

                                  PEAPOD, INC.
                            STATEMENTS OF OPERATIONS
               (in thousands, except share and per share data)
                                   (unaudited)

                                                                     Three months ended September 30,
                                                                -------------------------------------------
                                                                ------------------       ------------------
                                                                      1999                     1998
                                                                ------------------       ------------------
<S>                                                                   <C>                      <C>
Net sales    ..................................................         $ 16,493                 $ 15,676
Cost of sales..................................................           12,241                   12,295
                                                                ------------------       ------------------
Gross profit  .................................................            4,252                    3,381

Operating expenses:
     Fulfillment operations....................................            5,571                    4,019
     General and administrative................................            4,956                    1,925
     Marketing and selling.....................................            1,665                    1,462
     System development and maintenance........................              916                      999
     Depreciation and amortization.............................              525                      529
     Pre-opening costs.........................................              188                       95
                                                                ------------------       ------------------
          Total operating expenses.............................           13,821                    9,029
                                                                ------------------       ------------------

Operating loss.................................................           (9,569)                  (5,648)
Other income (expense):
     Investment income.........................................              321                      609
     Interest expense..........................................             (104)                     (44)
                                                                ==================       ==================
Net loss.......................................................       $   (9,352)              $   (5,083)
                                                                ==================       ==================

Net loss per share:
     Basic.....................................................       $    (0.53)              $    (0.30)
     Diluted...................................................       $    (0.53)              $    (0.30)

Shares used to compute net loss per share:
     Basic.....................................................       17,498,863               17,074,771
     Diluted...................................................       17,498,863               17,074,771

</TABLE>

      See accompanying notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>

                                  PEAPOD, INC.
                            STATEMENTS OF OPERATIONS
                (in thousands, except share and per share data)
                                   (unaudited)

                                                                     Nine months ended September 30,
                                                                -------------------------------------------
                                                                ------------------       ------------------
                                                                      1999                     1998
                                                                ------------------       ------------------
<S>                                                                   <C>                      <C>
Net sales    ..................................................       $   51,574               $   52,070
Cost of sales..................................................           39,509                   40,454
                                                                ------------------       ------------------
Gross profit  .................................................           12,065                   11,616

Operating expenses:
     Fulfillment operations....................................           15,460                   12,758
     General and administrative................................            8,146                    5,794
     Marketing and selling.....................................            4,093                    4,589
     System development and maintenance........................            2,427                    2,430
     Depreciation and amortization.............................            1,603                    1,501
     Pre-opening costs.........................................              828                      136
                                                                ------------------       ------------------
          Total operating expenses.............................           32,557                   27,208
                                                                ------------------       ------------------

Operating loss.................................................          (20,492)                 (15,592)
Other income (expense):
     Investment income.........................................            1,385                    2,144
     Interest expense..........................................             (239)                    (133)
                                                                ==================       ==================
Net loss.......................................................       $  (19,346)              $  (13,581)
                                                                ==================       ==================

Net loss per share:
     Basic.....................................................       $    (1.11)              $    (0.80)
     Diluted...................................................       $    (1.11)              $    (0.80)

Shares used to compute net loss per share:
     Basic.....................................................       17,364,721               16,954,079
     Diluted...................................................       17,364,721               16,954,079
</TABLE>

       See accompanying notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>

                                  PEAPOD, INC.
                       STATEMENTS OF COMPREHENSIVE INCOME
                                 (in thousands)
                                   (unaudited)

                                                                          Three Months Ended September 30,
                                                                          ----------------------------------
                                                                               1999               1998
                                                                          ---------------     --------------
<S>                                                                         <C>                <C>
Net loss................................................................    $ (9,352)          $ (5,083)

Other comprehensive income:
      Unrealized gain/(loss) on available-for-sale securities...........          13                176
                                                                          ---------------     --------------

Comprehensive income (loss).............................................    $ (9,339)          $ (4,907)
                                                                          ===============     ==============

</TABLE>

      See accompanying notes to financial statements.


<PAGE>
<TABLE>
<CAPTION>
                                  PEAPOD, INC.
                       STATEMENTS OF COMPREHENSIVE INCOME
                                 (in thousands)
                                   (unaudited)

                                                                           Nine Months Ended September 30,
                                                                         -------------------------------------
                                                                              1999                 1998
                                                                         ---------------     -----------------
<S>                                                                        <C>                   <C>
Net loss................................................................   $ (19,346)            $ (13,581)

Other comprehensive income:
     Unrealized gain/(loss) on available-for-sale securities............        (333)                  151
                                                                         ---------------     -----------------

Comprehensive income (loss)..........................................      $ (19,679)            $ (13,430)
                                                                         ===============     =================

</TABLE>
       See accompanying notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>

                                  PEAPOD, INC.
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)

                                   (unaudited)                                   Nine Months Ended September 30,
                                                                                --------------------------------------

                                                                                     1999                  1998
                                                                                ----------------     -----------------
<S>                                                                                  <C>                   <C>
Cash flows from operating activities:
    Net loss.......................................................                  $ (19,346)            $ (13,581)
    Adjustments   to  reconcile  net  loss  to  net  cash  used  in  operating
        activities:
        Depreciation and amortization..............................                      1,603                 1,501
        Stock issued for services rendered.........................                        146                    45
        Loss on disposition of fixed assets........................                         22                    --
        Changes in operating assets and liabilities:
        (Increase) decrease in receivables, net................                            887                  (220)
        (Increase) decrease in merchandise inventories.........                           (268)                   --
        (Increase) decrease in prepaid expenses................                         (1,049)                 (177)
        (Increase) decrease in other current assets............                            247                  (583)
        Increase (decrease) in accounts payable................                            662                (4,561)
        Increase (decrease) in accrued compensation............                            187                  (285)
        Increase (decrease) in other accrued liabilities.......                           (592)                  278
        Increase (decrease) in deferred revenue................                           (488)                 (708)
                                                                                ----------------     -----------------
                Net cash used in operating activities..............                    (17,989)              (18,291)

Cash flows from investing activities:
    Property and equipment purchased...............................                     (1,967)               (1,637)
    Capitalized software development costs.........................                         --                  (514)
    Purchases of marketable securities.............................                     (7,383)              (24,369)
    Sales of marketable securities.................................                     25,276                    --
    Proceeds from sale of property and equipment...................                         12                    --
                                                                                ----------------     -----------------
                Net cash provided by (used in) investing activities                     15,938               (26,520)

Cash flows from financing activities:
    Proceeds from issuance of stock upon exercise of options and warrants
         and employee stock purchase plan............................                    2,105                   715
    Stock purchased for treasury...................................                       (262)                 (608)
    Payments on capital lease obligations..........................                       (584)                 (592)
                                                                                ----------------     -----------------
                Net cash provided by (used in) financing activities                      1,259                  (485)
                                                                                ----------------     -----------------
Net increase (decrease) in cash and cash equivalents...............                       (792)              (45,296)
Cash and cash equivalents at beginning of period...................                      4,341                54,079
                                                                                ================     =================
Cash and cash equivalents at end of period.........................                  $   3,549             $   8,783
                                                                                ================     =================

Supplemental disclosure of cash flows information--interest paid......               $     236             $     117
Supplemental disclosures of noncash investing and financing activity:
          Issuance of common stock for note........................                      2,500                    --
          Common stock issued for professional services............                        140                    45
          Options exercised by sale of stock to the Company........                        262                   608
          Equipment on capital leases..............................                      1,287                   126
                                                                                ================     =================
</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, 1999,  and the results of its  operations,
     comprehensive income 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, 1998,  which are included in the  Company's  Annual  Report on
     Form 10-K filed with the Securities and Exchange Commission.

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

3.   Note Receivable  from Officer.  The Company issued 311,891 shares of common
     stock  to an  officer  pursuant  to a note  receivable  over 5 years  at an
     interest rate of 5.82%.


<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,
                                             --------------------------       ---------------------------
                                             ------------   -----------       ------------   ------------
                                                1999           1998              1999           1998
                                             ------------   -----------       ------------   ------------
  <S>                                            <C>             <C>                <C>             <C>
  Net sales..................................    100    %        100  %             100  %          100  %
  Cost of sales..............................     74              78                 77              78
                                             ------------   -----------       ------------   ------------
  Gross profit ..............................     26              22                 23              22

  Operating expenses:
       Fulfillment operations................     34              26                 30              24
       General and administrative............     30              13                 16              11
       Marketing and selling.................     10               9                  8               9
       System development and maintenance....      6               6                  5               5
       Depreciation and amortization.........      3               3                  3               3
       Pre-opening expenses..................      1               1                  1               *
                                             ------------   -----------       ------------   ------------
            Total costs and expenses.........     84              58                 63              52
                                             ------------   -----------       ------------   ------------
  Operating loss.............................    (58)            (36)               (40)            (30)
  Other income (expense):
       Investment income.....................      2               4                  2               4
       Interest expense......................     (1)              *                  *               *
                                             ============   ===========       ============   ============
  Net loss...................................    (57)  %         (32) %             (38) %          (26) %
                                             ============   ===========       ============   ============
   * - Less than 1%
</TABLE>


Comparison of Three Months Ended September 30, 1999 and September 30, 1998

         Net sales. Net sales include (i) revenue from the sale of groceries and
related products, (ii)fees paid by customers and retail supply partners, (iii)
fees from consumer goods companies for interactive advertising,  promotion  and
research,  and (iv) revenues  from  maintenance  and licensing  fees relating to
licensing of the Company's software to Coles Myer Ltd. Net sales increased by 5%
from  $15,676,000 in the quarter ended  September 30, 1998 to $16,493,000 in the
quarter ended September 30, 1999.

         Revenues from the sale of groceries and related products increased from
$13,057,000  in the  quarter  ended  September  30, 1998 to  $14,574,000  in the
quarter ended September 30, 1999.  Orders  increased from 112,300 in the quarter
ended  September  30, 1998 to 130,200 in the quarter  ended  September 30, 1999.
Average  order  sizes  tended to be  slightly  lower in  centralized  markets as
customers  shifted to the reduced  SKU mix.  Fees paid by  customers  and retail
supply partners decreased from $2,306,000 in the quarter ended September 30,
1998 to $1,488,000 in the quarter ended September 30, 1999.   This  decrease  is
attributable  to (i) reduced  customer  fees and (ii) lower fees paid by retail
supply partners as we conduct more of our business from our  centralized
fulfillment  centers  versus retail stores.  Customers,  measured as customers
transacting within the last 12 months,  decreased 6% from 99,000 at  September
30, 1998 to 92,900 at September 30, 1999.  Reductions  in the Company's customer
base resulted  largely from a mid-1998 decision to scale back marketing programs
in order to focus resources on the new service model and on initiatives to
centralize fulfillment operations in a number of markets.

         Fees  from  consumer  goods  companies  for  interactive   advertising,
promotion and research  increased  from $263,000 in the quarter ended  September
30, 1998 to $431,000 in the quarter ended September 30, 1999 as new business was
cultivated from new and existing clients. Licensing revenues were $50,000 in the
quarter ended September 30, 1998 compared to no such licensing  revenues for the
quarter ended September 30, 1999.

         Cost of sales.  Cost of sales  are the cost of  groceries  and  related
products.  Cost  of  sales  decreased  from  $12,295,000  in the  quarter  ended
September 30, 1998 to $12,241,000 in the quarter ended  September 30, 1999. This
decrease  occurred in spite of a 12%  increase  in grocery  and related  product
sales and is attributed to an increasing percentage of company volumes operating
through  centralized  fulfillment  centers  which  generate  higher  margins  on
products  sold.  Specifically,  gross  margins  improved from 22% in the quarter
ended  September  30, 1998 to 26% in the quarter  ended  September  30, 1999. We
anticipate  gross margins to increase in the future as volumes continue to shift
from retail stores to centralized fulfillment centers.

         Fulfillment operations. Fulfillment operations expenses include (i) the
direct costs relating to the shopping,  packing and delivery of customer 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  and
customer support.  Fulfillment operations expenses increased from $4,019,000 for
the quarter  ended  September  30,  1998 to  $5,571,000  for the  quarter  ended
September 30, 1999.  The increase is primarily  attributable  to higher  grocery
fulfillment costs while we build scale, gain expertise, and incur duplicative
costs during the initial months of warehouse operations.

         At September 30, 1999, the Company  fulfilled  customer  orders from 22
fulfillment  centers  across  eight  metropolitan   markets  covering  8,023,500
households.  This compares to 36 fulfillment  centers across seven  metropolitan
markets at September 30, 1998 covering 6,400,400 households

         General and administrative.  General and administrative expenses, which
include  corporate staff,  accounting and human  resources,  occupancy and other
fixed  expenses,  increased from  $1,925,000 in the quarter ended  September 30,
1998 to $4,956,000 in the quarter ended September 30, 1999. A one-time charge of
$2,830,000 is attributable to investments in senior management in support of our
centralized fulfillment model.

         Marketing and selling.  Marketing and selling expenses include the cost
of customer  marketing,  such as radio  advertising  and direct mail, as well as
certain costs relating to public relations and the sale of interactive marketing
products.  Marketing and selling  expenses  increased by 14% from $1,462,000 for
the quarter  ended  September  30,  1998 to  $1,665,000  for the  quarter  ended
September 30, 1999. The increase is primarily the result of greater  spending in
centralized  markets  that are now fully  operational  and  focused  on  growing
customers and building scale.

         System development and maintenance.  System development and maintenance
expenses,  which include new product  development as well as the maintenance and
enhancement  of existing  systems,  decreased  9% from  $999,000 for the quarter
ended  September 30, 1998 to $916,000 for the quarter ended  September 30, 1999.
The  decrease is  attributable  to the  elimination  of expenses  related to the
licensing  division that was spun-off as a separate entity on December 31, 1998.
No development costs were capitalized in the third quarter of 1999 while $51,000
of development costs was capitalized in the third quarter of 1998.

         Depreciation and amortization.  Depreciation and amortization of
$529,000 for the quarter ended September 30, 1998 decreased slightly to $525,000
for the quarter ended September 30, 1999.

         Pre-opening Expense.  Pre-opening expense includes costs incurred prior
to a centralized  fulfillment  center becoming  operational and certain one-time
expenditures  to support these  initiatives.  These costs  include  building and
equipment lease expense,  utilities,  supplies,  permits, licenses, and staffing
related expenses. Pre-opening expenses of $95,000 in the quarter ended September
30, 1998  increased to $188,000 in the quarter  ended  September  30, 1999.  The
increase results from investments in current and new markets.

         Other income (expense).  Other income (expense)  includes interest from
investment  earnings  and interest  paid on capital  leases.  Investment  income
decreased  from $609,000 in the quarter ended  September 30, 1998 to $321,000 in
the quarter  ended  September  30, 1999 due primarily to a reduction in invested
principal.  Interest  expense  increased  from  $44,000  for the  quarter  ended
September  30, 1998 to $104,000 in the  quarter  ended  September  30, 1999 as a
result of greater leasing activity utilized in the new centralized  distribution
facilities.

Comparison of Nine months Ended September 30, 1999 and September 30, 1998

         Net sales.  Net sales decreased by 1% from $52,070,000 for the nine
month period ended September 30, 1998 to $51,574,000 for the nine month period
ended September 30, 1999.

         Revenues from the sale of groceries and related  products  increased 5%
from  $42,999,000  for  the  nine  month  period  ended  September  30,  1998 to
$45,103,000 for the nine month period ended September 30, 1999. Orders increased
6% from 372,700 for the nine month period  ended  September  30, 1998 to 393,600
for the nine month  period  ended  September  30,  1999 and  average  order size
remained unchanged.  Fees paid by customers and retail supply partners decreased
from $7,703,000 for the nine month period ended September 30, 1998 to $5,470,000
for the nine month period ended September 30, 1999. This decrease is
attributable to (i) reduced customer fees and (ii) lower fees paid by retail
supply partners as we conduct more of our business from our centralized
fulfillment centers versus retail stores.

         Fees  from  consumer  goods  companies  for  interactive   advertising,
promotion and research decreased from $1,225,000 for the nine month period ended
September 30, 1998 to $1,001,000  for the nine month period ended  September 30,
1999. Licensing revenues were $150,000 for the nine month period ended September
30, 1998 compared to no such  licensing  revenue for the nine month period ended
September 30, 1999.

         Cost of sales. Cost of sales decreased 2% from $40,454,000 for the nine
month period ended September 30, 1998 compared to $39,509,000 for the nine month
period  ended  September  30,  1999.  This  decrease  occurred  in spite of a 5%
increase in grocery and related product sales and is attributed to an increasing
percentage of company volumes operating through centralized  fulfillment centers
which  generates higher margins on products  sold.  Specifically,  gross margins
improved  from 22% in the nine month period ended  September  30, 1998 to 23% in
the nine month period ended  September 30, 1999. Despite the decrease in fees
paid by customers and retailers we anticipate gross margins to increase in the
future as volumes  continue  to shift  from  retail  stores to centralized
fulfillment centers.

         Fulfillment  operations.  Fulfillment operations expenses increased 21%
from  $12,758,000  for  the  nine  month  period  ended  September  30,  1998 to
$15,460,000  for the nine month period ended September 30, 1999. The increase is
primarily attributable to higher grocery fulfillment costs while we build scale,
gain  expertise,  and incur  duplicative  costs  during  the  initial  months of
warehouse operations.

         General  and  administrative.   General  and  administrative   expenses
increased from  $5,794,000 for the nine month period ended September 30, 1998 to
$8,146,000 for the nine month period ended September 30, 1999. A one-time charge
of $2,830,000 is attributable to investments in senior management in support of
the centralized fulfillment model.

         Marketing and selling.  Marketing and selling expenses decreased by 11%
from $4,589,000 for the nine month period ended September 30, 1998 to $4,093,000
for the nine month period ended  September  30, 1999.  The decrease is primarily
attributable to the Company's mid-1998 decision to limit marketing  expenditures
in order to focus on modifying  its service model and  centralizing  fulfillment
operations in a number of markets.

         System development and maintenance.  System development and maintenance
expenses  of  $2,430,000  for the nine month  period  ended  September  30, 1998
decreased  slightly to $2,427,000 for the nine month period ended  September 30,
1999. No development costs were capitalized during the first nine months of 1999
while $514,000 of development costs was capitalized during the first nine months
of 1998.

         Depreciation and amortization.  Depreciation and amortization increased
7% from  $1,501,000  for the nine  month  period  ended  September  30,  1998 to
$1,603,000 for the nine month period ended  September 30, 1999. This increase is
the result of equipment added to support new centralized distribution facilities
and information technology equipment necessary to increase the capacity of the
Company's website.

         Pre-opening  Expense.  Pre-opening  expenses increased from $136,000 in
the nine month  period  ended  September  30, 1998 to $828,000 in the nine month
period ended  September 30, 1999. The increase  primarily  results from expenses
incurred  related  to the  opening  of the San  Francisco  warehouse  in May and
June of 1999 and the Chicago  warehouse in December  1998 and January 1999.
In comparison, no warehouses were opened during the same period in 1998.

         Other income (expense).  Other income (expense)  includes interest from
investment  earnings  and interest  paid on capital  leases.  Investment  income
decreased from  $2,144,000 for the nine month period ended September 30, 1998 to
$1,385,000 for the nine month period ended September 30, 1999 due primarily to a
reduction in invested  principal.  Interest expense  increased from $133,000 for
the nine month  period ended  September  30, 1998 to $239,000 for the nine month
period ended September 30, 1999 as a result of greater leasing activity utilized
in the new centralized distribution facilities.


LIQUIDITY AND CAPITAL RESOURCES

         Cash used in operating  activities  decreased  from  $18,291,000 in the
first nine months of 1998 to $17,989,000 in the first nine months of 1999. As of
September 30, 1999, the Company had $3,549,000 in cash and cash  equivalents and
$12,822,000 in marketable  securities.  The Company uses its working  capital to
fund ongoing operations, marketing programs, geographic expansion and to further
develop its products and services.

         The Company  anticipates  that existing cash and marketable  securities
may be  insufficient to fund the Company's  operations and capital  requirements
for the next year and is currently evaluating financing opportunities. There can
be no  assurance  that  capital  will 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 DISCLOSURE

         The "Year 2000" problem  concerns the inability of information  systems
to properly recognize and process date-sensitive information beyond December 31,
1999.  The  Company  has  evaluated  the  impact of the Year  2000  issue on its
business and believes the costs associated with its own Year 2000 compliance and
internal   Year  2000  issues  will  be   comprised  of  software  and  hardware
expenditures  totaling less than $500,000.  Therefore,  the Year 2000 issue will
not have a material impact on the Company's  business,  results of operations or
financial  condition.  The Company  believes its internal  software  systems and
applications   are  currently  Year  2000  compliant  and  are  currently  being
recompiled on Y2K compliant operation systems.

         Nonetheless,  failure  of  certain  third  party  systems  could have a
material adverse impact on the Company.  Because of the range of possible issues
and the large number of variables  involved,  it is  impossible  to quantify the
potential cost of problems  should  remediation  efforts of third parties,  with
whom the Company does  business,  not be  successful.  For example,  the Company
relies on its retail  partners  and on other third party  vendors for  inventory
that the Company sells. The Company is addressing whether these third parties in
its supply chain are adequately  addressing  their Year 2000 compliance  issues.
The Company  continues to communicate  with its significant  suppliers and other
vendors to monitor the Year 2000 issue and  evaluate  the impact on the Company.
Failure by such  parties to timely  address the Year 2000 issue could impact the
Company's  ability to obtain inventory,  among other things,  which could have a
material  adverse  impact on the  Company's  business,  financial  condition  or
results of operations.  With respect to the Company's  ability to obtain product
information,  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.  The  Company has not  incurred to date,  and does not expect to incur,
material costs with respect to its initiatives mentioned above.

         Furthermore,  the Company utilizes third party equipment,  software and
content,   including  non-information   technology  systems  (such  as  building
equipment and security systems) that may not be Year 2000 compliant. The Company
has assessed  whether  critical  third-party  vendor  systems and  equipment and
critical  non-information   technology  systems  and  equipment  are  adequately
addressing  the Year 2000  issue.  The  Company  has  completed  the  process of
installing  all  recommended  upgrades  and  is  currently  running  Year  2000
compliant  versions.  Failure of third-party  equipment,  software or content to
operate properly with regard to the Year 2000 issue could require the Company to
incur  unanticipated  expense to remedy  problems,  which  could have a material
adverse  effect on the Company's  business,  results of operations and financial
condition.


                                     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  its
                  interactive marketing services and research customers; (3) the
                  Company's ability to execute its growth strategies,  including
                  effectively    implementing    a    centralized    fulfillment
                  distribution  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.


<PAGE>



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,
                      1999.  However,  a Form 8-K was filed on  October  7, 1999
                      detailing  the terms of employment of the new CEO and
                      president, William Malloy.








                                    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)


                                            /s/ Dan Rabinowitz
November 4, 1999                           _________________________
                                            Dan Rabinowitz
                                            Chief Financial Officer