-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A/1/UY3CAPQ3ouoNoH7aFdi2Ghr1x3Ns7STW+wdgq/HSOf4LUcKSSmEHFn+AnI/+ ynBgqkW6uzdecD6F9Cnwlg== 0000950147-98-000634.txt : 19980817 0000950147-98-000634.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950147-98-000634 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: POORE BROTHERS INC CENTRAL INDEX KEY: 0000944508 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 860786101 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-14556 FILM NUMBER: 98689017 BUSINESS ADDRESS: STREET 1: 3500 S LA COMETA DR CITY: GOODYEAR STATE: AZ ZIP: 85338 BUSINESS PHONE: 6029326200 MAIL ADDRESS: STREET 1: 2664 SOUTH LITCHFIELD RD CITY: GOODYEAR STATE: AZ ZIP: 85338 10QSB 1 QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [ X ] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1998 OR [ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______ to _______ Commission File Number 1-14556; 0-21857 POORE BROTHERS, INC. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 86-0786101 -------- ---------- (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification No.) 3500 S. La Cometa Drive, Goodyear, Arizona 85338 ------------------------------------------------ (Address of principal executive offices) (602) 932-6200 -------------- (Issuer's telephone number) Check whether the Registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 --- --- As of June 30, 1998, the number of issued and outstanding shares of common stock of the Registrant was 7,126,657. Transitional Small Business Disclosure Format (check one): Yes No X --- --- Table of Contents
Part I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997............................ 3 Consolidated Statements of Operations for the three and six months ended June 30, 1998 and 1997.................................................................. 4 Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997................................................................................ 5 Notes to Financial Statements.................................................................... 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.............................................................................. 8 Part II. OTHER INFORMATION Item 1. Legal Proceedings................................................................................ 11 Item 2. Changes in Securities and Use of Proceeds........................................................ 11 Item 3. Defaults Upon Senior Securities.................................................................. 11 Item 4. Submission of Matters to a Vote of Security Holders.............................................. 12 Item 5. Other Information................................................................................ 12 Item 6. Exhibits and Reports on Form 8-K................................................................. 12
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements POORE BROTHERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1998 1997 ---- ---- ASSETS (unaudited) Current assets: Cash and cash equivalents....................................................... $ 1,166,892 $ 1,622,751 Accounts receivable, net of allowance of $173,000 in 1998 and $174,000 in 1997 ......................................................... 1,412,168 1,528,318 Note receivable ................................................................. -- 78,414 Inventories ..................................................................... 502,319 473,025 Other current assets ............................................................ 188,569 175,274 ------------ ------------ Total current assets .......................................................... 3,269,948 3,877,782 Property and equipment, net ........................................................ 6,382,505 6,602,435 Intangible assets, net ............................................................. 2,206,430 2,294,324 Other assets ....................................................................... 84,014 100,673 ------------ ------------ Total assets .................................................................. $ 11,942,897 $ 12,875,214 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable............................................................... $ 640,352 $ 824,129 Accrued liabilities ............................................................. 586,954 502,793 Current portion of long-term debt ............................................... 843,225 1,127,217 ------------ ------------ Total current liabilities ................................................ 2,070,531 2,454,139 Long-term debt, less current portion ............................................... 4,772,264 5,017,724 ------------ ------------ Total liabilities ............................................................. 6,842,795 7,471,863 ------------ ------------ Shareholders' equity: Preferred stock, $100 par value; 50,000 shares authorized; None issued and outstanding in 1998 and 1997 ...................... ..... -- -- Common stock, $.01 par value; 15,000,000 shares authorized; 7,126,657 and 7,051,657 shares issued and outstanding in 1998 and 1997, respectively ................................................. 71,267 70,516 Additional paid-in capital ...................................................... 10,875,134 10,794,768 Accumulated deficit ............................................................. (5,846,299) (5,461,933) ------------ ------------ Total shareholders' equity .................................................... 5,100,102 5,403,351 ------------ ------------ Total liabilities and shareholders' equity .................................... $ 11,942,897 $ 12,875,214 ============ ============
The accompanying notes are an integral part of these financial statements. 3 POORE BROTHERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, Six Months Ended June 30, -------------------------- -------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- (unaudited) (unaudited) (unaudited) (unaudited) Net sales .............................. $ 3,264,454 $ 4,378,866 $ 6,461,219 $ 9,324,599 Cost of sales .......................... 2,440,401 3,865,746 4,813,287 8,127,646 ----------- ----------- ----------- ----------- Gross profit ........................ 824,053 513,120 1,647,932 1,196,953 Selling, general and administrative expense 847,247 881,211 1,783,091 2,005,427 Sale of Texas distribution business .... -- 150,000 -- 150,000 ----------- ----------- ----------- ----------- Operating loss ...................... (23,194) (518,091) (135,159) (958,474) ----------- ----------- ----------- ----------- Interest income ........................ 11,627 31,911 25,122 74,687 Interest expense ....................... (137,237) (84,580) (274,329) (165,393) ----------- ----------- ----------- ----------- (125,610) (52,669) (249,207) (90,706) ----------- ----------- ----------- ----------- Net loss ........................... $ (148,804) $ (570,760) $ (384,366) $(1,049,180) =========== =========== =========== =========== Net loss per common share: Basic ................................ $ (0.02) $ (0.08) $ (0.05) $ (0.15) =========== =========== =========== =========== Diluted .............................. $ (0.02) $ (0.08) $ (0.05) $ (0.15) =========== =========== =========== =========== Weighted average number of common shares: Basic ................................ 7,126,657 7,004,826 7,092,988 6,982,594 =========== =========== =========== =========== Diluted .............................. 7,126,657 7,004,826 7,092,988 6,982,594 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 4 POORE BROTHERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, ------------------------- 1998 1997 ---- ---- (unaudited) (unaudited) Cash flows from operating activities: Net loss .......................................................... $ (384,366) $(1,049,180) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation .................................................... 289,864 119,520 Amortization .................................................... 104,553 87,894 Bad debt expense ................................................ 59,000 21,500 Loss on disposition of business ................................. -- 150,000 Change in operating assets and liabilities: Accounts receivable ............................................. 57,150 (220,828) Inventories ..................................................... (29,293) 230,601 Other assets and liabilities .................................... 65,118 60,107 Accounts payable and accrued liabilities ........................ (99,615) (607,008) ----------- ----------- Net cash provided by (used in) operating activities 62,411 (1,207,394) ----------- ----------- Cash flows from investing activities: Proceeds on disposal of property ................................. 21,977 767,859 Sale of Texas distribution business .............................. -- 78,414 Purchase of short term investments ............................... -- (2,003,436) Purchase of property and equipment ............................... (91,910) (2,275,463) ----------- ----------- Net cash (used in) investing activities ........... (69,933) (3,432,626) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock ........................... 81,116 1,253,431 Net decrease in restricted certificate of deposit ................ -- 1,250,000 Stock issuance costs ............................................. -- (162,574) Proceeds from issuance of long-term debt ......................... -- 1,677,793 Payments made on long-term debt .................................. (298,921) (2,010,723) Net (decrease) in working capital line of credit ................. (230,532) (18,284) ----------- ----------- Net cash (used in) provided by financing activities (448,337) 1,989,643 ----------- ----------- Net (decrease) in cash and cash equivalents .......................... (455,859) (2,650,377) Cash and cash equivalents at beginning of period ..................... 1,622,751 3,603,850 ----------- ----------- Cash and cash equivalents at end of period ........................... $ 1,166,892 $ 953,473 =========== =========== Supplemental disclosures of cash flow information: Summary of non cash investing and financing activities: Construction loan for new facility .............................. $ -- $ 998,746 Capital lease obligation incurred - equipment acquisition ....... -- 6,479 Mortgage impounds for interest, taxes and insurance ............. -- 35,990 Note received for sale of Texas distribution business ........... -- 78,414 Cash paid during the six months for interest, net of amounts capitalized ................................................... 268,447 194,793
The accompanying notes are an integral part of these financial statements. 5 POORE BROTHERS, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies: General Poore Brothers, Inc. (the "Company"), a Delaware corporation, was organized in February 1995 as a holding company and on May 31, 1995 acquired substantially all of the equity of Poore Brothers Southeast, Inc. ("PB Southeast") in an exchange transaction pursuant to which 1,560,000 previously unissued shares of the Company's common stock, par value $.01 per share (the "Common Stock"), were exchanged for 150,366 issued and outstanding shares of PB Southeast's common stock. The exchange transaction with PB Southeast has been accounted for similar to a pooling-of interests since both entities had common ownership and control immediately prior to the transaction. In December 1996, the Company completed an initial public offering of its common stock. During 1997, the Company sold its Houston, Texas distribution business and closed its Tennessee manufacturing operation. The Company manufactures and distributes potato chips under the Poore Brothers(TM) brand name, as well as private label potato chips, and also distributes a variety of other independently manufactured snack food items. Basis of Presentation The consolidated financial statements include the accounts of Poore Brothers, Inc. and all of its controlled subsidiaries. In all situations, the Company owns from 99% to 100% of the voting interests of the controlled subsidiaries. All significant intercompany amounts and transactions have been eliminated. The financial statements have been prepared in accordance with the instructions for Form 10-QSB and, therefore, do not include all the information and footnotes required by generally accepted accounting principles. In the opinion of management, the consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary in order to make the consolidated financial statements not misleading. A description of the Company's accounting policies and other financial information is included in the audited financial statements filed with the Form 10-KSB for the fiscal year ended December 31, 1997. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of the results expected for the full year. Certain expenses relating to manufacturing costs and promotional expenses have been reclassified for the previously reported periods shown as part of this current filing in order to conform to the current financial statement classifications and to those that are preferred in the industry. The current and previously reported amounts are shown in the table below. Three months ended June 30, Six months ended 1997 June 30, 1997 --------------------------- --------------------------- Previously Current Previously Current reported filing reported filing ------------ ------------ ------------ ------------ Net sales ........ $ 4,203,555 $ 4,378,866 $ 8,937,241 $ 9,324,599 Cost of sales .... 3,330,903 3,865,746 7,099,941 8,127,646 Gross profit ..... 872,652 513,120 1,837,300 1,196,953 Operating expenses 1,390,743 1,031,211 2,795,774 2,155,427 Operating (loss) . (518,091) (518,091) (958,474) (958,474) 6 Loss Per Share During 1997, the Company adopted SFAS 128, "Earnings Per Share". Pursuant to SFAS 128, basic earnings per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Exercises of outstanding stock options and conversion of convertible debentures were not assumed to be exercised for purposes of calculating diluted earning per share for the quarters ended June 30, 1998 and 1997, as their effect was anti-dilutive.
Three months ended Six months ended June 30, June 30, -------------------------------------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Basic loss per share: Loss available to common shareholders $ (148,804) $ (570,760) $ (384,366) $(1,049,180) Weighted average common shares 7,126,657 7,004,826 7,092,988 6,982,594 ----------- ----------- ----------- ----------- Loss per share-basic $ (0.02) $ (0.08) $ (0.05) $ (0.15) =========== =========== =========== =========== Diluted loss per share: Loss available to common shareholders $ (148,804) $ (570,760) $ (384,366) $(1,049,180) Weighted average common shares 7,126,657 7,004,826 7,092,988 6,982,594 Common stock equivalents -- -- -- -- ----------- ----------- ----------- ----------- Loss per share-diluted $ (0.02) $ (0.08) $ (0.05) $ (0.15) =========== =========== =========== ===========
2. Debt The Company's $1.0 million working capital line of credit was renewed as of May 31, 1998 for a six-month period. At June 30, 1998, the Company had over $1.0 million of eligible receivables. The balance outstanding was $355,565 and $586,097 at June 30, 1998 and December 31, 1997, respectively. At June 30, 1998, the Company had outstanding 9% Convertible Debentures due July 1, 2002 (the "9% Convertible Debentures") in the principal amount of $2,299,591. The Company was not in compliance with a required interest coverage ratio of 2:1 (actual of -1.8:1). However, the holders of the 9% Convertible Debentures have granted the Company a waiver effective through June 30, 1999. After that time, the Company will be required to be in compliance with the following financial ratios, so long as the 9% Convertible Debentures remain outstanding: working capital of at least $1,000,000; minimum shareholders' equity (net worth) that will be calculated based upon the earnings of the Company and the consideration received by the Company from issuances of securities by the Company; an interest coverage ratio of at least 2:1; and a current ratio at the end of any fiscal quarter of at least 1.1:1. Interest on the 9% Convertible Debentures is paid by the Company on a monthly basis. Monthly principal payments of approximately $20,000 are required to be made by the Company beginning in July 1998 through July 2002. Management believes that the fulfillment of the Company's plans and objectives will enable the Company to attain a sufficient level of profitability to be in compliance with the financial ratios or alternatively, that the Company will be able to obtain an extension or renewal of the waivers; however, there can be no assurance that the Company will attain any such profitability, be in compliance with the financial ratios upon the expiration of the waivers or be able to obtain an extension or renewal of the waivers. Any acceleration under the 9% Convertible Debentures prior to their maturity on July 1, 2002 could have a material adverse effect upon the Company. As of February 1998, the Company issued warrants to Renaissance and Wells Fargo, the holders of the Company's 9% Convertible Debentures, representing the right to purchase 25,000 and 7,143 shares of the Company's Common Stock, respectively, at an exercise price of $1.00 per share. Each warrant became exercisable upon issuance and expires on July 1, 2002. The warrants were issued to Renaissance and Wells Fargo in consideration for the waiver by such parties, through June 30, 1999, of a financial covenant that the Company is subject to so long as the 9% Convertible Debentures remain outstanding. 7 3. Litigation In February 1998, the Court reversed its prior grant of summary judgment on one of the seven counts in the Gossett litigation and reinstated Mr. Gossett's claim that the defendants breached fiduciary duties to him. The Court also set the matter for trial beginning October 5, 1998. The Court's ruling merely preserves Mr. Gossett's claim for trial and does not adjudicate the merits of the claim. The Company believes that the claim is without merit and will continue to vigorously defend the lawsuit. In July 1998, the Company settled the litigation with Chris Ivey and his company, Shelby and Associates. The settlement included the release of all claims and the dismissal of his lawsuit. 4. New Accounting Pronouncements In July 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and for Hedging Activities", which is effective for years beginning after June 15, 1999. The Standard requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. Upon adoption in the first quarter of 2000, the Company expects there will be no impact on its financial condition or results of operations. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Quarter ended June 30, 1998 compared to the quarter ended June 30, 1997 Net sales for the three months ended June 30, 1998 were $3,264,000, down $1,115,000 or 25%, from $4,379,000 for the three months ended June 30, 1997. The sale of the Company's Texas distribution business contributed approximately $507,000 to the sales decline, consisting of $429,000 in sales of products manufactured by others and $78,000 in sales of Poore Brothers manufactured potato chips. An additional $166,000 decrease occurred in sales of products manufactured by others due to the elimination of several unprofitable product lines during the second quarter of 1997. Poore Brothers manufactured potato chip sales for the second quarter of 1998 were $2,603,000, down $441,000, or 14%, from $3,044,000 (excluding Texas) for the second quarter of 1997. This decrease was driven principally by lower volume as a result of the Company's discontinuance of unprofitable promotion programs with certain customers and the shutdown of the Company's Tennessee manufacturing facility in the third quarter of 1997. Gross profit for the three months ended June 30, 1998, was $824,000, or 25% of net sales, as compared to $513,000, or 12% of net sales, for the three months ended June 30, 1997. The $311,000 increase in gross profit, or 61%, occurred despite 25% lower sales as a result of the restructuring actions implemented in 1997, benefits from negotiated raw material cost savings and a continuing improvement in manufacturing and operating efficiencies from the new Goodyear, Arizona facility. Selling, general and administrative expenses decreased to $847,000 for the three months ended June 30, 1998 from $881,000 for the same period in 1997. This represented a $34,000 decrease, or 4%, compared to the second quarter of 1997. An 80% increase in marketing spending was offset by decreases in other selling, general and administrative expenses. In June 1997, the Company recorded a $150,000 charge related to severance, equipment write-downs and lease termination costs in connection with the sale of the Texas distribution business. 8 Net interest expense increased to $126,000 for the quarter ended June 30, 1998 from $53,000 for the quarter ended June 30, 1997. This increase was due primarily to interest expense related to the permanent financing on the new manufacturing facility and production equipment, and a decrease in interest income generated from investment of the remaining proceeds of the initial public offering. The Company's net losses for the quarters ended June 30, 1998 and June 30, 1997 were $149,000 and $571,000, respectively. The reduction in net loss was attributable primarily to the increased gross profit. Six months ended June 30, 1998 compared to the six months ended June 30, 1997 Net sales for the six months ended June 30, 1998 were $6,461,000, down $2,864,000 or 31%, from $9,325,000 for the six months ended June 30, 1997. The sale of the Texas distribution business in June 1997 contributed approximately $1,452,000 to the sales decline, consisting of $1,213,000 in sales of products manufactured by others and $239,000 in sales of Poore Brothers manufactured potato chips. An additional $741,000 decrease occurred in sales of products manufactured by others due to the elimination of several unprofitable product lines during the second quarter of 1997. Poore Brothers manufactured potato chip sales for the six months of 1998 were $5,234,000, down $671,000, or 11%, from $5,904,000 (excluding Texas) for the six months of 1997. This decrease was driven principally by lower volume as a result of the Company's discontinuance of unprofitable promotion programs with certain customers and the shutdown of the Tennessee manufacturing facility in the third quarter of 1997. Gross profit for the six months ended June 30, 1998, was $1,648,000, or 26% of net sales, as compared to $1,197,000, or 13% of net sales, for the six months ended June 30, 1997. The $451,000 increase in gross profit, or 38%, occurred despite 31% lower sales as a result of the restructuring actions implemented in 1997, benefits from negotiated raw material cost savings and a continuing improvement in manufacturing and operating efficiencies from the Company's new Goodyear, Arizona facility. Selling, general and administrative expenses decreased to $1,783,000 for the six months ended June 30, 1998 from $2,005,000 for the six months ended June 30, 1997. This represented a $222,000 decrease, or 11%, compared to the same period in 1997. A 47% increase in marketing spending was offset by decreases in other selling, general and administrative expenses. In June 1997 the Company recorded a $150,000 charge related to severance, equipment write-downs and lease termination costs in connection with the sale of the Company's Texas distribution business. Net interest expense increased to $249,000 for the six months ended June 30, 1998 from $91,000 for the same period in 1997. This increase was due primarily to interest expense related to the permanent financing on the new manufacturing facility and production equipment, and a decrease in interest income generated from investment of the remaining proceeds of the initial public offering. The Company's net losses for the six months ended June 30, 1998 and June 30, 1997 were $384,000 and $1,049,000, respectively. The reduction in net loss was attributable primarily to the increased gross profit and lower selling, general and administrative expenses, offset by higher net interest expense. Liquidity and Capital Resources Net working capital was $1,199,000 at June 30, 1998, with a current ratio of 1.6:1. At December 31, 1997, net working capital was $1,424,000 with a current ratio of 1.6:1. The $225,000 decrease in working capital was primarily attributable to the Company's use of cash for operating activities. 9 The Company's $1.0 million working capital line of credit was renewed as of May 31, 1998 for a six-month period. At June 30, 1998, the Company had over $1.0 million of eligible receivables. The balance outstanding was $355,565 and $586,097 at June 30, 1998 and December 31, 1997, respectively. At June 30, 1998, the Company had outstanding 9% Convertible Debentures due July 1, 2002 (the "9% Convertible Debentures") in the principal amount of $2,299,591. The Company was not in compliance with a required interest coverage ratio of 2:1 (actual of -1.8:1). However, the holders of the 9% Convertible Debentures have granted the Company a waiver effective through June 30, 1999 in consideration for the issuance by the Company to such parties of warrants to purchase shares of the Company's Common Stock. See "Part II, Item 2. Changes in Securities and Use of Proceeds." After that time, the Company will be required to be in compliance with the following financial ratios, so long as the 9% Convertible Debentures remain outstanding: working capital of at least $1,000,000; minimum shareholders' equity (net worth) that will be calculated based upon the earnings of the Company and the consideration received by the Company from issuances of securities by the Company; an interest coverage ratio of at least 2:1; and a current ratio at the end of any fiscal quarter of at least 1.1:1. Interest on the 9% Convertible Debentures is paid by the Company on a monthly basis. Monthly principal payments of approximately $20,000 are required to be made by the Company beginning in July 1998 through July 2002. Management believes that the fulfillment of the Company's plans and objectives will enable the Company to attain a sufficient level of profitability to be in compliance with the financial ratios or alternatively, that the Company will be able to obtain an extension or renewal of the waivers; however, there can be no assurance that the Company will attain any such profitability, be in compliance with the financial ratios upon the expiration of the waivers or be able to obtain an extension or renewal of the waivers. Any acceleration under the 9% Convertible Debentures prior to their maturity on July 1, 2002 could have a material adverse effect upon the Company. As a result of the expansion of the Company's operations, the Company may incur additional operating losses in the future. Expenditures relating to marketing, territory expansion and new product development may adversely affect selling, general and administrative expenses and consequently may adversely affect operating and net income. These types of expenditures are expensed for accounting purposes as incurred, while sales generated from the result of such expansion may benefit future periods. Management believes that current working capital, together with available line of credit borrowings, and anticipated cash flows from operations, will be sufficient to finance the operations of the Company for at least the next twelve months. This belief is based on current operating plans and certain assumptions, including those relating to the Company's future sales levels and expenditures, industry and general economic conditions and other conditions. If any of these plans, assumptions or factors change, or if the Company pursues strategic acquisitions, the Company may require future debt or equity financing to meet its capital requirements. There can be no assurance that such financing will be available or, if available, on terms attractive to the Company. Year 2000 Compliance The Company believes that it has no material risk in connection with the potential impact of the year 2000 on the processing of date sensitive information by the Company's computerized information systems. In addition, any problems the Company's suppliers and customers may have related to this issue are not expected to materially adversely affect the Company. The Company has not, to date, incurred material costs in connection with the year 2000 issue and is not expected to incur any material costs in connection with the year 2000 issue in the future. FORWARD LOOKING STATEMENTS WHEN USED IN THIS FORM 10-QSB AND IN FUTURE FILINGS BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), THE WORDS OR PHRASES "WILL LIKELY RESULT," "THE COMPANY EXPECTS," "WILL CONTINUE," "IS ANTICIPATED," "ESTIMATED," "PROJECT," OR "OUTLOOK," OR SIMILAR WORDS OR EXPRESSIONS, ARE INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY WISHES TO CAUTION READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, EACH OF WHICH SPEAK ONLY AS OF THE DATE MADE. SUCH STATEMENTS ARE SUBJECT TO 10 CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL EARNINGS AND THOSE PRESENTLY ANTICIPATED OR PROJECTED. IN LIGHT OF SUCH RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT FORWARD-LOOKING INFORMATION CONTAINED IN THIS FORM 10-QSB WILL, IN FACT, TRANSPIRE OR PROVE TO BE ACCURATE. THE COMPANY HAS NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS THAT MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT ANTICIPATED OR UNANTICIPATED EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE OF SUCH STATEMENTS. PART II. OTHER INFORMATION Item 1. Legal Proceedings In June 1996, a lawsuit was commenced in an Arizona state court against two directors of the Company, Mark S. Howells and Jeffrey J. Puglisi, and Poore Brothers Southeast, Inc. ("PB Southeast") which alleged, among other things, that James Gossett had an oral agreement with Mr. Howells to receive a 49% ownership interest in PB Southeast, that Messrs. Howells and Puglisi breached fiduciary duties and other obligations to Mr. Gossett and that he was entitled to exchange such alleged stock interest for shares in the Company. Another plaintiff, PB Pacific Distributing, Inc., further alleged that Messrs. Howells and Puglisi failed to honor the terms of an alleged distribution agreement between it and PB Foods. In July 1997, summary judgment was granted in favor of all defendants on all counts of the lawsuit. In February 1998, the Court reversed its prior grant of summary judgment on one of the seven counts and reinstated Mr. Gossett's claim that Messrs. Howells and Puglisi breached fiduciary duties to him. The Court also set the matter for trial beginning October 5, 1998. The Court's recent ruling merely preserves Mr. Gossett's claim for trial and does not adjudicate the merits of the claim. The Company believes that the claim is without merit and will continue to vigorously defend the lawsuit. In July 1998, the Company settled the litigation with Chris Ivey and his company, Shelby and Associates. The settlement included the release of all claims.and the dismissal of his lawsuit. Item 2. Changes in Securities and Use of Proceeds As of February 1998, the Company issued warrants to Renaissance and Wells Fargo, the holders of the Company's 9% Convertible Debentures, representing the right to purchase 25,000 and 7,143 shares of the Company's Common Stock, respectively, at an exercise price of $1.00 per share. Each warrant became exercisable upon issuance and expires on July 1, 2002. The warrants were issued to Renaissance and Wells Fargo in consideration for the waiver by such parties, through June 30, 1999, of a financial covenant that the Company is subject to so long as the 9% Convertible Debentures remain outstanding. See "Item 3. Defaults Upon Senior Securities." The issuance of the warrants was exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(2) of the Securities Act. Item 3. Defaults Upon Senior Securities At June 30, 1998, the Company had outstanding 9% Convertible Debentures due July 1, 2002 (the "9% Convertible Debentures") in the principal amount of $2,299,591. The Company was not in compliance with a required interest coverage ratio of 2:1 (actual of -1.8:1). However, the holders of the 9% Convertible Debentures have granted the Company a waiver effective through June 30, 1999 in consideration for the issuance by the Compnany to such parties of warrants to purchase shares of the Company's Common Stock. See "Item 2. Changes in Securities and Use of Proceeds." After that time, the Company will be required to be in compliance with the following financial ratios, so long as the 9% Convertible Debentures remain outstanding: working capital of at least $1,000,000; minimum shareholders' equity (net worth) that will be 11 calculated based upon the earnings of the Company and the consideration received by the Company from issuances of securities by the Company; an interest coverage ratio of at least 2:1; and a current ratio at the end of any fiscal quarter of at least 1.1:1. Interest on the 9% Convertible Debentures is paid by the Company on a monthly basis. Monthly principal payments of approximately $20,000 are required to be made by the Company beginning in July 1998 through July 2002. Management believes that the fulfillment of the Company's plans and objectives will enable the Company to attain a sufficient level of profitability to be in compliance with the financial ratios or alternatively, that the Company will be able to obtain an extension or renewal of the waivers; however, there can be no assurance that the Company will attain any such profitability, be in compliance with the financial ratios upon the expiration of the waivers or be able to obtain an extension or renewal of the waivers. Any acceleration under the 9% Convertible Debentures prior to their maturity on July 1, 2002 could have a material adverse effect upon the Company. Item 4. Submission of Matters to a Vote of Security Holders (a) The annual Meeting of Stockholders of the Company (the "Meeting") was held on May 14, 1998. (b) Proxies for the Meeting were solicited pursuant to Regulation 14A under the Exchange Act. There was no solicitation in opposition to the management's nominees as listed in the proxy statement and all of such nominees were elected. (c) At the Meeting, the Company's stockholders voted upon the election of five directors of the Company. Management's nominees were Messrs. Mark S. Howells, Eric J. Kufel, Jeffrey J. Puglisi, Robert C. Pearson and Aaron M. Shenkman. There were no other nominees. The following are the respective numbers of votes cast "for" and "withheld" with respect to each nominee. There were no votes cast against or broker non-votes with respect to any nominee. Name of Nominee Votes Cast For Votes Withheld ------- ------- -------------- -------------- Mark S. Howells 6,150,193 148,140 Eric J. Kufel 6,167,935 130,398 Jeffrey J. Puglisi 6,167,735 130,598 Robert C. Pearson 6,167,935 130,398 Aaron M. Shenkman 6,167,935 130,398 There were no other matters voted upon at the Meeting. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit Number Description 10.80 Form of Warrant. * 27.1 Financial Data Schedule. * * Filed herewith. (b) Current Reports on Form 8-K: None. 12 SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POORE BROTHERS, INC. By /s/ Eric J. Kufel --------------------------------------------- Dated: August 14, 1998 Eric J. Kufel President and Chief Executive Officer (principal executive officer) By: /s/ Thomas W. Freeze --------------------------------------------- Dated: August 14, 1998 Thomas W. Freeze Vice President, Chief Financial Officer, Treasurer and Secretary (principal financial and accounting officer) 13 EXHIBIT INDEX Exhibit Number Description 10.80 Form of Warrant 27.1 Financial Data Schedule. 14 EX-10.80 2 WARRANT TO PURCHASE COMMON STOCK EXHIBIT 10.80 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT. WARRANT TO PURCHASE COMMON STOCK OF POORE BROTHERS, INC. Date of Issuance: _________________ Warrant No. __ This certifies that, for value received, POORE BROTHERS, INC., a Delaware corporation (the "Company"), grants to _________________________________, or registered assigns (the "Registered Holder"), the right to subscribe for and purchase from the Company, at the price of $____ per share, as such price may be adjusted from time to time (the "Exercise Price"), from and after 9:00 a.m., Phoenix time, on the date of issuance of this Warrant (the "Exercise Commencement Date") and to and including 5:00 p.m., Phoenix time, on _____________ (the "Expiration Date"), ______________ (______) shares, as such number of shares may be adjusted from time to time (the "Warrant Shares"), of the Company's common stock, par value $0.01 per share (the "Common Stock"), subject to the provisions and upon the terms and conditions herein set forth. The Exercise Price and the number of Warrant Shares purchasable upon exercise of this Warrant are subject to adjustment from time to time as provided in Section 7 hereof. Section 1. Registration. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Records"), in the name of the Registered Holder. The Company may deem and treat the Registered Holder as the absolute owner of this Warrant for the purpose of any exercise hereof or any distribution to the Registered Holder, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Section 2. Registration of Transfers and Exchanges. (a) Subject to Section 10 hereof, the Company shall register the transfer of this Warrant, in whole or in part, upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the Form of Assignment attached hereto completed and duly endorsed by the Registered Holder, to the Company at the office specified in or pursuant to Section 3(b). Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Common Stock purchase rights so transferred shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Common Stock purchase rights not so transferred, if any, shall be issued to the Registered Holder. (b) This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the office of the Company specified in or pursuant to Section 3(b) hereof, for new Warrants, in substantially the form of this Warrant evidencing, in the aggregate, the right to purchase the number of Warrant Shares which may then be purchased hereunder, each of such new Warrants to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Registered Holder at the time of such surrender. 15 Section 3. Duration and Exercise of this Warrant. (a) This Warrant shall be exercisable by the Registered Holder, in its entirety (and not in part), on any business day before 5:00 p.m., Phoenix time, during the period beginning on the Exercise Commencement Date and ending on the Expiration Date. At 5:00 p.m., Phoenix time, on the Expiration Date, this Warrant, if not previously exercised, shall become void and of no further force or effect. (b) Subject to Sections 4 and 10(a) hereof, upon exercise or surrender of this Warrant, with the Form of Election to Purchase attached hereto completed and duly endorsed by the Registered Holder, to the Company at its office at 3500 South La Cometa Drive, Goodyear, Arizona 85338, Attention: Chief Financial Officer, or at such other address as the Company may specify in writing to the Registered Holder, and upon payment of the Exercise Price multiplied by the number of Warrant Shares then issuable upon exercise of this Warrant in lawful money of the United States of America, all as specified by the Registered Holder in the Form of Election to Purchase, the Company shall promptly issue and cause to be delivered to or upon the written order of the Registered Holder, and in such name or names as the Registered Holder may designate, a certificate for the Warrant Shares issued upon such exercise. Any person so designated in the Form of Election to Purchase, duly endorsed by the Registered Holder, as the person to be named on the certificates for the Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares, evidenced by such certificates, as of the Date of Exercise (as hereinafter defined) of such Warrant. (c) The Registered Holder may pay the applicable Exercise Price pursuant to Section 3(b), at the option of the Registered Holder, either (i) in cash or by cashier's or certified bank check payable to the Company in an amount equal to the product of the Exercise Price multiplied by the number of Warrant Shares then issuable upon exercise of this Warrant (the "Aggregate Exercise Price"), or (ii) by wire transfer of immediately available funds to the account which shall be indicated in writing by the Company to the Registered Holder. (d) The "Date of Exercise" of any Warrant means the date on which the Company shall have received (i) this Warrant, with the Form of Election to Purchase attached hereto appropriately completed and duly endorsed, and (ii) payment in full of the Aggregate Exercise Price as provided herein. (e) This Warrant shall be exercisable as an entirety only (i.e., for all of the Warrant Shares which are then issuable hereunder). Section 4. Payment of Taxes and Expenses. (a) The Company will pay all expenses and taxes (other than any federal or state income tax or similar obligations of the Registered Holder) and other governmental charges attributable to the preparation, execution, issuance and delivery of this Warrant, any new Warrant and the Warrant Shares; provided, however, that the Company shall not be required to pay any tax in respect of the transfer of this Warrant or the Warrant Shares, or the issuance or delivery of certificates for Warrant Shares upon the exercise of this Warrant, to a person or entity other than a Registered Holder or an Affiliate (as hereinafter defined) of such Registered Holder. (b) An "Affiliate" of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity. 16 Section 5. Mutilated or Missing Warrant Certificate. If this Warrant shall be mutilated, lost, stolen or destroyed, upon request by the Registered Holder, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, of like tenor, but, in the case of loss, theft or destruction, only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, indemnity also reasonably satisfactory to it. Section 6. Reservation, Listing and Issuance of Warrant Shares. (a) The Company will at all times have authorized, and reserve and keep available, free from preemptive rights, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon the exercise of the rights represented by this Warrant, the number of Warrant Shares deliverable upon exercise of this Warrant. The Company will, at its expense, use its best efforts to cause such shares to be included in or listed on (subject to issuance or notice of issuance of Warrant Shares) all markets or stock exchanges in or on which the Common Stock is included or listed not later than the date on which the Common Stock is first included or listed on any such market or exchange and will thereafter maintain such inclusion or listing of all shares of Common Stock from time to time issuable upon exercise of this Warrant. (b) Before taking any action which could cause an adjustment pursuant to Section 7 hereof reducing the Exercise Price below the par value of the Warrant Shares, the Company will take any corporate action which may be necessary in order that the Company may validly and legally issue at the Exercise Price, as so adjusted, Warrant Shares that are fully paid and non-assessable. (c) The Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized, fully paid and nonassessable, and (ii) free from all taxes with respect to the issuance thereof and from all liens, charges and security interests. Section 7. Adjustments of Exercise Price and Number of Warrant Shares. (a) The Exercise Price at which Warrant Shares may be purchased hereunder, and the number of Warrant Shares to be purchased upon exercise hereof, are subject to change or adjustment from time to time as hereinafter provided. Upon each resulting adjustment of such Exercise Price, the number of Warrant Shares issuable upon the exercise of this Warrant shall be adjusted to the nearest full Warrant Share by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (b) Subdivisions or Combinations of Stock. In case the Company shall at any time subdivide the outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced; and conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased. (c) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. In case the Company (i) consolidates with or mergers into any other corporation and is not the continuing or surviving corporation of such consolidation of merger, or (ii) permits any other corporation to consolidate with or 17 merge into the Company and the Company is the continuing or surviving corporation but, in connection with such consolidation or merger, the Common Stock is changed into or exchanged for stock or other securities of any other corporation or cash or any other assets, or (iii) transfers all or substantially all of its properties and assets to any other corporation, or (iv) effects a capital reorganization or reclassification of the capital stock of the Company in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash and/or assets with respect to or in exchange for Common Stock, then, and in each such case, proper provision shall be made so that the Registered Holder, upon the exercise of this Warrant at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive (at the aggregate Exercise Price in effect for all shares of Common Stock issuable upon such exercise immediately prior to such consummation as adjusted to the time of such transaction), in lieu of shares of Common Stock issuable upon such exercise prior to such consummation, the stock and other securities, cash and/or assets to which such holder would have been entitled upon such consummation if the Registered Holder had so exercised this Warrant immediately prior thereto (subject to adjustments subsequent to such corporate action as nearly equivalent as possible to the adjustments provided for in this Section 7). (d) Notice of Adjustment. Upon any adjustment of the Exercise Price, then and in each case the Company shall promptly deliver to the Registered Holder a certificate of the chief financial officer of the Company which shall state the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (e) Other Notices. In case at any time there shall occur any of the events described in paragraph (c) of this Section 7, then, in each such case the Company shall give written notice, addressed to the Registered Holder at the address of such Registered Holder as shown on the books of the Company, of the date (or, if not then known, a reasonable approximation thereof by the Company) on which such event or events shall take place. Such notice shall also specify (or, if not then known, reasonably approximate) the date, if any, as of which the holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event. Such written notice shall be given at least thirty (30) days prior to the action in question and not less than thirty (30) days prior to the record date or the date on which the Company's transfer books are closed in respect thereto. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Act, or to a favorable vote of stockholders, if either is required. Section 8. No Rights or Liabilities as a Stockholder. The Registered Holder shall not be entitled to vote or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or subscription rights or otherwise, until the Date of Exercise shall have occurred. No provision of this Warrant, in the absence of affirmative action by the Registered Holder hereof to purchase shares of Common Stock, and no mere enumeration herein of the rights and privileges of the Registered Holder, shall give rise to any liability of such holder for the 18 Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. Section 9. Fractional Warrant Shares. The Company shall not be required to issue fractions of Warrant Shares upon exercise of the Warrant or to distribute certificates which evidence fractional Warrant Shares. If any fraction of a Warrant Share would, except for the provisions of this Section 9, be issuable on the exercise of this Warrant, the Company shall pay to the Registered Holder an amount in cash equal to the fair market value of a Warrant Share as of the Date of Exercise, multiplied by such fraction. For purposes of this Section 9, the fair market value of a Warrant Share shall be determined by the Company's board of directors, in its sole discretion. Section 10. Transfer Restrictions; Registration of the Warrant and Warrant Shares. (a) Neither the Warrant nor the Warrant Shares have been registered under the Act. The Registered Holder, by acceptance hereof, represents that it is acquiring this Warrant to be issued to it for its own account and not with a view to the distribution thereof, and agrees not to sell, transfer, pledge or hypothecate this Warrant, any purchase rights evidenced hereby or any Warrant Shares unless a registration statement is effective for this Warrant or the Warrant Shares under the Act or in the opinion of such Registered Holder's counsel reasonably satisfactory to the Company, a copy of which opinion shall be delivered to the Company, such transaction is exempt from the registration requirements of the Act. (b) Subject to the provisions of the following paragraph of this Section 10, each Certificate for Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the following form: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT. (c) The restrictions and requirements set forth in the foregoing paragraph shall apply with respect to Warrant Shares unless and until such Warrant Shares are sold or otherwise transferred pursuant to an effective registration statement under the Act or are otherwise no longer subject to the restrictions of the Act, at which time the Company agrees to promptly cause such restrictive legends to be removed and stop transfer restrictions applicable to such Warrant Shares to be rescinded. (d) The Company will use its best efforts to comply with the reporting requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act") (whether or not it shall be required to do so pursuant to such Sections) and will use its best efforts to comply with all other public information reporting requirements of the Securities and Exchange Commission (including, without limitation, Rule 144 promulgated under the Act) from time to time in effect and relating to the availability of an exemption from the Act for sale of restricted securities. The Company also will cooperate with the Registered Holder and with each holder of any Warrant Shares in supplying such information as may be necessary for any such holders to complete and file any information reporting forms presently or hereafter required by the Securities and 19 Exchange Commission as a condition to the availability of an exemption from the Act for the sale of restricted securities. Section 11. Notices. All notices, requests, demands and other communications relating to this Warrant shall be in writing and shall be deemed to have been duly given if delivered personally or sent by United States certified or registered first-class mail, postage prepaid, return receipt requested, to the parties hereto at the following addresses or at such other address as any party hereto shall hereafter specify by notice to the other party hereto: (a) If to the Registered Holder of this Warrant or the holder of the Warrant Shares, addressed to the address of such Registered Holder or holder as set forth on books of the Company or otherwise furnished by the Registered Holder or holder to the Company. (b) If to the Company, addressed to Poore Brothers, Inc., 3500 South La Cometa Drive, Goodyear, Arizona 85338, Attention: Chief Financial Officer. Section 12. Binding Effect. This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns, and the holder or holders from time to time of this Warrant and the Warrant Shares. Section 13. Survival of Rights and Duties. This Warrant shall terminate and be of no further force and effect on the earlier of (i) 5:00 p.m., Phoenix time, on the Expiration Date and (ii) the date on which this Warrant and all purchase rights evidenced hereby have been exercised, except that the provisions of Sections 4 and 10 hereof shall continue in full force and effect after such termination date. Section 14. Governing Law. This Warrant shall be construed in accordance with and governed by the laws of the State of Arizona. Section 15. Section Headings. The Section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof. Section 16. Amendment or Waiver. This Warrant and any term hereof may be amended, waived, discharged or terminated only by and with the written consent of the Company and the holder of this Warrant. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed under its corporate seal by its officers thereunto duly authorized as of the date hereof. POORE BROTHERS, INC. ATTEST: By: __________________________ By: __________________________ Name: Name: Title: Title: 20 FORM OF ELECTION TO PURCHASE (TO BE EXECUTED UPON EXERCISE OF THIS WARRANT) TO POORE BROTHERS, INC.: THE UNDERSIGNED, THE RECORD HOLDER OF THIS WARRANT, HEREBY IRREVOCABLY ELECTS TO EXERCISE THE RIGHT, REPRESENTED BY THIS WARRANT (WARRANT NO. ___), TO PURCHASE ___________ OF THE WARRANT SHARES AND HEREWITH TENDERS PAYMENT FOR SUCH WARRANT SHARES TO THE ORDER OF POORE BROTHERS, INC. OF $_________ REPRESENTING THE FULL PURCHASE PRICE FOR SUCH SHARES AT THE PRICE PER SHARE PROVIDED FOR IN SUCH WARRANT AND THE DELIVERY OF ANY APPLICABLE TAXES PAYABLE BY THE UNDERSIGNED PURSUANT TO SUCH WARRANT. THE UNDERSIGNED REQUESTS THAT CERTIFICATES FOR SUCH SHARES BE ISSUED IN THE NAME OF: _______________________________ PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER - ------------------------------- - ------------------------------- - ------------------------------- - ------------------------------- ---------------------------------- (PLEASE PRINT NAME AND ADDRESS) FORM OF ASSIGNMENT FOR VALUE RECEIVED, _______________________ HEREBY SELLS, ASSIGNS AND TRANSFERS TO EACH ASSIGNEE SET FORTH BELOW ALL OF THE RIGHTS OF THE UNDERSIGNED UNDER THE ATTACHED WARRANT (WARRANT NO. _____) WITH RESPECT TO THE NUMBER OF SHARES OF COMMON STOCK COVERED THEREBY SET FORTH OPPOSITE THE NAME OF SUCH ASSIGNEE UNTO: NAME OF ASSIGNEE ADDRESS NUMBER OF SHARES OF ---------------- ------- COMMON STOCK ------------ IF THE TOTAL OF SAID PURCHASE RIGHTS REPRESENTED BY THE WARRANT SHALL NOT BE ASSIGNED, THE UNDERSIGNED REQUESTS THAT A NEW WARRANT CERTIFICATE EVIDENCING THE PURCHASE RIGHTS NOT SO ASSIGNED BE ISSUED IN THE NAME OF AND DELIVERED TO THE UNDERSIGNED. DATED: ___________________ NAME OF HOLDER (PRINT): BY: ________________________________ (NAME): ____________________________ (TITLE): _____________________________ EX-27 3 FINANCIAL DATA SCHEDUL
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1998, INCLUDED WITH FORM 10-QSB, AND IS QUALIFIED IN ITS ENTIRETY BY REFRERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. Dollars 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1 1,166,892 0 1,412,168 173,000 502,319 3,269,948 7,299,557 917,052 11,942,897 2,070,531 4,772,264 0 0 71,267 5,028,835 11,942,897 6,461,219 6,461,219 4,813,287 4,813,287 1,783,091 0 274,329 (384,366) 0 (384,366) 0 0 0 (384,366) (0.05) (0.05)
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