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 March 31, 1999
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
POORE BROTHERS, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 86-0786101
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or 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 March 31, 1999, the number of issued and outstanding shares of common
stock of the Registrant was 7,832,997.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated balance sheets as of March 31, 1999 and
December 31, 1998................................................... 3
Consolidated statements of operations for the three
months ended March 31, 1999 and 1998................................ 4
Consolidated statements of cash flows for the three
months ended March 31, 1999 and 1998 ............................... 5
Notes to consolidated financial statements............................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION................................................... 9
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................. 11
ITEM 5. OTHER INFORMATION................................................... 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................... 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1999 1998
------------ -------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 154,843 $ 270,295
Accounts receivable, net of allowance of
$34,000 in 1999 and $24,000 in 1998 1,580,126 1,712,955
Inventories 426,923 465,038
Other current assets 234,456 281,994
------------ ------------
Total current assets 2,396,348 2,730,282
Property and equipment, net 6,195,073 6,270,374
Intangible assets, net 3,593,276 3,723,906
Other assets 203,695 214,327
------------ ------------
Total assets $ 12,388,392 $ 12,938,889
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 660,250 $ 870,204
Accrued liabilities 426,000 439,404
Current portion of long-term debt 703,933 652,519
------------ ------------
Total current liabilities 1,790,183 1,962,127
Long-term debt, less current portion 5,683,937 5,720,247
------------ ------------
Total liabilities 7,474,120 7,682,374
------------ ------------
Shareholders' equity:
Preferred stock, $100 par value; 50,000 shares
authorized; No shares issued or outstanding
in 1999 and 1998 -- --
Common stock, $.01 par value; 15,000,000 shares
authorized; 7,832,997 shares issued and
outstanding in 1999 and 1998 78,329 78,329
Additional paid-in capital 11,514,210 11,514,210
Accumulated deficit (6,678,267) (6,336,024)
------------ ------------
Total shareholders' equity 4,914,272 5,256,515
------------ ------------
Total liabilities and shareholders' equity $ 12,388,392 $ 12,938,889
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----------- ------------
(unaudited) (unaudited)
Net sales .......................................... $ 3,690,858 $ 3,196,764
Cost of sales ...................................... 2,928,941 2,372,885
----------- -----------
Gross profit ..................................... 761,917 823,879
Selling, general and administrative expenses ....... 879,031 935,844
----------- -----------
Operating loss ................................... (117,114) (111,965)
----------- -----------
Interest income .................................... 5,806 13,495
Interest expense ................................... (159,304) (137,092)
----------- -----------
(153,498) (123,597)
----------- -----------
Loss before cumulative effect of a change in
accounting principle ........................... (270,612) (235,562)
Cumulative effect of a change in accounting
principle ........................................ (71,631) --
----------- -----------
Net loss ......................................... $ (342,243) $ (235,562)
=========== ===========
Loss per common share:
Basic-
Loss before cumulative effect of a change
in accounting principle ...................... $ (0.03) $ (0.03)
Cumulative effect of a change in accounting
principle .................................... (0.01) --
----------- -----------
Net loss ................................... $ (0.04) $ (0.03)
=========== ===========
Diluted-
Loss before cumulative effect of a change in
accounting principle ....................... $ (0.03) $ (0.03)
Cumulative effect of a change in accounting
principle .................................. (0.01) --
----------- -----------
Net loss ..................................... $ (0.04) $ (0.03)
=========== ===========
Weighted average number of common shares:
Basic .......................................... 7,832,997 7,058,946
=========== ===========
Diluted ........................................ 7,832,997 7,058,946
=========== ===========
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----------- ------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................... $(342,243) $ (235,562)
Adjustments to reconcile net loss to net cash
used in operating activities:
Cumulative effect of a change in accounting
principle .................................... 71,631 --
Depreciation ................................... 147,737 142,052
Amortization ................................... 111,530 57,991
Bad debt expense ............................... 12,000 50,000
Change in operating assets and liabilities:
Accounts receivable ............................ 120,828 (157,014)
Inventories .................................... 38,116 38,196
Other assets and liabilities ................... 8,139 16,463
Accounts payable and accrued liabilities ....... (223,357) (236,426)
--------- -----------
Net cash used in operating activities ........... (55,619) (324,300)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............... (72,437) (31,142)
--------- -----------
Net cash used in investing activities .......... (72,437) (31,142)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ........... -- 81,116
Payments made on long-term debt .................. (154,646) (232,585)
Net increase in working capital line of credit ... 167,250 17,955
--------- -----------
Net cash (used in) provided by financing
activities ................................... 12,604 (133,514)
--------- -----------
Net (decrease) in cash and cash equivalents ........ (115,452) (488,956)
Cash and cash equivalents at beginning of period ... 270,295 1,622,751
--------- -----------
Cash and cash equivalents at end of period ......... $ 154,843 $ 1,133,795
========= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three months for interest ... $ 112,780 $ 133,710
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
POORE BROTHERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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. The exchange transaction with PB Southeast was accounted
for similar to a pooling-of interests since both entities had common ownership
and control immediately prior to the transaction. During 1997, the Company sold
its Houston, Texas distribution business and closed its PB Southeast
manufacturing operation. In November 1998, the Company acquired the business and
certain assets (including the Bob's Texas StyleTM potato chips brand) of Tejas
Snacks, L.P. ("Tejas"), a Texas-based potato chip manufacturer.
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 brands of batch-cooked
potato chips under the Poore Brothers(R) and Bob's Texas StyleTM brand names,
manufactures private label potato chips for grocery store chains, and
distributes and merchandises snack food products that are manufactured by
others.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Poore
Brothers, Inc. and all of its wholly owned 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,
1998. The results of operations for the three months ended March 31, 1999 are
not necessarily indicative of the results expected for the full year.
CHANGE IN ACCOUNTING PRINCIPLE
In accordance with Statement of Position 98-5, REPORTING ON THE COSTS OF
START-UP ACTIVITIES, effective January 1, 1999, the Company was required to
change its accounting principle for organization costs. Previously, the Company
capitalized such costs and amortized them using the straight-line method over
five years. At December 31, 1998, such costs totaled $257,051 and the
accumulated amortization totaled $185,420. In the first quarter of 1999, the
Company wrote-off the remaining $71,631 and will expense as incurred any future
organization costs. The write-off has been reflected in the Consolidated
Statement of Operations for the three months ended March 31, 1999 as the
"Cumulative effect on prior years (to December 31, 1998) of expensing
organization costs" in accordance with APB No. 20.
LOSS PER SHARE
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 or warrants and conversion of
convertible debentures were not assumed to be exercised for purposes of
calculating diluted earning per share for the three months ended March 31, 1999
and 1998, as their effect was anti-dilutive.
6
<PAGE>
2. LONG-TERM DEBT
At March 31, 1999, the Company had outstanding 9% Convertible Debentures
due July 1, 2002 (the "9% Convertible Debentures") in the principal amount of
$2,229,114. The 9% Convertible Debentures are secured by land, buildings,
equipment and intangibles. 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 November 1999
through June 2002. For the period November 1, 1998 through October 31, 1999,
Renaissance Capital (the holder of $1,718,094 principal amount of the 9%
Convertible Debentures) agreed to waive all mandatory principal redemption
payments and accepted 183,263 unregistered shares of Common Stock in lieu of
$154,628 cash interest payments.
The Convertible Debenture Loan Agreement contains covenants requiring the
maintenance of certain financial ratios including an interest coverage ratio of
1:1, minimum working capital of $500,000, a current ratio of 1.1:1 and a minimum
of $4,500,000 shareholders' equity. At March 31, 1999, the Company was in
compliance with all of the financial ratio requirements. The holders of the 9%
Convertible Debentures had previously granted the Company a waiver effective
through June 30, 1999 for the interest coverage ratio. In the event of default,
the holders of the 9% Convertible 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 9% Convertible Debentures. Management believes that the achievement of
the Company's plans and objectives will enable the Company to attain a
sufficient level of profitability to remain in compliance with the financial
ratios. There can be no assurance, however, that the Company will attain any
such profitability and remain in compliance with the financial ratios. Any
acceleration under the 9% Convertible Debentures prior to their maturity on July
1, 2002 could have a material adverse effect upon the Company.
On November 4, 1998, the Company signed a new $2.5 million Credit Agreement
with Wells Fargo Business Credit, Inc. (hereinafter "Wells Fargo" and formerly
Norwest Business Credit, Inc.) which includes a $2.0 million working capital
line of credit (the "Wells Fargo Line of Credit") and a $0.5 million term loan
(the "Wells Fargo Term Loan"). The outstanding balance on the Wells Fargo Line
of Credit was $1,014,263 and $847,013 at March 31, 1999 and December 31, 1998,
respectively. The Wells Fargo Line of Credit bears interest at an annual rate of
prime plus 1.5% and matures in November 2001 while the Wells Fargo Term Loan
bears interest at an annual rate of prime plus 3% and requires monthly principal
payments of approximately $28,000, plus interest, until maturity on May 1, 2000.
The Wells Fargo Credit Agreement is secured by accounts receivable, inventories,
equipment and general intangibles. The borrowing base under the Wells Fargo Line
of Credit is limited to 85% of eligible receivables and 60% of eligible
inventories. As of April 16, 1999, the Company had a borrowing base of
approximately $1,340,000 under the Wells Fargo Line of Credit. The Wells Fargo
Credit Agreement requires the Company to be in compliance with certain financial
performance criteria, including minimum debt service coverage ratio, minimum
quarterly and annual operating results and minimum quarterly and annual changes
in book net worth. At March 31, 1999, the Company was in compliance with all of
the financial performance criteria. Management believes that the fulfillment of
the Company's plans and objectives will enable the Company to attain a
sufficient level of profitability to remain in compliance with these financial
performance criteria. There can be no assurance, however, that the Company will
attain any such profitability and remain in compliance. Any acceleration under
the Wells Fargo Credit Agreement prior to the scheduled maturity of the Wells
Fargo Line of Credit or the Wells Fargo Term Loan could have a material adverse
effect upon the Company.
3. LITIGATION
The Company is a party to various lawsuits arising in the ordinary course
of business. Management believes, based on discussions with legal counsel, that
the resolution of such lawsuits will not have a material effect on the financial
statements taken as a whole.
7
<PAGE>
4. BUSINESS SEGMENTS
The Company's operations consist of two segments: manufactured products and
distributed products. The manufactured products segment produces potato chips
for sale primarily to snack food distributors. The distributed products segment
sells snack food products manufactured by other companies to the Company's
Arizona snack food distributors and also merchandises in Texas for a fee, but
does not purchase and resell, snack food products for manufacturers. The
Company's reportable segments offer different products and services. All of the
Company's revenues are attributable to external customers in the United States
and all of its assets are located in the United States. The Company does not
allocate assets based on its reportable segments.
The accounting policies of the segments are the same as those described in
the Summary of Accounting Policies included in Note 1 to the audited financial
statements filed with the Form 10-KSB for the fiscal year ended December 31,
1998. The Company does not allocate selling, general and administrative
expenses, income taxes or unusual items to segments and has no significant
non-cash items other than depreciation and amortization.
MANUFACTURED DISTRIBUTED
PRODUCTS PRODUCTS CONSOLIDATED
-------- -------- ------------
1999
Revenues from external customers .. $2,593,113 $1,097,745 $3,690,858
Depreciation and amortization in
segment gross profit ............ 185,568 -- 185,568
Segment gross profit .............. 689,246 72,671 761,917
1998
Revenues from external customers .. $2,630,756 $ 566,008 $3,196,764
Depreciation and amortization in
segment gross profit ............ 141,982 -- 141,982
Segment gross profit .............. 787,019 36,860 823,879
The following table reconciles reportable segment profit to the Company's
consolidated loss before income taxes and cumulative effect of change in
accounting principle.
1999 1998
--------- ---------
Consolidated segment gross profit .................. $ 761,917 $ 823,879
Unallocated amounts:
Selling, general and administrative expenses ..... 879,031 935,844
Interest expense, net ............................ 153,498 123,597
--------- ---------
Loss before income taxes and cumulative effect of
change in accounting principle ................... $(270,612) $(235,562)
========= =========
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1998
Net sales for the three months ended March 31, 1999 were $3,690,858, up
$494,094, or 15%, from $3,196,764 for the three months ended March 31, 1998.
Sales of products manufactured by the Company accounted for 70% and 82% of total
net sales in 1999 and 1998, respectively, while revenues from distributed
products accounted for 30% and 18% in 1999 and 1998, respectively. Sales of
branded and private label manufactured products were generally flat, while
revenues from the distribution and merchandising of products manufactured by
others increased $531,737, or 94%. The majority of this increase, $297,401, was
from the Texas merchandising operation, acquired by the Company in November 1998
in connection with the Tejas acquisition. The remainder of the increase was due
to increased sales of distributed product lines.
Gross profit for the three months ended March 31, 1999, was $761,917, or
21% of net sales, as compared to $823,879, or 26% of net sales, for the three
months ended March 31, 1998. The decrease in gross profit of manufactured
products from $787,019, or 30% of net sales, to $689,246, or 27% of net sales,
was primarily the result of higher potato and oil costs versus a year ago. The
gross profit of distributed products increased from $36,860 to $72,671
reflecting the impact of higher revenues.
Selling, general and administrative expenses decreased to $879,031 for the
three months ended March 31, 1999 from $935,844 for the same period in 1998. The
decrease of $56,813, or 6%, compared to the first quarter of 1998, was
principally due to lower bad debt expense and promotional spending.
Net interest expense increased to $153,498 for the three months ended March
31, 1999 from $123,597 for the three months ended March 31, 1998. This increase
was due to lower interest income on investments of $7,689 and increased interest
expense of $22,212 on indebtedness related to the Tejas acquisition.
The cumulative effect of a change in accounting principle resulted in a
$71,631 charge and was related to the Company's expensing of previously
capitalized organization costs in accordance with Statement of Position 98-5,
REPORTING ON THE COSTS OF START-UP ACTIVITIES."
LIQUIDITY AND CAPITAL RESOURCES
Net working capital was $606,165 (a current ratio of 1.3:1) and $768,155 (a
current ratio of 1.4:1) at March 31, 1999 and December 31, 1998, respectively.
The $161,990 decrease in working capital was primarily attributable to the
Company's use of cash for operating and investing activities. For the three
months ended March 31, 1999, the Company used $55,619 for operating activities,
principally to reduce payables, and invested $72,437 in new equipment.
At March 31, 1999, the Company had outstanding 9% Convertible Debentures
due July 1, 2002 (the "9% Convertible Debentures") in the principal amount of
$2,229,114. The 9% Convertible Debentures are secured by land, buildings,
equipment and intangibles. 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 November 1999
through June 2002. For the period November 1, 1998 through October 31, 1999,
Renaissance Capital (the holder of $1,718,094 principal amount of the 9%
Convertible Debentures) agreed to waive all mandatory principal redemption
payments and accepted 183,263 unregistered shares of Common Stock in lieu of
$154,628 cash interest payments.
The Convertible Debenture Loan Agreement contains covenants requiring the
maintenance of certain financial ratios including an interest coverage ratio of
1:1, minimum working capital of $500,000, a current ratio of 1.1:1 and a minimum
9
<PAGE>
of $4,500,000 shareholders' equity. At March 31, 1999, the Company was in
compliance with all of the financial ratio requirements. The holders of the 9%
Convertible Debentures had previously granted the Company a waiver effective
through June 30, 1999 for the interest coverage ratio. In the event of default,
the holders of the 9% Convertible 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 9% Convertible Debentures. Management believes that the achievement of
the Company's plans and objectives will enable the Company to attain a
sufficient level of profitability to remain in compliance with the financial
ratios. There can be no assurance, however, that the Company will attain any
such profitability and remain in compliance with the financial ratios. Any
acceleration under the 9% Convertible Debentures prior to their maturity on July
1, 2002 could have a material adverse effect upon the Company.
On November 4, 1998, the Company signed a new $2.5 million Credit Agreement
with Wells Fargo Business Credit, Inc. (hereinafter "Wells Fargo" and formerly
Norwest Business Credit, Inc.) which includes a $2.0 million working capital
line of credit (the "Wells Fargo Line of Credit") and a $0.5 million term loan
(the "Wells Fargo Term Loan"). The balance outstanding was $1,014,263 and
$847,013 at March 31, 1999 and December 31, 1998, respectively. The Wells Fargo
Line of Credit bears interest at an annual rate of prime plus 1.5% and matures
in November 2001 while the Wells Fargo Term Loan bears interest at an annual
rate of prime plus 3% and requires monthly principal payments of approximately
$28,000, plus interest, until maturity on May 1, 2000. The Wells Fargo Credit
Agreement is secured by accounts receivable, inventories, equipment and general
intangibles. The borrowing base under the Wells Fargo Line of Credit is limited
to 85% of eligible receivables and 60% of eligible inventories. As of April 16,
1999, the Company had a borrowing base of approximately $1,340,000 under the
Wells Fargo Line of Credit. The Wells Fargo Credit Agreement requires the
Company to be in compliance with certain financial performance criteria,
including minimum debt service coverage ratio, minimum quarterly and annual
operating results and minimum quarterly and annual changes in book net worth. At
March 31, 1999, the Company was in compliance with all of the financial
performance criteria. Management believes that the fulfillment of the Company's
plans and objectives will enable the Company to attain a sufficient level of
profitability to remain in compliance with these financial performance criteria.
There can be no assurance, however, that the Company will attain any such
profitability and remain in compliance. Any acceleration under the Wells Fargo
Credit Agreement prior to the scheduled maturity of the Wells Fargo Line of
Credit or the Wells Fargo Term Loan could have a material adverse effect upon
the Company.
In connection with the implementation of the Company's business strategy,
the Company may incur additional operating losses in the future and is likely to
require future debt or equity financings (particularly in connection with future
strategic acquisitions). Expenditures relating to acquisition-related
integration costs, market and 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. As a
result of the 1997 restructuring actions and the 1998 Tejas acquisition,
management believes that the Company will generate positive cash flow from
operations in 1999, which along with its existing working capital and borrowing
facilities, should enable the Company to meet its operating cash requirements
through 1999. The belief is based on current operating plans and certain
assumptions, including those relating to the Company's future revenue levels and
expenditures, industry and general economic conditions and other conditions. If
any of these factors change, the Company may require future debt or equity
financings to meet its business requirements. There can be no assurance that any
required financings will be available or, if available, on terms attractive to
the Company.
10
<PAGE>
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
SPEAKS ONLY AS OF THE DATE MADE. SUCH STATEMENTS ARE SUBJECT TO 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
The Company is a party to various lawsuits arising in the ordinary course
of business. Management believes, based on discussions with legal counsel, that
the resolution of such lawsuits will not have a material effect on the financial
statements taken as a whole.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On May 3, 1999, the Company announced that it had signed a letter of intent
to acquire Wabash Foods, LLC for 4.0 million shares of common stock and
assumption of debt. The Company simultaneously signed a management contract
pursuant to which the Company will manage the operations of Wabash Foods pending
completion of the acquisition. The Company will receive a management fee for
such services. Completion of the acquisition is subject to the signing of a
definitive purchase agreement, approval by the Company's Board of Directors and
approval by the Company's shareholders. The acquisition is expected to close in
the third quarter. In the event that a definitive agreement is signed but the
transaction is not approved by the Company's shareholders, the Company is
obligated to pay Wabash a breakup fee consisting, in the Company's sole and
absolute discretion, of either $130,000 or 100,000 shares of the Company's
common stock.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27.1 Financial Data Schedule. *
* Filed herewith.
(b) Current Reports on Form 8-K:
None.
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.
Dated: May 7, 1999 By: /s/ Eric J. Kufel
-------------------------------------
Eric J. Kufel
President and Chief Executive Officer
(principal executive officer)
Dated: May 7, 1999 By: /s/ Thomas W. Freeze
-------------------------------------
Thomas W. Freeze
Vice President, Chief Financial
Officer, Treasurer and Secretary
(principal financial and accounting
officer)
12
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
27.1 Financial Data Schedule.
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1999,
INCLUDED WITH FORM 10-QSB, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 154,843
<SECURITIES> 0
<RECEIVABLES> 1,580,126
<ALLOWANCES> 33,951
<INVENTORY> 426,923
<CURRENT-ASSETS> 2,396,348
<PP&E> 7,544,963
<DEPRECIATION> 1,349,890
<TOTAL-ASSETS> 12,388,392
<CURRENT-LIABILITIES> 1,790,183
<BONDS> 5,683,937
0
0
<COMMON> 78,329
<OTHER-SE> 4,835,943
<TOTAL-LIABILITY-AND-EQUITY> 12,388,392
<SALES> 3,690,858
<TOTAL-REVENUES> 3,690,858
<CGS> 2,928,941
<TOTAL-COSTS> 2,928,941
<OTHER-EXPENSES> 879,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153,498
<INCOME-PRETAX> (270,612)
<INCOME-TAX> 0
<INCOME-CONTINUING> (270,612)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (71,631)
<NET-INCOME> (342,243)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
