As filed with the Securities and Exchange Commission on July 9, 1998.
Registration No. 333-36101
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
--------------------------
POORE BROTHERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0786101
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
---------------------------
3500 South La Cometa Drive
Goodyear, AZ 85338
(602) 932-6200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Eric J. Kufel
President and Chief Executive Officer
Poore Brothers, Inc.
3500 South La Cometa Drive
Goodyear, AZ 85338
(602) 932-6200
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
---------------------------
With copies to counsel for the Registrant:
Jeffrey B. Cobb, Esq.
Cobb & Eisenberg LLC
315 Post Road West
Westport, CT 06881
(203) 222-9560
--------------------------
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this registration statement.
<PAGE>
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
-------------------------
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------- --------------- --------------- -------------- ----------------------------------
Proposed Proposed
Maximum Maximum
Amount To Be Offering Aggregate
Title Of Each Class Of Registered Price Per Offering Amount Of Registration
Securities To Be Registered Share (4) Price(4) Fee(5)
- --------------------------------------------- --------------- --------------- -------------- ----------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share 195,000(1) $1.28125 $ 249,843.75 $ 75.71
- --------------------------------------------- --------------- --------------- -------------- ----------------------------------
Common Stock issuable upon exercise of 300,000(2) $1.28125 $ 384,375.00 $116.48
Financing Warrant
- --------------------------------------------- --------------- --------------- -------------- ----------------------------------
Common Stock issuable upon exercise of 2,109,717(3) $1.28125 $2,703,074.91 $819.11
Debentures
============================================= =============== =============== ============== ==================================
</TABLE>
(1) Shares of the Registrant's Common Stock being registered for resale on
behalf of selling security holders.
(2) Underlying shares of Common Stock issuable upon the exercise of a Warrant
issued by the Registrant to Westminster Capital, Inc. in September 1996
(the "Financing Warrant"). This Registration Statement also covers such
additional number of shares as may become issuable upon exercise of the
Financing Warrant by reason of anti-dilution, pursuant to Rule 416.
(3) Underlying shares of Common Stock issuable upon conversion of outstanding
9% Convertible Debentures due July 1, 2002 (the "Debentures"), issued by
the Registrant to Renaissance Capital Growth & Income Fund III, Inc.
("Renaissance") and Wells Fargo Small Business Investment Company, Inc.
("Wells Fargo"). This Registration Statement also covers such additional
number of shares as may become issuable upon exercise of the Debentures by
reason of anti-dilution pursuant to Rule 416.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended, and
based upon the last reported sale price of the Common Stock on the NASDAQ
SmallCap Market on July 2, 1998.
(5) The aggregate Registration Fee has increased to $1,011.30 from $412.30 (as
set forth in the initial Registration Statement on Form SB-2 which was
filed with the Commission on September 22, 1997), as a result of changes in
the number of shares of Common Stock being registered and in the offering
price per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
2
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED _____________________, 1998
PROSPECTUS
- ----------
2,604,717 Shares
POORE BROTHERS, INC.
Common Stock
This Prospectus relates to the offer and sale (the "Offering") by
certain persons (the "Selling Security Holders") of up to 2,604,717 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock"), of
Poore Brothers, Inc. (the "Company"). The Shares being offered include (i)
195,000 shares of Common Stock previously issued by the Company, (ii) 300,000
shares of Common Stock issuable upon the exercise of a Warrant issued in
September 1996 by the Company to Westminster Capital, Inc. (the "Financing
Warrant") and (iii) 2,109,717 shares of Common Stock issuable upon conversion of
outstanding 9% Convertible Debentures due July 1, 2002 (the "Debentures"),
issued by the Company to Renaissance Capital Growth & Income Fund III, Inc. and
Wells Fargo Small Business Investment Company, Inc. in May 1995. See "Selling
Security Holders and Plan of Distribution" and "Description of Securities."
The Selling Security Holders may sell all or a portion of the Shares
offered hereby from time to time in transactions on the NASDAQ SmallCap Market,
in privately negotiated transactions, or by a combination of such methods of
sale, at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. See "Selling Security Holders and Plan of Distribution." The
Company will not receive any of the proceeds from the sale of the Shares offered
pursuant to this Prospectus, but will receive proceeds of up to $420,000 from
the exercise of the Financing Warrant. The expenses of preparing and filing the
Registration Statement of which this Prospectus is a part are being borne by the
Company.
The Selling Security Holders and any broker-dealers or agents who
participate with the Selling Security Holders in the distribution of any Shares
may be deemed to be "underwriters" as such term is defined under the Securities
Act of 1933, as amended (the "Securities Act"), and any discount or commission
received by them and any profit on the sale of the Shares purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act.
The shares of Common Stock are quoted on the NASDAQ SmallCap Market
under the symbol "POOR." On July 2, 1998, the last reported sale price for the
Common Stock was $1.28125 per share.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _________________, 1998.
3
<PAGE>
The Poore Brothers logo is a registered trademark of the Company. Poore
BrothersTM is a trademark of the Company. All other trademarks or service marks
appearing in this Prospectus are trademarks or registered trademarks of the
respective owners thereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to
which the Company files reports and other information with the Securities and
Exchange Commission (the "Commission"). Any interested party may inspect the
reports and other information filed by the Company, without charge, at the
Public Reference Room of the Commission at its principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Any interested party may obtain copies of
all or any portion of such documents at prescribed rates from the Public
Reference Room of the Commission at its principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. Any interested party may obtain information
regarding the operation of the Public Reference Room by calling the Commission
at 1-800-SEC-0330. The Company files reports and information statements with the
Commission electronically. The Commission maintains an Internet site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
such Internet site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (such Registration Statement, with all amendments and exhibits thereto,
hereinafter collectively referred to as the "Registration Statement") under the
Securities Act with respect to the Shares offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the Shares offered hereby,
reference is made to the Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each statement being qualified in its entirety by such reference.
The Company furnishes its stockholders with annual reports containing
audited financial statements and may distribute such other periodic reports as
the Company may determine to be appropriate or as may be required by law.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed by the Company with the
Commission (Commission File Numbers 1-14556 and 0-21857) under the Exchange Act
are incorporated herein by reference in this Prospectus:
(i) Annual Report on Form 10-KSB for the year ended December 31,
1997;
(ii) Current Report on Form 8-K filed on January 7, 1998, as
amended on January 14, 1998;
(iii) Quarterly Report on Form 10-QSB for the fiscal quarter ended
March 31, 1998; and
(iv) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission
on December 10, 1996, including any amendment or report
updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of securities contemplated hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
A copy of any or all of the documents incorporated or deemed to be
incorporated herein by reference (other than exhibits to such documents which
are not specifically incorporated by reference herein) will be provided without
charge to any person to whom a copy of this Prospectus, as amended or
supplemented from time to time, and any other documents (or parts of documents)
that constitute part of this Prospectus under Section 10(a) of the Securities
Act of 1933, as amended (the "Securities Act"), will also be provided without
charge to each such person, upon written or oral request. Requests for such
copies should be directed to: Chief Financial Officer, Poore Brothers, Inc.,
3500 South La Cometa Drive, Goodyear, AZ 85338, telephone number (602) 932-6200.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
4
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus, including all documents incorporated by reference,
includes "forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 12E of the Securities Exchange
Act of 1934, as amended, and the Private Securities Litigation Reform Act of
1995, and the Company desires to take advantage of the "safe harbor" provisions
thereof. Therefore, the Company is including this statement for the express
purpose of availing itself of the protections of the safe harbor with respect to
all of such forward-looking statements. In this Prospectus, the words
"anticipates," "believes," "expects," "intends," "estimates," "projects," "will
likely result," "will continue," "future" and similar terms and expressions
identify forward-looking statements. The forward-looking statements in this
Prospectus reflect the Company's current views with respect to future events and
financial performance. These forward-looking statements are subject to certain
risks and uncertainties, including specifically the Company's brief operating
history and significant operating losses to date, the probability that the
Company will need additional financing due to continued operating losses or in
order to implement the Company's business strategy, significant competition,
volatility of the market price of the Common Stock and those other risks and
uncertainties discussed herein, that could cause actual results to differ
materially from historical results or those anticipated. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained in this Prospectus will in fact transpire or prove to be
accurate. Readers are cautioned to consider the specific risk factors described
herein and in "Risk Factors," and not to place undue reliance on the
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that may arise
after the date hereof. All subsequent written or oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by this section.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE SELLING SECURITY HOLDERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO BUY THE SHARES OF COMMON STOCK BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
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Page Page
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<S> <C> <C> <C>
Available Information 4 Use of Proceeds 12
Incorporation of Certain Information by Reference 4 Selling Security Holders 12
Forward-Looking Statements 5 Plan of Distribution 13
Summary Information Limitation of Liability and Indemnification Matters 13
The Company 6 Legal Matters 13
The Offering 7 Experts 13
Risk Factors 7
</TABLE>
UNTIL _______________,___ 1998 ALL DEALERS EFFECTING TRANSACTIONS IN
THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
5
<PAGE>
SUMMARY INFORMATION
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the notes thereto, contained elsewhere in, or incorporated
by reference into, this Prospectus. Unless otherwise indicated, the information
set forth in this Prospectus assumes: (i) the issuance of 300,000 shares of
Common Stock issuable upon the exercise of the Financing Warrant and 2,109,717
shares of Common Stock issuable upon the conversion of the Debentures, and (ii)
no issuance of 2,151,550 shares of Common Stock reserved for issuance upon the
exercise of outstanding stock options or 225,000 shares of Common Stock reserved
for issuance upon the exercise of a warrant issued by the Company to Paradise
Valley Securities, Inc. (the "Underwriter"), the underwriter of the Company's
initial public offering, in December 1996 (the "Underwriter's Warrant"). Each
prospective investor is urged to read this Prospectus carefully in its entirety.
The Company
The Company is engaged in the production, marketing and distribution of
salty snack food products that are sold primarily throughout the southwestern
United States. The Company manufactures and sells its own brand of potato chips
under the Poore BrothersTM logo, manufactures private label potato chips for
grocery store chains, and distributes snack food products that are manufactured
by others. For the year ended December 31, 1997 and the three months ended March
31, 1998, net sales totaled $15,731,796 and $3,196,764, respectively. During
such periods, approximately 64% and 69%, respectively, of sales were
attributable to the Company's Poore BrothersTM brand potato chips; approximately
29% and 18%, respectively, of sales were attributable to the distribution by the
Company of snack food products manufactured by other companies; and
approximately 7% and 13%, respectively, of sales were attributable to potato
chips produced by the Company for sale under the private labels of customers.
The Company generally sells its products to retailers through independent
distributors.
Poore BrothersTM brand potato chips are produced with a batch frying
process that the Company believes results in potato chips with enhanced
crispness and flavor. They are currently offered in ten flavors: Original, Salt
& Vinegar, Jalapeno, Barbecue, Parmesan & Garlic, Cajun, Dill Pickle, Grilled
Steak & Onion, Tangy Calypso and Unsalted. The Company also manufactures potato
chips for sale on a private label basis using a continuous frying process. The
Company currently has one California and two Arizona grocery chains as customers
for its private label potato chips.
The Company's business objective is to become a leading regional
manufacturer and distributor of branded premium potato chips and other salty
snack foods by providing high quality products at competitive prices that are
superior in taste to comparable products. The Company plans to achieve growth
primarily through increased distribution and sales volume in existing markets,
development of new products and acquisitions. See "Business Strategy."
The Company, a Delaware corporation, was organized in February 1995 as
a holding company to acquire, on May 31, 1995, (i) substantially all of the
assets, subject to certain liabilities, of Poore Brothers' Foods, Inc. ("PB
Foods"); (ii) a 100% equity interest in Poore Brothers Distributing, Inc. ("PB
Distributing"); and (iii) an equity interest (which, with related purchases,
constituted 80%) in Poore Brothers of Texas, Inc. ("PB Texas"). The Company also
acquired substantially all of the outstanding shares of Poore Brothers
Southeast, Inc. ("PB Southeast") in an exchange transaction consummated
concurrently with the acquisition of PB Foods, PB Distributing and PB Texas.
Such acquisitions are referred to collectively herein as the "PB Acquisition."
As a result of the consummation of the PB Acquisition, the Company
became a holding company with two manufacturing subsidiaries, Poore Brothers
Arizona, Inc., which had acquired the assets of PB Foods, and PB Southeast, as
well as two distribution subsidiaries, PB Distributing and PB Texas. Subsequent
to the PB Acquisition, the Company purchased the remaining equity of PB Texas,
increasing its equity ownership to 100%. Prior to their acquisition by the
Company, PB Foods, PB Distributing and PB Texas were owned and operated by
Donald and James Poore (since 1986, 1990 and 1991, respectively).
In December 1996, the Company completed an initial public offering of
its Common Stock.
In June 1997, the Company sold the operations of PB Texas. In September
1997, the Company closed the PB Southeast manufacturing operation in LaVergne,
Tennessee and consolidated all of the Company's manufacturing operations into a
new facility in Goodyear, Arizona. At present, PB Texas and PB Southeast are
inactive subsidiaries of the Company. The land and building comprising the
Company's new Arizona facility is owned by a wholly owned subsidiary, La Cometa
Properties, Inc., which was formed by the Company in May 1997.
6
<PAGE>
As used herein, the term "Company" refers to Poore Brothers, Inc. and
its subsidiaries, except where the context indicates otherwise.
The Company's executive offices are located at 3500 South La Cometa
Drive, Goodyear, Arizona 85338, and its telephone number is (602) 932-6200.
The Offering
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<S> <C>
Common Stock Offered by Selling Security Holders.............. 2,604,717 shares(1)
Common Stock Outstanding Before the Offering.................. 7,126,657 shares(2)
Common Stock to be Outstanding After the Offering............. 9,536,374 shares(2)(3)
Use of Proceeds. ............................................. The Company will not receive any of the proceeds from
the sale of the Shares offered pursuant to this
Prospectus, but will receive proceeds of up to $420,000
from the exercise of the Financing Warrant. The
proceeds, if any, from the exercise of the Financing
Warrant will be used by the Company for working capital
and general corporate purposes.
NASDAQ SmallCap Market Symbol................................. POOR
</TABLE>
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(1) Includes: (i) 195,000 shares of Common Stock previously issued by the
Company, (ii) 300,000 shares of Common Stock issuable upon the exercise of
the Financing Warrant, and (iii) 2,109,717 shares of Common Stock issuable
upon the conversion of the Debentures. See "Selling Security Holders and
Plan of Distribution" and "Description of Securities."
(2) Does not include: (i) 2,151,550 shares of Common Stock reserved for
issuance upon the exercise of outstanding stock options; or (ii) 225,000
shares of Common Stock reserved for issuance upon the exercise of the
Underwriter's Warrant.
(3) Assumes the exercise in full of the Financing Warrant and the full
conversion of the Debentures.
RISK FACTORS
THE SHARES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK, INCLUDING, BUT NOT LIMITED TO, THE RISK FACTORS DESCRIBED BELOW.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS,
TOGETHER WITH ALL OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, PRIOR TO
MAKING A DECISION TO PURCHASE ANY SHARES OF COMMON STOCK.
BRIEF OPERATING HISTORY; SIGNIFICANT LOSSES TO DATE; ACCUMULATED
DEFICIT. Although certain of the Company's subsidiaries have operated for
several years, the Company as a whole has a relatively brief operating history
upon which an evaluation of its prospects can be made. Such prospects are
subject to the substantial risks, expenses and difficulties frequently
encountered in the establishment and growth of a new business in the snack food
industry, which is characterized by a significant number of market entrants and
intense competition. The Company has had significant operating losses to date
and has never made a profit. For the fiscal years ended December 31, 1996 and
1997 and the three months ended March 31, 1998, the Company incurred losses of
$691,678, $3,034,097 and $235,562, respectively. At December 31, 1997 the
Company had an accumulated deficit of $5,461,933 and net working capital of
$1,423,643, and at March 31, 1998 the Company had an accumulated deficit of
$5,697,495 and net working capital of $1,314,664.
Even if the Company is successful in expanding the production and
distribution of its products and in increasing net sales, it may be expected to
incur substantial additional expense, including advertising and promotional
costs and "slotting" expenses (i.e., the cost of obtaining shelf space in
certain grocery stores). Accordingly, the Company may incur additional losses in
the future as a result of the implementation of the Company's business strategy,
even if net sales increase significantly. There can be no assurance that the
Company's business strategy will prove successful or that the Company will ever
become profitable.
7
<PAGE>
POSSIBLE NEED FOR ADDITIONAL FINANCING. Continued operating losses or
expansion of the Company's business may each result in requirements for funds in
excess of cash flow generated from operations, the Company's existing cash
balances and its available borrowing facilities. Accordingly, the Company may
require future debt or equity financing to meet its business requirements. There
can be no assurance that such financing will be available or, if available, on
terms attractive to the Company. Any such financing may dilute the equity
interests of the Company's stockholders.
NON-COMPLIANCE WITH FINANCIAL COVENANTS; POSSIBLE ACCELERATION OF
DEBENTURES. On May 31, 1995, the Company issued $2,700,000 principal amount of
the Debentures, with monthly principal payments of approximately $20,000
commencing July 1998 through July 1, 2002, in connection with the PB
Acquisition. In December 1996, in connection with the Company's initial public
offering, the holders of the Debentures converted $400,409 principal amount of
the Debentures into 367,348 shares of Common Stock. As of March 31, 1998,
$2,299,591 principal amount of the Debentures remained outstanding. In addition,
as of March 31, 1998, the Company was not in compliance with a financial ratio
that the Company is required to maintain while the Debentures are outstanding,
related to a required interest coverage ratio of 1.5:1 (actual ratio of -3.1:1).
As a result of an event of default, the holders of the Debentures have the
right, upon written notice and after a thirty-day period during which such
default may be cured, to demand immediate payment of the then unpaid principal
and accrued but unpaid interest under the Debentures. The holders of the
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 Debentures remain outstanding:
working capital of at least $1,000,000; minimum shareholders' equity (net
worth); an interest coverage ratio of at least 2.0:1; and a current ratio at the
end of any fiscal quarter of at least 1.1:1. The Company is currently in
compliance with the working capital, minimum shareholders' equity and current
ratio requirements. There can be no assurance, however, that the Company will
attain a sufficient level of profitability to 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 Debentures prior
to their maturity on July 1, 2002 could have a material adverse effect upon the
Company.
COMPETITION. The market for salty snack foods, such as those sold by
the Company, including potato chips, tortilla chips, popcorn and pretzels, is
large and intensely competitive. Competitive factors in the salty snack food
industry include product quality and taste, brand awareness among consumers,
access to supermarket shelf space, price, advertising and promotion, variety of
snacks offered, nutritional content, product packaging and package design. The
Company competes in that market principally on the basis of product quality and
taste.
The snack food industry is primarily dominated by Frito-Lay, Inc.,
which has substantially greater financial and other resources than the Company
and sells brands that are more widely recognized than are the Company's
products. Numerous other companies that are actual or potential competitors of
the Company, many with greater financial and other resources (including more
employees and more extensive facilities) than the Company, offer products
similar to those of the Company. In addition, many of such competitors offer a
wider range of products than that offered by the Company. Local or regional
markets often have significant smaller competitors, many of whom offer batch
fried products similar to those of the Company. Expansion of Company operations
into new markets has and will continue to encounter significant competition from
national, regional and local competitors that may be greater than that
encountered by the Company in its existing markets. In addition, such
competitors may challenge the Company's position in its existing markets. While
the Company believes that its products and method of operations will enable it
to compete successfully, there can be no assurance of its ability to do so.
PROMOTIONAL AND SHELF SPACE COSTS. Successful marketing of food
products generally depends upon obtaining adequate retail shelf space for
product display, particularly in supermarkets. Frequently, food manufacturers
and distributors, such as the Company, incur additional costs in order to obtain
additional shelf space. Whether or not the Company incurs such costs in a
particular market is dependent upon a number of factors, including existing
demand for the Company's products, relative availability of shelf space and
general competitive conditions. The Company may incur significant shelf space or
other promotional costs as a necessary condition of entering into competition in
particular markets or stores. If incurred, such costs may materially affect the
Company's financial performance.
NO ASSURANCE OF CONSUMER ACCEPTANCE OF COMPANY'S EXISTING AND FUTURE
PRODUCTS. Consumer preferences for snack foods are continually changing and are
extremely difficult to predict. The ability of the Company to develop successful
operations in new markets will depend upon customer acceptance of, and the
Company's ability to manufacture, its products. There can be no assurance that
the Company's products will achieve a significant degree of market acceptance,
that acceptance, if achieved, will be sustained for any significant period or
that product life cycles will be sufficient to permit the Company to recover
start-up and other associated costs. In addition, there can be no assurance that
the Company will succeed in the
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development of any new products or that any new products developed by the
Company will achieve market acceptance or generate meaningful revenue for the
Company.
UNCERTAINTIES AND RISKS OF FOOD PRODUCTS INDUSTRY. The food products
industry in which the Company is engaged is subject to numerous uncertainties
and risks outside of the Company's control. Profitability in the food products
industry is subject to adverse changes in general business and economic
conditions, oversupply of certain food products at the wholesale and retail
levels, seasonality, the risk that a food product may be banned or its use
limited or declared unhealthful, the risk that product tampering may occur that
may require a recall of one or more of the Company's products, and the risk that
sales of a food product may decline due to perceived health concerns, changes in
consumer tastes or other reasons beyond the control of the Company.
FLUCTUATIONS IN PRICES OF SUPPLIES; DEPENDENCE UPON AVAILABILITY OF
SUPPLIES AND PERFORMANCE OF SUPPLIERS. The Company's manufacturing costs are
subject to fluctuations in the prices of potatoes and oil, the two major
ingredients used in the manufacture of potato chips, as well as other
ingredients of the Company's products. Potatoes are widely available year-round,
either freshly harvested or from storage during winter months. TrisunR, a
sunflower oil low in saturated fat that is used by the Company in the production
of Poore BrothersTM brand potato chips, is supplied by one company. The Company
believes that alternative cooking oils that are low in saturated fat are readily
abundant and available. The Company is dependent upon its suppliers to provide
the Company with products and ingredients in adequate supply and on a timely
basis. Although the Company believes that its requirements for products and
ingredients are readily available, and that its business success is not
dependent on any single supplier, the failure of certain suppliers to meet the
Company's performance specifications, quality standards or delivery schedules
could have a material adverse effect on the Company's operations. In particular,
a sudden scarcity, a substantial price increase, or an unavailability of product
ingredients could materially adversely affect the Company's operations. There
can be no assurance that alternative ingredients would be available when needed
and on commercially attractive terms, if at all.
LACK OF PROPRIETARY MANUFACTURING METHODS. The taste and quality of
Poore BrothersTM brand potato chips is largely due to two elements of the
Company's manufacturing process: its use of batch frying and its use of
distinctive seasonings to produce a variety of flavors. The Company does not
have exclusive rights to the use of either element; consequently, competitors
may incorporate such elements into their own processes.
DEPENDENCE UPON MAJOR CUSTOMERS. Two customers of the Company, Fry's
Food Stores (a subsidiary of Kroger, Inc.) and Safeway, Inc., accounted for 14%
and 10%, respectively, of the Company's 1997 net sales and 17% and 10%,
respectively, of the Company's net sales for the three months ended March 31,
1998. The remainder of the Company's net sales were derived from sales to a
limited number of additional customers, either grocery chains or regional
distributors, none of which individually accounted for more than 10% of the
Company's sales. A decision by any major customers to cease or substantially
reduce their purchases could have a material adverse effect on the Company's
business.
RELIANCE ON KEY EMPLOYEES; NON-COMPETE AGREEMENTS. The Company's
success is dependent in large part upon the abilities of its executive officers,
including Eric J. Kufel (President and Chief Executive Officer). The inability
of the executive officers to perform their duties or the inability of the
Company to attract and retain other highly qualified personnel could have a
material adverse effect upon the Company's business and prospects. The Company
does not maintain, nor does it currently contemplate obtaining, "key man" life
insurance with respect to such employees. With the exception of James M. Poore
(Vice President), the employment of the executive officers of the Company,
including Mr. Kufel, Thomas W. Freeze (Vice President, Chief Financial Officer,
Treasurer and Secretary), Scott D. Fullmer (Vice President - Sales and
Marketing), Glen E. Flook (Vice President - Manufacturing) and Wendell T. Jones
(Director of Sales - Arizona), is on an "at-will" basis. The Company has
non-compete agreements with all of its executive officers, except Mr. Jones.
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 PB Southeast which alleged, among other things, that James Gossett,
plaintiff, 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. The complaint seeks unspecified amounts of damages, fees and costs. The
Company has agreed to indemnify Messrs. Howells and Puglisi in regard to this
lawsuit. In February 1997, plaintiffs filed pleadings indicating they are
seeking $3 million in damages; plaintiffs may not be limited by this damage
amount at trial. Messrs. Howells and Puglisi and PB Southeast filed an answer
and counterclaim against Mr. Gossett denying the major provisions of the
complaint, alleging various acts of nonperformance and breaches of
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<PAGE>
fiduciary duty on the part of Mr. Gossett and seeking various compensatory and
punitive damages. In July 1997, summary judgement was granted in favor of all
defendants on all counts of the lawsuit. In its Order, the Maricopa County
(Arizona) Superior Court ruled that there was no oral contract and that the
remainder of the plaintiffs' claims could not support a cause of action against
the defendants. 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.
GOVERNMENTAL REGULATION. The packaged food industry is subject to
numerous federal, state and local governmental regulations, including those
relating to the preparation, labeling and marketing of food products. The
Company is particularly affected by the Nutrition Labeling and Education Act of
1990 ("NLEA"), which requires specified nutritional information to be disclosed
on all packaged foods. The Company believes that the labeling on its products
currently meets these requirements. The Company does not believe that complying
with the NLEA regulations materially increases the Company's manufacturing
costs. There can be no assurance, however, that new laws or regulations will not
be passed that could require the Company to alter the taste or composition of
its products. Such changes could affect sales of the Company's products and have
a material adverse effect on the Company.
PRODUCT LIABILITY CLAIMS. As a manufacturer and marketer of food
products, the Company may be subjected to various product liability claims.
There can be no assurance that the product liability insurance maintained by the
Company will be adequate to cover any loss or exposure for product liability, or
that such insurance will continue to be available on terms acceptable to the
Company. Any product liability claim not fully covered by insurance, as well as
any adverse publicity from a product liability claim, could have a material
adverse effect on the financial condition or results of operations of the
Company.
NO DIVIDENDS. The Company has never declared or paid any dividends on
the shares of Common Stock. Management intends to retain any future earnings for
the operation and expansion of the Company's business and does not anticipate
paying any dividends at any time in the foreseeable future. In any event,
certain debt agreements of the Company limit its ability to declare and pay
dividends on the Common Stock.
POSSIBLE ISSUANCE OF ADDITIONAL COMMON STOCK AND PREFERRED STOCK. The
authorized capital stock of the Company consists of 15,000,000 shares of Common
Stock, of which 9,536,374 shares will be issued and outstanding upon completion
of the offering (assuming the issuance of (i) 300,000 shares upon the exercise
in full of the Financing Warrant and (ii) 2,109,717 shares upon the conversion
of the Debentures), and 50,000 shares of preferred stock, par value $100 per
share (the "Preferred Stock"), of which no shares will be issued and outstanding
upon completion of the offering. Additionally: (i) there are stock options
outstanding which, upon vesting, could result in the issuance of 2,151,550
additional shares of Common Stock at an average exercise price of $2.01 per
share; and (ii) the Underwriter's Warrant gives the Underwriter the right to
purchase 225,000 shares of Common Stock at an exercise price of $4.38 per share.
In addition, the Company's Board of Directors has authority, without action or
vote of the Company's stockholders, to issue all or part of the authorized but
unissued shares of Common Stock and Preferred Stock. Any such issuances of
Common Stock will dilute the percentage ownership interest of existing
stockholders and may further dilute the per share book value of the Common
Stock. Any such Preferred Stock would have rights senior to the Common Stock.
VOLATILITY OF MARKET PRICE OF COMMON STOCK; DECLINE IN MARKET PRICE OF
COMMON STOCK SINCE INITIAL PUBLIC OFFERING. Recent history relating to market
prices of companies that recently completed an initial public offering indicates
that, from time to time, there is significant volatility in the market price of
the securities of such companies for reasons that may not be related to such
companies' operations or financial conditions. Since the completion of the
initial public offering of the Company's Common Stock in December 1996 at an
offering price of $3.50 per share, the market price of the Common Stock has
experienced a substantial decline. The last reported sales price of the Common
Stock on the NASDAQ SmallCap Market on July 2, 1998 was $1.28125 per share.
There can be no assurance as to the future market price of the Common Stock.
MARKET OVERHANG OF REGISTERED STOCK MAY AFFECT MARKET PRICE OF THE
COMPANY'S COMMON STOCK. Due to the limited trading market for the Common Stock
and the volatility of the market price of the Common Stock since the Company's
initial public offering in December 1996, sales by the Selling Security Holders
of any of the Shares may have an adverse effect on the market price of the
Company's Common Stock. Sales of significant numbers of Shares into the open
market will likely have a depressive effect on the market price of the Common
Stock. The Company cannot predict the timing or extent of any sales of the
Shares or the short- or long-term effect on the market price of the Common Stock
from any such sales.
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NASDAQ LISTING MAINTENANCE REQUIREMENTS; NO ASSURANCE OF QUALIFICATION
FOR CONTINUED LISTING. NASDAQ has implemented rules changes increasing its
quantitative listing standards that make it more difficult for the Company to
maintain compliance with the listing requirements for the NASDAQ SmallCap
Market. One of such requirements is that the bid price on the Common Stock be
equal to or greater than $1. If the Company is unable to meet the NASDAQ
SmallCap listing requirements in the future, its securities will be subject to
being delisted, and trading, if any, would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc. As a
consequence of such delisting, an investor could find it more difficult to
dispose of, or to obtain accurate quotations as to the price of, the Company's
Common Stock.
RISK OF LOW-PRICED STOCK. Under the rules of the Commission, stock
priced under $5.00 per share is classified as "penny stock." Broker-dealers
trading in "penny stock" are subject to burdensome record keeping and disclosure
requirements, which can have the effect of reducing the liquidity and the value
of such stock. Pursuant to one such requirement, broker-dealers involved in a
penny stock transaction must make a special suitability determination for the
purchaser and receive the purchaser's written consent to the transaction prior
to the sale. A listing of securities on the NASDAQ SmallCap Market affords an
exemption from those rules, and because the Common Stock is currently listed on
the NASDAQ SmallCap Market, the "penny stock" rules do not apply to it. If,
however, at some time in the future the Common Stock should become ineligible
for continued listing on the NASDAQ SmallCap Market, those rules would apply.
FUTURE SALES OF COMMON STOCK BY THE COMPANY'S STOCKHOLDERS. At May 31,
1998, there were 9,536,374 shares of Common Stock issued and outstanding
(including 2,604,717 shares of Common Stock being registered pursuant to the
Registration Statement of which this Prospectus is a part and assuming the
issuance of 300,000 shares of Common Stock upon the exercise in full of the
Financing Warrant and 2,109,717 shares of Common Stock upon the full conversion
of the Debentures), excluding (i) 2,151,550 shares of Common Stock reserved for
issuance upon the exercise of outstanding stock options and (ii) 225,000 shares
of Common Stock reserved for issuance upon the exercise of the Underwriter's
Warrant. Upon the effectiveness of the Registration Statement of which this
Prospectus is a part, 8,710,099 of the issued and outstanding shares of Common
Stock (assuming the exercise in full of the Financing Warrant and the full
conversion of the Debentures) will be freely tradable without further
restriction or further registration under the Securities Act, unless purchased
by "affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act ("Rule 144"). The remaining 826,275 issued and outstanding shares
of Common Stock will be "restricted securities" as that term is defined in Rule
144 and will be eligible for immediate sale under Rule 144, subject to volume
limitations and other conditions of Rule 144. In addition, the 2,151,550 shares
of Common Stock issuable upon the exercise of outstanding stock options and the
225,000 shares of Common Stock reserved for issuance upon the exercise of the
Underwriter's Warrant have been registered under the Securities Act. Upon the
issuance, if any, of such shares, they will be freely tradable without further
restriction or further registration under the Securities Act, unless purchased
by "affiliates" of the Company, as that term is defined in Rule 144.
In general, under Rule 144 as currently in effect, any affiliate of the
Company or any person (or persons whose shares are aggregated in accordance with
Rule 144) who has beneficially owned restricted securities for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of 1% of the outstanding shares of Common Stock
(approximately 95,364 shares based upon the number of shares assumed to be
outstanding after the Offering assuming the exercise in full of the Financing
Warrant and the full conversion of the Debentures) or the reported average
weekly trading volume in the over-the-counter market for the four weeks
preceding the sale. Sales under Rule 144 are also subject to certain
manner-of-sale restrictions and notice requirements and to the availability of
current public information concerning the Company. Persons who have not been
affiliates of the Company for at least three months and who have held their
shares for more than two years are entitled to sell restricted securities
without regard to the volume, manner of sale, notice and public information
requirements of Rule 144.
NO UNDERWRITER PARTICIPATION IN PREPARATION OF PROSPECTUS OR
REGISTRATION STATEMENT. No underwriter has participated in the preparation of
this Prospectus or the Registration Statement of which this Prospectus is a
part. Generally, in an underwritten offering, an underwriter would conduct
certain investigations relative to the issuer, its business and the terms of the
offering in order to establish a reasonable basis for determining the
completeness of the disclosures set forth in any offering documents. Inasmuch as
no underwriter has participated in the preparation of the Prospectus or the
Registration Statement of which this Prospectus is a part, such an investigation
has not been conducted in connection with this Offering.
CERTAIN ANTI-TAKEOVER PROVISIONS. The Company's Certificate of
Incorporation authorizes the issuance of up to 50,000 shares of "blank check"
Preferred Stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors of the Company. The
Company may issue such shares of Preferred Stock in the future without
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stockholder approval. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of discouraging, delaying or
preventing a change of control of the Company, and preventing holders of Common
Stock from realizing a premium on their shares. In addition, under Section 203
of the Delaware General Corporation Law (the "DGCL"), the Company is prohibited
from engaging in any business combination (as defined in the DGCL) with any
interested stockholder (as defined in the DGCL) unless certain conditions are
met. This statutory provision could also have an anti-takeover effect.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares offered pursuant to this Prospectus, but will receive proceeds of up to
$420,000 from the exercise of the Financing Warrant. The proceeds, if any, from
the exercise of the Financing Warrant will be used by the Company for working
capital and general corporate purposes. There can be no assurance that the
Financing Warrant will be exercised in whole or in part.
SELLING SECURITY HOLDERS
All of the securities of the Company covered by this Prospectus are
being sold for the account of the Selling Security Holders as identified in the
following table. The Selling Security Holders are offering for sale an aggregate
of up to 2,604,717 shares of Common Stock, including (i) 195,000 shares of
Common Stock previously issued by the Company, (ii) 300,000 shares of Common
Stock issuable upon the exercise of the Financing Warrant, and (iii) 2,109,717
shares of Common Stock issuable upon the conversion of the Debentures.
The following table sets forth with respect to each of the Selling
Security Holders: the number of securities held of record or beneficially (to
the extent known by the Company); the number of shares included in the Offering;
the number of shares to be held after the Offering; and the percentage ownership
of such person after the Offering.
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares
of Common Stock of Common Stock of Common Stock Percentage
Held Before Included in to be Held After Ownership After
Name Offering Offering Offering Offering (1)
---- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Arthur D. Ehrenreich 10,000 5,000 5,000 *%
William A. Franke 80,000 80,000 0 --
Renaissance Capital Growth &
Income Fund III, Inc. 1,640,891 1,640,891 0 --
Gerald Rubin 50,000 50,000 0 --
Larry Searles 10,000 10,000 0 --
Wells Fargo Small Business
Investment Company, Inc. 469,826 468,826 1,000 *
Westminster Capital, Inc. 300,000 300,000 0 --
George J. Wischer Trust 50,000 50,000 0 --
All Selling Security Holders 2,610,717 2,604,717 6,000 *
</TABLE>
- --------------------
* Less than 1%.
(1) Based on 9,536,374 shares of Common Stock being issued and outstanding
after the completion of the offering, assuming the issuance of 300,000
shares of Common Stock upon the exercise in full of the Financing Warrant
and the issuance of 2,109,717 shares of Common Stock upon the full
conversion of the Debentures.
The Company has agreed to pay for all costs and expenses incident to
the preparation and filing of the Registration Statement of which this
Prospectus is a part, including but not limited to all expenses and fees of
preparing, filing and printing the Registration Statement and Prospectus and any
related exhibits, amendments and supplements thereto and the mailing of such
items. The Company will not pay selling commissions and expenses associated with
any sales of the Shares by the Selling Security holders.
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PLAN OF DISTRIBUTION
The Shares offered by the Selling Security Holders pursuant to this
Prospectus may be offered and sold from time to time directly by the Selling
Security Holders acting as principal for their own account in one or more
transactions on or through the NASDAQ SmallCap Market, in the over-the-counter
market or in negotiated transactions at market prices prevailing at the time of
sale or at prices otherwise negotiated. Alternatively, the Shares may be sold
from time to time through agents, brokers, dealers or underwriters designated
from time to time, and such agents, brokers, dealers or underwriters may receive
compensation in the form of commissions or concessions from the Selling Security
Holders or the purchasers of the securities. The Shares have not been registered
under any securities laws of any state.
Selling Security Holders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of Shares by the Selling Security Holders.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation provides that no director
shall have any personal liability to the Company or its stockholders for any
monetary damages for breach of fiduciary duty as a director, except that the
Certificate of Incorporation does not eliminate or limit the liability of each
director (i) for any breach of such director's duty of loyalty to the Company or
its stockholders, (ii) for acts of omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which such director derived an improper personal benefit. As a result of
this provision, the ability of the Company or a stockholder thereof to
successfully prosecute an action against a director for a breach of his duty of
care has been limited. However, this provision does not affect the availability
of equitable remedies such as an injunction or rescission based upon a
director's breach of his duty of care.
The Company's By-Laws provide mandatory indemnification rights to any
officer or director of the Company who, by reason of the fact that he or she is
an officer or director of the Company, is involved in a legal proceeding of any
nature. Such indemnification rights include reimbursement for expenses incurred
by such officer or director in advance of the final disposition of such
proceeding. The By-Laws also provide that the Company may in the discretion of
the Board of Directors, purchase insurance on behalf of any officer or director
against any liability asserted against and incurred by such person in such
capacity.
The Company's officers, directors and controlling persons also have
certain indemnification rights pursuant to: (i) the Debenture Loan Agreement
dated as of May 31, 1995, by and among the Company, Renaissance and Wells Fargo,
in connection with the registration of the shares of Common Stock issuable upon
conversion of the Debentures; and (ii) the Financing Warrant, in connection with
the registration of the shares of Common Stock issuable upon the exercise of the
Financing Warrant.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
LEGAL MATTERS
Certain legal matters with respect to the shares of Common Stock
offered hereby will be passed upon for the Company by Cobb & Eisenberg LLC,
Westport, Connecticut 06881.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in this prospectus and elsewhere in the registration statement, to the
extent and for the periods indicated in its report, have been audited by Arthur
Andersen LLP, independent public accountants, and is included herein in reliance
upon the authority of said firm as experts in giving said report.
The consolidated balance sheet as of December 31, 1996 and the
consolidated statements of operations, shareholders' equity, and cash flows for
the year ended December 31, 1996, incorporated by reference in this registration
statement, have been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses of the Company for the issuance and distribution of the
shares of Common Stock registered hereby are set forth in the following table:
Item Amount
---- ------
Securities and Exchange Commission Filing Fee $1,011.30
Legal Fees of the Company [_______]*
Accounting Fees of the Company [_______]*
Printing and Engraving Costs [_______]*
Miscellaneous Expenses [_______]*
Total [_______]*
- ---------------
* Estimated.
Item 15. Indemnification of Directors and Officers.
The Certificate of Incorporation of the Company provides that no
director shall have any personal liability to the Company or its stockholders
for any monetary damages for breach of fiduciary duty as a director, except that
the Certificate of Incorporation does not eliminate or limit the liability of
each director (i) for any breach of such director's duty of loyalty to the
Company or its stockholders, (ii) for acts of omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which such director derived an improper personal benefit.
The By-Laws of the Company provide that:
(a) The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) The Company shall indemnify any person who was or is part or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgement in its favor by
reason of the fact that he is or was a directory, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith an in a manner he reasonably
believed to be in or not opposed to the best interests of the Company and except
that no indemnification shall be made in respect to any claim, issue or matter
as to which such person shall have been adjudged to be liable to the Company
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnify for such expenses
which the Court of Chancery or such other court shall deem proper.
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(c) To the extent that a director, officer, employee or agent of the
Company has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Subsections (a) and (b) above, or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under Subsections (a) and (b) above (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Subsections (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified by the Company
as authorized in this Section.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled by any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) The Company is authorized, according to the discretion of the Board
of Directors, to purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Company must
indemnify him against liability under the provisions of the Section.
(h) For purposes of this provisions, references to "the Company" shall
include, in addition to the Company, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had the power and authority to
indemnify its directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
these provisions with respect to the resulting corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
The employment agreement of each of Eric J. Kufel, a director and
officer of the Company, and Thomas W. Freeze, Scott D. Fullmer and Glen E.
Flook, each of which is an officer of the Company, provides that the Company
shall indemnify and hold harmless and defend such person for, from and against
all claims, liabilities, obligations, fines, penalties and other matters and all
costs and expenses relating thereto that the Company and/or any of its
subsidiaries or affiliated entities is permitted by applicable law, except as
any of the foregoing arises out of or is related to such employee's negligence,
willful malfeasance, and/or breach of the employment agreement. The Company has
also agreed to provide indemnification on similar terms to David J. Brennan, the
Company's former director, President and Chief Executive Officer, and Jeffrey H.
Strasberg, the Company's former Vice President, Chief Financial Officer,
Treasurer and Secretary.
The Company has agreed to indemnify Mark S. Howells and Jeffrey J.
Puglisi, directors of the Company, in connection with the lawsuit brought
against PB Southeast and each of Messrs. Howells and Puglisi, by James Gossett.
The Company's officers, directors and controlling persons also have
certain indemnification rights pursuant to: (i) the Debenture Loan Agreement
dated as of May 31, 1995, by and among the Company, Renaissance and Wells Fargo,
in connection with the registration of the shares of Common Stock issuable upon
conversion of the Debentures; and (ii) the Financing Warrant, in connection with
the registration of the shares of Common Stock issuable upon the exercise of the
Financing Warrant.
15
<PAGE>
Item 16. Exhibits
(a) The following exhibits are required by Item 601 of Regulation S-B:
Exhibit
Number Description
- --------- -----------
3.1 -- Certificate of Incorporation of the Company filed with the
Secretary of State of the State of Delaware on February 23, 1995.
(1)
3.2 -- Certificate of Amendment to the Certificate of Incorporation of
the Company filed with the Secretary of State of the State of
Delaware on March 3, 1995. (1)
3.3 -- By-Laws of the Company. (1)
4.1 -- Specimen Certificate for shares of Common Stock. (2)
4.2 -- Form of Underwriter's Warrant issued by the Company to Paradise
Valley Securities, Inc. on December 11, 1996. (Incorporated by
reference to Amendment No. 3 to the Company's Registration
Statement on Form SB-2, Registration No. 333-5594-LA.)
4.3 -- Convertible Debenture Loan Agreement dated May 31, 1995 by and
among the Company, PB Arizona, PB Distributing, PB Texas, PB
Southeast, Renaissance and Wells Fargo. (2)
4.4 -- Debenture dated May 31, 1995, issued by the Company to
Renaissance. (1)
4.5 -- Debenture dated May 31, 1995, issued by the Company to Wells
Fargo. (1)
5.1 -- Opinion of Cobb & Eisenberg LLC (3)
23.1 -- Consent of Arthur Andersen LLP (3)
23.2 -- Consent of PricewaterhouseCoopers LLP (3)
24.1 -- Power of Attorney (included on signature page)
- ---------------------------------
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-2, Registration No. 333-5594-LA.
(2) Incorporated by reference to Amendment No. 1 to Company's Registration
Statement on Form SB-2, Registration No. 333-5594-LA.
(3) Filed herewith.
Item 17. Undertakings.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales of securities
are being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or together, represent a fundamental change in
the information in the Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment
that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Goodyear, State of Arizona on July 9,
1998.
POORE BROTHERS, INC.
By: /s/ Eric J. Kufel
-------------------------------------
Eric J. Kufel
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Eric J. Kufel his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all further amendments to this Amendment to the Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact, agent or
his substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Eric J. Kufel President, Chief Executive Officer, and Director July 9, 1998
- --------------------------------------------- (Principal Executive Officer)
Eric J. Kufel
/s/ Thomas W. Freeze Vice President, Chief Financial Officer, Treasurer July 9, 1998
- --------------------------------------------- and Secretary
Thomas W. Freeze (Principal Financial Officer and
Principal Accounting Officer)
/s/ Mark S. Howells Chairman of the Board July 9, 1998
- ---------------------------------------------
Mark S. Howells
/s/ Jeffrey J. Puglisi Director July 9, 1998
- ---------------------------------------------
Jeffrey J. Puglisi
/s/ Robert C. Pearson Director July 9, 1998
- ---------------------------------------------
Robert C. Pearson
/s/ Aaron M. Shenkman Director July 9, 1998
- ---------------------------------------------
Aaron M. Shenkman
</TABLE>
17
<PAGE>
EXHIBIT INDEX
5.1 Opinion of Cobb & Eisenberg LLC
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (included on signature page of Registration Statement)
18
EXHIBIT 5.1
OPINION OF LEGAL COUNSEL
COBB & EISENBERG LLC
315 Post Road West
Westport, Connecticut 06881
(203) 222-9560
July 8, 1998
Poore Brothers, Inc.
3500 South La Cometa Drive
Goodyear, Arizona 85338
Re: Registration Statement on Form S-3 (Amendment No. 1)
----------------------------------------------------
Dear Sirs:
We have acted as counsel to Poore Brothers, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a
registration statement on Form S-3 (Amendment No. 1) (the "Registration
Statement") relating to a proposed offering from time to time of up to 2,604,717
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"). The shares of Common Stock to be registered consist of: (i) 195,000
shares of Common Stock (the "Stockholder Shares") previously issued by the
Company; (ii) 300,000 shares of Common Stock (the "Warrant Shares") issuable
upon the exercise of a Warrant (the "Financing Warrant") issued by the Company
to Westminster Capital, Inc. in September 1996; and (iii) 2,109,717 shares of
Common Stock (the "Debenture Shares") issuable upon conversion of outstanding 9%
Convertible Debentures due July 1, 2002 (the "Debentures") issued by the Company
to Renaissance Capital Growth & Income Fund III, Inc. and Wells Fargo Small
Business Investment Company, Inc. in May 1995. The Registration Statement will
be filed with the Securities and Exchange Commission (the "Commission") pursuant
to the Securities Act of 1933, as amended.
As such counsel, we have examined copies of (i) the
Certificate of Incorporation, as amended to date, and the By-laws of the
Company, and (ii) the Registration Statement and prospectus included therein. We
have also examined originals, certified, conformed or photostatic copies, of
such corporate minutes, records, agreements and other instruments of the
Company, certificates of public officials and other documents and have made such
examinations of law, as we have deemed necessary to form the basis for the
opinions hereinafter expressed. In such examinations, we have assumed the
completion of all requisite corporate actions and authorizations prior to the
effectiveness of the Registration Statement, the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all copies submitted to us as certified, conformed or
photostatic copies, and the authenticity of all originals of such copies. As to
various questions of fact material to such opinions, we have relied, to the
extent we deemed appropriate, upon representations, statements and certificates
of officers and representatives of the Company and others.
Based upon the foregoing, we are of the opinion that:
(a) the Stockholder Shares have been validly authorized and issued
and are fully paid and non-assessable;
(b) the Warrant Shares have been validly authorized and will, when
issued in accordance with the terms of the Warrant, be validly
issued, fully-paid and non-assessable; and
(c) the Debenture Shares have been validly authorized and will,
when issued in accordance with the terms of the Debentures, be
validly issued, fully paid and non-assessable.
The foregoing opinion is limited to the present corporate laws
of the State of Delaware and the present federal laws of the United States. We
undertake no obligation to advise you as a result of developments occurring
after the date hereof or as a result of facts or circumstances brought to our
attention after the date hereof.
We consent to the filing of this opinion with the Commission as Exhibit
5.1 to the Registration Statement and to the reference to our firm under the
caption "Legal Matters" in the Prospectus constituting a part of the
Registration Statement.
Very truly yours,
/s/ Cobb & Eisenberg LLC
COBB & EISENBERG LLC
19
EXHIBIT-23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 12, 1998
included in Poore Brothers, Inc. Form 10-KSB for the year ended December 31,
1997 and to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
July 2, 1998
20
EXHIBIT-23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 (File No. 333-36101) of our report dated March 4, 1997, on our audit of
the consolidated balance sheet of Poore Brothers, Inc. and Subsidiaries as of
December 31, 1996 and the consolidated statements of operations, shareholders'
equity and cash flows for the year ended December 31, 1996. We also consent to
the reference to our firm under the caption "Experts".
PricewaterhouseCoopers LLP
Phoenix, Arizona
July 8, 1998
21
