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
--- ---
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
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
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
ASSETS (unaudited)
<S> <C> <C>
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
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
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
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
---- ----
(unaudited) (unaudited)
<S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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)
=========== =========== =========== ===========
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
10.80 Form of Warrant
27.1 Financial Data Schedule.
14
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
<PAGE>
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): _____________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,166,892
<SECURITIES> 0
<RECEIVABLES> 1,412,168
<ALLOWANCES> 173,000
<INVENTORY> 502,319
<CURRENT-ASSETS> 3,269,948
<PP&E> 7,299,557
<DEPRECIATION> 917,052
<TOTAL-ASSETS> 11,942,897
<CURRENT-LIABILITIES> 2,070,531
<BONDS> 4,772,264
0
0
<COMMON> 71,267
<OTHER-SE> 5,028,835
<TOTAL-LIABILITY-AND-EQUITY> 11,942,897
<SALES> 6,461,219
<TOTAL-REVENUES> 6,461,219
<CGS> 4,813,287
<TOTAL-COSTS> 4,813,287
<OTHER-EXPENSES> 1,783,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 274,329
<INCOME-PRETAX> (384,366)
<INCOME-TAX> 0
<INCOME-CONTINUING> (384,366)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (384,366)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
