SECURITIES AND EXCHANGE COMMISSION
                             Washington D.C. 20549

                                  FORM 10-KSB

(Mark One)
[ X ] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 1996

                                       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.
               ---------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                   Delaware                                      86-0786101
                   --------                                      ----------
(State or Other Jurisdiction of Incorporation or              (I.R.S. Employer
                  Organization)                              Identification No.)

2664 South Litchfield Rd., Goodyear, Arizona                       85338
---------------------------------------------                      -----
 (Address of principal executive offices)                        (Zip Code)

                                 (602) 925-0731
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:
                                      None

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock , $.01 par value
                       ----------------------------------
                                (Title of Class)

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
                                                                      ---   ---

Check  if no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of the  registrant's  knowledge,  in definitive proxy or information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to the Form 10-KSB. [ ]

The Registrant's revenues for the most recent fiscal year were: $17,219,641.

At February 28, 1997,  the  aggregate  market value of the  Registrant's  common
stock held by non-affiliates of the Registrant was approximately $19,750,000.

At February  28,  1997,  the number of issued and  outstanding  shares of common
stock of the Registrant was 6,986,324.

Transitional Small Business Disclosure Format (check one): Yes      No  X
                                                              -----   -----
<PAGE>
                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's  definitive  proxy statement,  which the Registrant
anticipates  mailing in April 1997, are incorporated by reference in Part III of
this Annual Report on Form 10-KSB.


                           FORWARD LOOKING STATEMENTS

WHEN USED IN THIS FORM  10-KSB  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 CERTAIN  RISKS AND
UNCERTAINTIES  THAT  COULD  CAUSE  ACTUAL  RESULTS  TO  DIFFER  MATERIALLY  FROM
HISTORICAL  EARNINGS AND THOSE PRESENTLY  ANTICIPATED OR PROJECTED. SEE "ITEM 1.
DESCRIPTION   OF  BUSINESS  --  RISK  FACTORS."  IN  LIGHT  OF  SUCH  RISKS  AND
UNCERTAINTIES,  THERE  CAN  BE NO  ASSURANCE  THAT  FORWARD-LOOKING  INFORMATION
CONTAINED IN THIS FORM 10-KSB WILL, IN FACT,  TRANSPIRE OR PROVE TO BE ACCURATE.
THE COMPANY HAS NO  OBLIGATION  TO PUBLICLY  RELEASE THE RESULT OF ANY REVISIONS
WHICH MAY BE MADE TO ANY  FORWARD-LOOKING  STATEMENTS TO REFLECT  ANTICIPATED OR
UNANTICIPATED  EVENTS  OR  CIRCUMSTANCES   OCCURRING  AFTER  THE  DATE  OF  SUCH
STATEMENTS.
                                       2
<PAGE>
                                     PART I

Item 1.  Description of Business

Business

         Poore  Brothers,  Inc. (the  "Company")  is engaged in the  production,
marketing and  distribution of salty snack food products that are sold primarily
throughout  the  southern  and  western  United  States.  The  Company has three
distinct lines of business:  it  manufactures  and sells its own brand of potato
chips under the Poore Brothers logo; it manufactures  private label potato chips
for grocery store chains; and it distributes food products that are manufactured
by others. For the year ended December 31, 1996,  revenues totaled  $17,219,641.
Approximately  57% of  such  sales  were  attributable  to the  Company's  Poore
BrothersTM brand potato chips; approximately 38% of such sales were attributable
to the  distribution  by the  Company  of food  products  manufactured  by other
companies;  and approximately 5% of such sales were attributable to potato chips
produced by the Company for sale under the private labels of customers.

         Poore  BrothersTM  brand  potato  chips  consist of two primary  types,
regular and low-fat. The Poore BrothersTM  brand regular potato chips, which are
produced  with a  batch  frying  process  that  the  Company  believes  enhances
crispness and flavor, are currently offered in eleven flavors:  Original, Salt &
Vinegar,  Au Gratin,  Barbecue,  Cajun, Dill Pickle,  Grilled Steak & Onion, Hot
Mustard,  Jalapeno, No Salt and Parmesan & Garlic. The Poore BrothersTM brand of
low-fat  potato chips,  which were  introduced in June 1996,  are produced using
batch  frying  and then  processed  to  remove  most of the  cooking  oil  while
retaining the taste of frying. The low-fat potato chips are currently  available
in five flavors:  Original, No Salt, Au Gratin, Salt & Vinegar and Barbecue. The
Company also  manufactures  potato chips for sale on a private label basis using
modified cooking methods.  The Company  currently has two Arizona grocery chains
as private label customers.

         The Company, a Delaware corporation, was organized in February 1995 and
has four operating subsidiaries, all acquired on May 31, 1995: two manufacturing
companies,  Poore  Brothers  Arizona,  Inc. ("PB  Arizona")  and Poore  Brothers
Southeast, Inc. ("PB Southeast"); and two distribution companies, Poore Brothers
Distributing,  Inc. ("PB  Distributing")  and Poore Brothers of Texas, Inc. ("PB
Texas").  See "-- Company  History." In December 1996, the Company  completed an
initial public offering of its Common Stock.

         The Company's  executive  offices are located at 2664 South  Litchfield
Rd., Goodyear, Arizona 85338, and its telephone number is (602) 925-0731.

Risk Factors

         Brief  Operating  History;  Significant  Losses  to  Date;  Accumulated
Deficit.  Although  certain of the  Company's  subsidiaries  have  operated  for
several years, the Company as a whole has a relatively brief operating  history.
The Company has had  significant  operating  losses to date and has never made a
profit.  The Company  incurred  losses of $691,678 and  $1,194,910 for the years
ended  December  31, 1996 and 1995,  respectively.  At December  31,  1996,  the
Company had an  accumulated  deficit of  $2,427,836.  See "Item 6.  Management's
Discussion and Analysis of Results of Operations and Financial Condition."

         Even if the Company is  successful  in  expanding  the  production  and
distribution of its products and in increasing  revenues,  it may be expected to
incur substantial  additional  expenses,  including  advertising and promotional
costs and  "slotting"  expenses  (i.e.,  the costs of  obtaining  shelf space in
certain stores.)  Accordingly,  the Company may incur  additional  losses in the
future as a result of the  implementation  of the Company's  business  strategy,
even if revenues  increase  significantly.  There can be no  assurance  that the
Company's  business strategy will prove successful or that the Company will ever
become profitable.

         Possible  Need for  Additional  Financing.  Continued  expansion of the
Company's  business may result in requirements  for funds in excess of cash flow
generated from operations and its existing financial resources.
                                       3
<PAGE>
Accordingly, the Company may require future debt or equity financing to meet its
business  requirements.  There can be no assurance  that such  financing will be
available or, if available, on terms attractive to the Company.

         Competition.  The market for salty snack  foods,  such as those sold by
the Company,  primarily potato chips,  tortilla chips, popcorn and pretzels,  is
large and  intensely  competitive.  Competitive  factors in the salty snack food
industry  include  product quality and taste,  brand awareness among  consumers,
access to supermarket shelf space, price, advertising and promotion,  variety of
snacks offered,  nutritional content,  product packaging and package design. The
Company competes in that market  principally on the basis of product quality and
taste.

         The snack food  industry is  primarily  dominated by  Frito-Lay,  Inc.,
which has  substantially  greater financial and other resources than the Company
and  sells  brands  that  are more  widely  recognized  than  are the  Company's
products.  Numerous other companies that are actual or potential  competitors of
the Company,  many with greater  financial and other  resources  (including more
employees  and more  extensive  facilities)  than the  Company,  offer  products
similar  to  those  of  the  Company.  Local  or  regional  markets  often  have
significant  smaller  competitors,  many of whom  offer  batch  fried or low-fat
products similar to those of the Company.  Expansion of Company  operations into
new markets has and will  continue to  encounter  significant  competition  from
national,  regional  and  local  competitors  that  may  be  greater  than  that
encountered by the Company in its existing  markets.  While the Company believes
that  its  products  and  method  of  operations   will  enable  it  to  compete
successfully, there can be no assurance of its ability to do so.

         Promotional  and  Shelf  Space  Costs.  Successful  marketing  of  food
products  generally  depends  upon  obtaining  adequate  retail  shelf space for
product display,  particularly in supermarkets.  Frequently,  food manufacturers
and distributors, such as the Company, incur additional costs in order to obtain
additional  shelf  space.  Whether  or not the  Company  incurs  such costs in a
particular  market is  dependent  upon a number of factors,  including  existing
demand for the  Company's  products,  relative  availability  of shelf space and
general competitive conditions.  There can be no assurance that the Company will
not incur  significant  shelf  space or other  promotional  costs as a necessary
condition of entering into  competition  in particular  markets or stores.  Such
costs may materially affect the Company's financial performance.

         Status of Private Label  Products.  In 1996,  the Company  entered into
agreements with two Arizona grocery chains for the manufacture and  distribution
by the Company of their  respective  private  label  potato  chips.  The Company
manufactures  potato chips for these  customers in various  types and flavors as
specified by them.  The  Company's  private  label  potato  chips are  currently
produced  using  batch  frying.  In order to meet  potential  demand  for  these
products,  and to more  closely  emulate  standard  cooking  processes  for this
category of private label products, the Company acquired continuous line cooking
equipment  which is  currently  being  installed  at the  Company's  new Arizona
facility.  Until the equipment is  operational,  there can be no assurance  that
private  label  products  cooked via batch frying will continue to meet customer
specifications,  or that once  operational,  the Company will obtain  sufficient
business to recoup the costs  related to the purchase and  installation  of such
equipment.  Failure to meet customer specifications could result in cancellation
of an agreement.

         Status of Low-Fat  Products.  In June 1996, the Company began producing
low-fat  potato chips using a patented  oil  extraction  process  pursuant to an
agreement (the "Great Snaxx  Agreement")  between the Company and Great Snaxx of
AZ. L.L.C.  ("Great  Snaxx").  Great Snaxx has granted the Company rights in the
states of Arizona,  California,  Nevada and New Mexico, to market low-fat potato
chips produced  using this process.  The Company is dependent upon the resources
of  Great  Snaxx as Great  Snaxx  has the sole  right,  under  the  Great  Snaxx
Agreement,  to apply the oil extraction process to products  manufactured by the
Company.
                                       4
<PAGE>
         The Great Snaxx  Agreement  expires on September 19, 2006. In addition,
the Company may lose its rights to market  low-fat  potato chips  produced under
the Great Snaxx  Agreement if certain  minimum fees are not paid to Great Snaxx.
The Company is not currently  producing in  sufficient  quantities to meet these
minimum  fee  requirements.  In  addition,  Great  Snaxx has  certain  rights to
terminate  the  agreement.  The  termination  by Great  Snaxx of the Great Snaxx
Agreement  or the failure by Great Snaxx to perform  its  obligations  under the
Great Snaxx Agreement for any reason could have a material adverse effect on the
Company's  ability  to  produce  low-fat  potato  chips.  In the  case of such a
termination  or failure,  the Company would  consider  producing  low-fat potato
chips  using an  alternative  production  method,  such as  baking or the use of
alternative cooking oils. There can be no assurance,  however,  that the Company
would be successful in utilizing  such  alternative  production  methods or that
low-fat   potato  chips  produced  by  the  Company  will  be  accepted  in  the
marketplace.

         Non-compliance  with  Financial  Covenants.  At December 31, 1996,  the
Company had  outstanding  9% Convertible  Debentures in the principle  amount of
$2,299,591.  The Company was not in compliance with a required interest coverage
ratio of 1:1 that the Company is required to maintain  while the 9%  Convertible
Debentures  are  outstanding.   However,  the  holders  of  the  9%  Convertible
Debentures  have granted the Company a waiver  effective  through  September 30,
1997. 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 1.5:1; and a
current  ratio at the end of any fiscal  quarter of at least  1.1:1.  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;  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.

         Lack of  Proprietary  Manufacturing  Methods.  The taste and quality of
Poore  BrothersTM  products is largely due to two elements of its  manufacturing
process: the Company's use of batch frying and its use of distinctive seasonings
to produce a variety of flavors.  The Company does not have exclusive  rights to
the use of  either  element;  consequently,  competitors  may  incorporate  such
elements into their own processes. While management believes that the successful
use of batch frying involves certain  techniques and methods used by the Company
that may not be readily available to or known by other manufacturers,  there can
by no assurance that competitors will not develop the same or similar techniques
or methods.

         Legal  Proceeding.  In June 1996, a lawsuit was commenced in an Arizona
state court against two Directors of the Company, Mark S. Howells and Jeffrey J.
Puglisi, and PB Southeast which alleges, among other things, that the plaintiff,
James  Gossett,  had an oral  agreement  with Mr. Howells to receive up to a 49%
ownership  interest in PB Southeast,  that PB Southeast and Messrs.  Howells and
Puglisi breached  fiduciary duties and other obligations to Mr. Gossett and that
Mr.  Gossett is entitled to exchange such alleged  stock  interest for shares in
the Company.  Mr. Gossett further alleges that PB Southeast and Messrs.  Howells
and  Puglisi  failed  to honor the terms of an  alleged  distribution  agreement
between Poore Brothers  Foods,  Inc. ("PB Foods") and an entity  associated with
Mr. Gossett. The complaint seeks unspecified amounts of damages, fees and costs.
In February 1997,  plaintiffs  filed  pleadings  indicating  they are seeking $3
million in  damages;  plaintiffs  may not be limited  by this  damage  amount at
trial. Management of the Company believes that the lawsuit has no merit and that
the Company has defenses  thereto.  There can be no  assurance,  however,  of an
outcome  that will be  favorable  to the Company or, if  unfavorable,  that such
outcome will not have a material adverse effect on the Company.  The Company has
agreed to indemnify the two Directors  named in the lawsuit.  See "Item 3. Legal
Proceedings."
                                       5
<PAGE>
Company History

         PB Foods was  founded  in 1986 by Donald and James  Poore  (the  "Poore
Brothers"), each of whom has substantial experience in the potato chip industry.
The Poore  Brothers also founded PB  Distributing  in 1990 and PB Texas in 1986,
which provide distribution capabilities for the Company's Poore BrothersTM brand
products.  Prior to forming PB Foods, the Poore Brothers  co-founded  Groff's of
Texas, Inc. in 1983, which also manufactured batch fried potato chips. The Poore
Brothers had previously been employed for over thirteen years by Mira-Pak, Inc.,
a designer and manufacturer of packaging equipment for the potato chip industry.

         In May 1993, Mark S. Howells, a Director of the Company, and associated
individuals  formed PB  Southeast,  which  acquired  a license  from PB Foods to
manufacture  and  distribute  Poore  BrothersTM  brand  products.  In  1994,  PB
Southeast opened a manufacturing plant in LaVergne, Tennessee.

         In November 1994, PB Southeast  entered into a Purchase  Agreement (the
"Purchase  Agreement")  with PB Foods,  the Poore  Brothers and Amelia E. Poore,
that provided for the  acquisition by PB Southeast of (i)  substantially  all of
the  assets,  subject to certain  liabilities,  of PB Foods;  (ii) a 100% equity
interest in PB Distributing; and (iii) an 80% equity interest in PB Texas, after
giving effect to a 32% equity  interest to be purchased from other  stockholders
of PB Texas not parties to the Purchase Agreement.  Thereafter,  the Company was
formed as a holding company and the rights and obligations of PB Southeast under
the  Purchase   Agreement  were  assigned  to  the  Company.   The  transactions
contemplated  by the  Purchase  Agreement  were  consummated  on May  31,  1995.
Subsequent to the  acquisition  date,  the Company  acquired an  additional  14%
equity interest in PB Texas. The aggregate purchase price paid by the Company in
connection with these transactions was $4,052,631,  of which $3,228,061 was paid
in cash,  $500,000 of which was payable pursuant to a five-year  promissory note
(the  "Poore  Promissory  Note")  which was paid off in February  1997,  and the
remainder of which was  satisfied  by the  issuance of 300,000  shares of Common
Stock. The Purchase  Agreement  contains a noncompetition  covenant  pursuant to
which each of the Poore  Brothers  agreed not to compete  against  the  Company,
directly or indirectly, in various states for a five-year period expiring on May
31, 2000.

         Also in May 1995, the Company  entered into an exchange  agreement with
certain  stockholders  of PB Southeast,  including  Mark S. Howells,  Jeffrey J.
Puglisi and Parris H.  Holmes,  Jr.,  all of whom are  Directors of the Company,
pursuant to which the Company agreed to acquire from them  approximately  99% of
the outstanding shares of the capital stock of PB Southeast, in exchange for the
issuance to them of  1,560,000  shares of Common  Stock,  concurrently  with and
subject to the  consummation of the closing under the Purchase  Agreement.  Such
exchange was  consummated on May 31, 1995. The acquisition by the Company of its
subsidiaries  on May  31,  1995  is  sometimes  herein  referred  to as the  "PB
Acquisition."

Business Strategy

         The Company's  business  objective is to become a leading  manufacturer
and  distributor  of  specialty  potato  chips and other  salty  snack  foods by
providing a high quality,  healthier line of products at competitive prices that
are intended to be superior in taste to comparable  products.  The Company plans
to expand its  promotional  efforts to  increase  its  penetration  of  existing
markets and to expand into new markets.  Such market  expansion would consist of
promotional  efforts to increase consumer awareness of the Company's  brand-name
products  and seeking  additional  private  label  customers  for the  Company's
products.  The Company's  growth is planned to be accomplished via a combination
of internal growth and acquisition.  The key elements of the Company's  business
strategy are as follows:

         Expand  Market  Acceptance of the Company's  Brand Name  Products.  The
Company's  products  have  achieved  significant  market  acceptance in Phoenix,
Arizona,  Houston, Texas, San Antonio, Texas, St. Louis, Missouri and Nashville,
Tennessee.  The Company  attributes  the success of its products in these cities
largely to its batch frying process and the variety of flavors,  sizes and types
of products offered by the Company.  To increase awareness and acceptance of its
products, the Company intends to increase its advertising and
                                       6
<PAGE>
distribution efforts in existing markets and, in addition, to focus a portion of
its advertising and distribution  efforts on selected new markets.  Such efforts
will include,  among other things, joint advertising with supermarkets and other
product manufacturers,  in-store product tastings, coupon distribution and Poore
BrothersTM in-store displays.

         Expand  Private  Label  Business.  In the first  quarter  of 1996,  the
Company  entered  into  agreements  with  two  Arizona  grocery  chains  for the
manufacture and  distribution by the Company of their  respective  private label
potato  chips.  The Company  manufactures  potato  chips for these  customers in
various types and flavors as specified by them.  The Company  believes that many
opportunities  exist for the Company to expand this segment of its business both
in  revenues  generated  and as a  percentage  of  the  Company's  total  sales.
Consequently,  upon the successful installation of its continuous line machinery
at its new  Arizona  manufacturing  facility,  the  Company  intends  to  pursue
opportunities to produce private label products for additional grocery chains in
Arizona and California.

         Develop  Low-Fat Potato Chip Business.  In June 1996, the Company began
offering a new low-fat  potato chip under the Poore  BrothersTM  brand name. The
low-fat  area of salty  snack  foods is  believed  by the  Company to be rapidly
expanding,  with  reduced fat potato chip sales  increasing  by 85% from 1994 to
1995. In order to increase demand for Poore BrothersTM low-fat potato chips, the
Company intends to focus its marketing and distribution efforts on expanding the
region where its low-fat potato chips are currently sold and increasing consumer
awareness for the Company's product.

         Utilize  Consumer  Acceptance of Poore BrothersTM Brand Potato Chips to
Expand  Product Line.  The Company  intends to establish a broad product line of
high quality,  good tasting salty snack foods under the Poore  BrothersTM  brand
name,  capitalizing  on customer  acceptance  of Poore  BrothersTM  brand potato
chips. Such new product lines are expected to include, among others, popcorn and
tortilla  chips.  The Company  believes  that  offering a broad  variety of high
quality, good tasting and healthy snack food products will enable it to increase
its shelf space in stores and may encourage  retailers to create  separate Poore
BrothersTM brand sections in their snack food aisles.

         Continue to improve operations.  The Company plans to continue to focus
its efforts on producing a high quality snack food at an economical  price.  The
Company is in the process of designing and  implementing  a new quality  control
program  that will  monitor  production  volumes as well as the overall  flavor,
appearance and quality of its products.

Products

         Potato Chips. Poore BrothersTM brand potato chips were first introduced
by the Poore  Brothers in 1986 and have accounted for  substantially  all of the
Company's  manufacturing  sales to date.  The potato  chips are  marketed by the
Company as a premium product based on their  distinctive  combination of cooking
method and variety of distinctive  flavors. The potato chips manufactured by the
Company consist of two primary types, regular and low-fat. The Company's regular
potato chips are currently offered in eleven flavors:  Original, Salt & Vinegar,
Au Gratin,  Barbecue,  Cajun,  Dill Pickle,  Grilled Steak & Onion, Hot Mustard,
Jalapeno,  No Salt and Parmesan & Garlic.  The Company's  low-fat  potato chips,
which were introduced in June 1996, are available in five flavors:  Original, No
Salt, Au Gratin, Salt & Vinegar and Barbecue.  Also in 1996, the Company entered
into agreements with two grocery chains in Arizona pursuant to which the Company
produces their  respective  private label potato chips in the styles and flavors
specified by such grocery chains.

        Other Snack Food Products. Through its two distribution subsidiaries, PB
Distributing and PB Texas, the Company purchases and resells snack food products
manufactured by others.  Such products include  pretzels,  popcorn,  cookies and
candy. The Company also sells tortilla chips and cheese products manufactured by
others but packaged under the Poore BrothersTM brand name.
                                       7
<PAGE>
Manufacturing

         The Company  believes that a key element of its growth to date has been
its use of certain cooking  techniques and key ingredients in the  manufacturing
process to produce potato chips with improved flavor. These techniques currently
involve two elements:  the Company's use of a batch frying process for its brand
name products,  as opposed to the  conventional  continuous line cooking method,
and the Company's  use of  distinctive  seasonings to produce  potato chips in a
variety of  flavors.  The  Company  believes  that its batch  frying  process is
superior to  conventional  continuous  line cooking  methods because it enhances
crispness and flavor through greater control over  temperature and other cooking
conditions.  Although this  manufacturing  method  produces less volume than the
continuous line techniques of larger  manufacturers,  the Company  believes that
the method  facilitates  the production of potato chips with enhanced  crispness
and flavor.

         Private  Label  Products.  The  Company's  potato  chips  for sale on a
private label basis are currently  produced using batch frying. In order to meet
potential  demand for these products,  the Company has acquired  continuous line
cooking  equipment  which is  currently  being  installed in the  Company's  new
Arizona  facility.  The  equipment is expected to be  operational  in the second
quarter of 1997.  Continuous  line cooking differs from batch frying in that the
potato  chips  are  cooked  using a  continuous  conveyor  mechanism.  Until the
equipment is operational,  the Company's private label products will continue to
be produced using batch frying.  There can be no assurance that the Company will
obtain  sufficient  business  to recoup  the  costs of its  investment  in,  and
alteration  of  its   facilities.  Alternatively,  if  the  installation  of the
continuous  line  equipment  is  delayed,  the  Company  may not be able to meet
customer specifications or to meet anticipated production requirements,  and may
have to decline production opportunities.

         Low-Fat  Potato Chips.  In September  1995, the Company and Great Snaxx
entered into the Great Snaxx Agreement pursuant to which Great Snaxx granted the
Company  rights in the states of Arizona,  California,  Nevada and New Mexico to
market  low-fat  potato chips  processed by Great Snaxx.  The Company pays a per
pound  processing  fee to Great  Snaxx  for the  application  of  Great  Snaxx's
patented oil extraction process.  The Company began selling low-fat potato chips
processed  by  Great  Snaxx  in June  1996.  The  processed  potato  chips  have
approximately two grams of fat per serving,  in contrast to the 8 to 10 grams of
most standard potato chips.
                                       8
<PAGE>
         The Great Snaxx  Agreement  expires on September 19, 2006.  The Company
may lose its marketing rights in Arizona,  California,  Nevada and New Mexico if
certain minimum fees are not paid to Great Snaxx during prescribed periods.  The
Company  is not  currently  producing  in  sufficient  quantities  to meet these
minimum  fee  requirements.  In  addition,  Great  Snaxx has  certain  rights to
terminate the Great Snaxx Agreement. The termination by Great Snaxx of the Great
Snaxx Agreement or the failure by Great Snaxx to perform its  obligations  under
the Great Snaxx Agreement for any reason could have a material adverse effect on
the Company's  ability to produce  low-fat  potato chips.  In the case of such a
termination  or failure,  the Company would  consider  producing  low-fat potato
chips  using an  alternative  production  method,  such as  baking or the use of
alternative cooking oils. There can be no assurance,  however,  that the Company
would be successful in utilizing an  alternative  method or that low-fat  potato
chips produced by the Company will be accepted in the marketplace.

         Production  Capacity.  The Company is in the process of relocating  its
manufacturing  operations in Arizona to its newly constructed Goodyear,  Arizona
facility.  See "Item 2.  Description of Property." The Company  anticipates that
the  relocation  will be completed  during the second  quarter of 1997.  At that
time,  the new facility  will have the capacity to produce  approximately  3,000
pounds of potato chips per hour, with approximately  2,100 pounds of such amount
being produced  using a continuous  conveyor  mechanism and the remainder  being
produced using the Company's batch frying method.  Recently installed  machinery
at the  Company's  LaVergne,  Tennessee  facility has  increased its capacity to
approximately  720  pounds of potato  chips per hour using the  Company's  batch
frying method. In contrast to such increased capacities,  at January 1, 1996 the
Company had production  capacity of approximately 540 pounds of potato chips per
hour at its  Arizona  facility  and 360  pounds of potato  chips per hour at its
Tennessee facility.

Marketing and Distribution

         The Company currently sells its products  primarily in selected markets
in  the  southern  and  western  United  States.   The  Company's  products  are
distributed for the Company by a select group of independent distributors.

         The  Company's  Arizona  distribution  subsidiary  operates  throughout
Arizona, with approximately 35 independently operated service routes. Each route
is operated by an  independent  contractor who carries in excess of 250 items to
most major grocery store chains in Arizona, such as Albertson's,  ABCO, Basha's,
Fry's, Safeway, Smith's and Smitty's Food Stores. In addition to servicing major
supermarket chains, the Company's  distributors service many independent grocery
stores,  delicatessens,  club stores,  including PriceCostco,  sports complexes,
including America West Arena, and military  facilities  throughout  Arizona.  In
addition to Poore  BrothersTM  brand  products,  the Company  distributes a wide
variety of other  items  throughout  Arizona  manufactured  by other  companies,
including pretzels, popcorn, candies, cookies and coffee. The Company also sells
Poore  BrothersTM  brand potato  chips to America West  Airlines and Trans World
Airlines for passenger service.

         The  Company,  through  its  PB  Texas  subsidiary,  distributes  Poore
BrothersTM  brand products and other snack foods throughout  southeastern Texas.
Using  independently  contracted  route  distributors,   the  Company  currently
distributes  products in Houston,  Austin, Waco and Corpus Christi.  The Company
distributes  approximately  150  different  items in  Texas,  including  its own
products and products  manufactured by other companies.  The Company distributes
to approximately 75% of the grocery store chains in Houston,  Austin,  and their
surrounding  areas.  These  grocery  store  chains  include  Randall's,  Kroger,
Brookshire  Brothers,   Rice-Price  Busters,   Super  K-Mart,  and  Albertson's.
Additionally,  the Company  distributes to many  independent  grocery stores and
several military commissaries in Texas.
                                       9
<PAGE>
         Outside of Arizona and Texas the Company selects distributors primarily
on the basis of quality of  service,  call  frequency  on  customers,  financial
capability and relationships  they have with  supermarkets,  including access to
shelf space in the store's  snack aisles.  As of December 31, 1996,  the Company
had  arrangements  with  over 35  distributors  in a  number  of  major  cities,
including St. Louis, San Diego, Los Angeles, Minneapolis, San Antonio, Honolulu,
Nashville, Kansas City, Orlando, Tampa and Miami.

         Successful  marketing of the Company's products depends,  in part, upon
obtaining  adequate  retail  shelf  space  for such  products,  particularly  in
supermarkets. Frequently, the Company incurs additional marketing costs in order
to obtain  additional  shelf space.  Whether or not the Company will continue to
incur such costs in the future will  depend upon a number of factors,  including
existing demand for the Company's products, relative availability of shelf space
and general competitive  conditions.  There can be no assurance that the Company
will not incur significant shelf space or other promotional costs as a necessary
condition of entering into  competition  in particular  markets or stores.  Such
costs may materially affect the Company's financial performance.

Suppliers

         The principal  raw materials  used by the Company are potatoes and oil.
The Company believes that the raw materials it needs to produce its products are
readily  available from numerous  suppliers on  commercially  reasonable  terms.
Potatoes  are widely  available  year-round,  either  freshly  harvested or from
storage  during the winter  months.  The  Company  uses a low in  saturated  fat
sunflower  oil in the  production  of its Poore  BrothersTM  brand potato chips,
which is supplied by AC Humko Corporation. The Company believes that alternative
cooking oils that are low in saturated fat are readily  abundant and  available.
The Company also uses  flavorings  and packaging  material in its  manufacturing
process.   The  Company   chooses  its  suppliers   based  primarily  on  price,
availability and quality and does not have any long-term  arrangements  with any
supplier.  Although the Company  believes that its requirements for products and
ingredients  are  readily  available,  and  that  its  business  success  is not
dependent on any single supplier,  the failure of certain  suppliers to meet the
Company's  performance  specifications,  quality standards or delivery schedules
could have a material adverse effect on the Company's operations. In particular,
a sudden scarcity, a substantial price increase, or an unavailability of product
ingredients could materially  adversely affect the Company's  operations.  There
can be no assurance that alternative  ingredients would be available when needed
and on commercially attractive terms, if at all.

Customers

         One customer of the Company, Fry's Food Stores, a subsidiary of Kroger,
Inc.,  accounted for 16% of the Company's 1996 sales,  with the remainder of the
Company's  revenues  being derived from sales to a limited  number of additional
customers,  either  grocery  chains  or  regional  distributors,  none of  which
individually accounted for more than 10% of the Company's sales for 1996.

Market Overview and Competition

         According to the Snack Food  Association  ("SFA"),  the U.S. market for
salty snack foods reached $15.1 billion at retail in 1995, with potato chips and
tortilla  chips  accounting for  approximately  53% of the market with pretzels,
popcorn  and  other  products  accounting  for the  balance.  Per  capita  snack
consumption,  in dollar  terms,  has  increased  every year during the past five
years,  ranging from 6.0% (in 1990) to 0.4% (in 1994),  with a 1995  increase of
1.4% to a rate of $57.90 per person per annum.  Potato chip sales have similarly
increased steadily over the same period,  with 1995 retail sales of $4.8 billion
(a 2.5% increase over 1994) contrasted to 1990 sales of $4.3 billion.

         The  Company's  products  compete  generally  against other salty snack
foods,  including potato chips, tortilla chips, popcorn and pretzels.  The salty
snack food industry,  large and highly  competitive,  is dominated  primarily by
Frito-Lay, Inc., a subsidiary of PepsiCo, Inc. Frito-Lay possesses substantially
greater financial,
                                       10
<PAGE>
production,  marketing,  distribution  and other  resources than the Company and
distributes brands that are more widely recognized than the Company's  products.
In addition,  numerous other companies that are actual or potential  competitors
of the Company  have  greater  financial  and other  resources  (including  more
employees and more  extensive  facilities)  than the Company.  Local or regional
markets often have  significant  smaller  competitors,  many of whom offer batch
fried or low-fat products similar to those of the Company.  Expansion of Company
operations  to other  areas  of the  United  States  has and  will  continue  to
encounter significant competition from national,  regional and local competitors
that may be  greater  than  that  encountered  by the  Company  in its  existing
markets.  In addition,  such competitors may challenge the Company's position in
its existing markets.  While the Company believes that its specialized  products
and method of operations will enable it to compete successfully, there can be no
assurance of its ability to do so.

         The  principal   competitive  factors  affecting  the  market  for  the
Company's  products  include  product  quality and taste,  brand awareness among
consumers, supermarket shelf space, price, advertising and promotion, variety of
snacks  offered,  nutritional  content,  product  packaging and package  design.
Management believes that the Company's potato chips compete based primarily upon
their  taste,  distinctive  cooking  method  and  variety  of  flavors  that are
available.

Government Regulation

         The manufacture,  labeling and  distribution of the Company's  products
are subject to the rules and  regulations  of various  federal,  state and local
health  agencies,  including  the  Food and Drug  Administration.  In May  1994,
regulations  under the  Nutrition  Labeling and  Education  Act of 1990 ("NLEA")
concerning labeling of food products,  including  permissible use of nutritional
claims such as "fat-free" and "low-fat,"  became  effective.  In order to comply
with the NLEA  regulations,  products labeled as "fat-free" may not contain more
than 0.5 grams of fat per  ounce,  and  products  labeled as  "low-fat"  may not
contain more than 3.0 grams of fat per ounce.  Fat-free products containing less
than 0.3 grams of fat per ounce are required  under the NLEA  regulations  to be
labeled as containing 0 grams of fat.

         The Company is complying with the NLEA regulations and closely monitors
the fat content of its  products  through  various  testing and quality  control
procedures.  The  Company  does  not  believe  that  compliance  with  the  NLEA
regulations materially increases the Company's manufacturing costs. There can be
no  assurance  that  new  laws  or  regulations  will  not  further  reduce  the
permissible  fat  content of  "fat-free"  and  "low-fat"  products,  which could
require  the Company to alter the taste or  composition  of its  products.  Such
changes could affect sales of the Company's products and have a material adverse
effect on the Company.

         In addition to laws relating to food products, the Company's operations
are governed by laws relating to  environmental  matters,  workplace  safety and
worker health,  principally the Occupational  Safety and Health Act. The Company
believes that it presently  complies in all material respects with such laws and
regulations.

Employees

         As of December  31,  1996,  the Company  had 132  full-time  employees,
including 99 in manufacturing  and production,  12 in sales and marketing and 21
in administration  and finance.  The Company's  employees are not represented by
any collective  bargaining  organization and the Company has never experienced a
work  stoppage.  The Company  believes that its relations with its employees are
good.

Item 2.  Description of Property

         The Company owns a 61,000 square foot facility  located on 7.7 acres of
land in Goodyear, Arizona, approximately 15 miles west of Phoenix, Arizona, that
is in the  final  stages of  construction.  In March  1997,  the  Company  began
relocating  its  corporate   headquarters  and  its  Arizona   distribution  and
manufacturing  operations to the facility.  Such relocation is anticipated to be
completed  by July 1,  1997.  The site will  enable  the  Company  to expand its
facilities in the future to a total  building size of 120,000  square feet.  The
facility is partially  financed by a  construction  loan with  National  Bank of
Arizona. The construction loan matures on June 11, 1997.
                                       11
<PAGE>
         On February  28, 1997,  the Company  sold its three 12,000  square foot
buildings in Goodyear,  Arizona,  which house  the Company's Arizona  operations
and which will be replaced by the new  facility.  The net proceeds from the sale
of the properties,  which  approximated  $710,000,  were used to repay mortgages
which  encumbered the properties and to repay the $500,000  principal  amount of
the Poore  Promissory  Note.  The  Company is leasing  the  properties  from the
purchaser on a  month-to-month  basis until the Company's  relocation to its new
facility is completed.

         PB Southeast leases a 16,900 square foot manufacturing facility located
in LaVergne,  Tennessee,  approximately 15 miles south of Nashville,  Tennessee.
The facility is leased under a lease  agreement  that expires in November  1998.
The  Company  has an  option  to renew the  lease  agreement  for an  additional
five-year period.

         PB Texas'  facility is located in  Houston,  Texas and  includes  2,400
square feet of office space, and  approximately  13,600 square feet of warehouse
space. The PB Texas facility is leased on a month-to-month  basis,  with 60 days
advance notice required for termination by either PB Texas or the lessor.

         The Company  believes that its  facilities  are  adequately  covered by
insurance.

Item 3.  Legal Proceedings

         On June 19, 1996,  James Gossett and an associated  entity  commenced a
lawsuit in an Arizona state court against two Directors of the Company,  Mark S.
Howells and Jeffrey J.  Puglisi,  and the  Company's  PB  Southeast  subsidiary,
alleging, inter alia, that Mr. Gossett had an oral agreement with Mr. Howells to
receive up to a 49% ownership interest in PB Southeast, that Messrs. Howells and
Puglisi breached  fiduciary duties and other obligations to Mr. Gossett and that
Mr.  Gossett is entitled to exchange such alleged  stock  interest for shares in
the Company.  Mr. Gossett further alleges that PB Southeast and Messrs.  Howells
and  Puglisi  failed  to honor the terms of an  alleged  distribution  agreement
between PB Foods (allegedly entered into prior to the acquisition of PB Foods by
the  Company),  and Mr.  Gossett's  associated  entity,  whereby such entity was
allegedly  granted exclusive  distribution  rights to Poore Brothers products in
California.  The complaint seeks unspecified amounts of damages, fees and costs.
In February 1997,  plaintiffs  filed  pleadings  indicating  they are seeking $3
million in  damages;  plaintiffs  may not be limited  by this  damage  amount at
trial.  Messrs.  Howells and Puglisi and PB  Southeast  have filed an answer and
counterclaim against Mr. Gossett, denying the major provisions of the complaint,
alleging  various acts of  nonperformance  and breaches of fiduciary duty on the
part of Mr. Gossett and seeking various  compensatory and punitive damages.  The
Company has agreed to  indemnify  Messrs.  Howells and Puglisi in regard to this
lawsuit.  Management  of the Company  believes the lawsuit has no merit and that
the  Company  has  defenses  thereto.  However,  the  ultimate  outcome  of  the
proceeding  is not  presently  determinable.  There  can be no  assurance  of an
outcome  that will be  favorable  to the Company or, if  unfavorable,  that such
outcome will not have a material adverse effect on the Company.

         The Company is plaintiff in various other litigation matters incidental
to its business, none of which is deemed material by the Company.


Item 4.  Submission of Matters to a Vote of Security Holders

        None.
                                       12
<PAGE>
                                    PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

        The common stock,  $.01 par value,  of the Company (the "Common  Stock")
began trading on the Nasdaq  SmallCap  Market tier of the Nasdaq Stock Market on
December  6, 1996 under the symbol  "POOR." The  following  table sets forth the
high and low bid prices of the Common Stock as reported by Nasdaq for the period
beginning December 6, 1996 and ending December 31, 1996.

                                                          High            Low
                                                          ----            ---

         December 6, 1996 - December 31, 1996             5 1/8           3 1/4

         On February  28,  1997,  there were  6,986,324  shares of Common  Stock
outstanding.   Those  shares  were  held  of  record  by   approximately   1,300
shareholders.

         The Company has never  declared or paid any  dividends on the shares of
Common Stock. Management intends to retain any future earnings for the operation
and  expansion  of the  Company's  business and does not  anticipate  paying any
dividends at any time in the foreseeable future.


Item 6.  Management's  Discussion  and  Analysis  of Results  of  Operations and
         Financial Condition

Results of Operations

         Year ended  December 31, 1996  compared to the year ended  December 31,
         1995

         Revenues  increased to $17,219,641 for the year ended December 31, 1996
from  $6,868,923  for the year ended  December  31,  1995.  This  represents  an
increase of $10,350,718, or 151%. The 1996 results include the revenue effect of
the PB  Acquisition  on May 31, 1995 for the entire  year,  as compared to seven
months in the 1995 period. On a pro forma basis, assuming the PB Acquisition had
occurred on January 1, 1995 (see "Item 7. Financial  Statements"),  revenues for
the 1995 period would have totaled $11,456,320. Therefore, on a pro forma basis,
revenues increased by $5,763,321, or 50%, from 1995 to 1996. The increase is due
to the  expansion of sales of Poore  BrothersTM  brand  products to new markets,
increased sales in existing  markets and the  introduction  of Poore  BrothersTM
brand  low-fat  potato chips and potato  chips sold on a private  label basis to
grocery  chains.  For 1996,  revenues from the private label business  (sales of
which began in February 1996) totaled $913,272 and revenues from the sale of the
low-fat potato chips (sales of which began in June 1996) totaled  $297,895.  For
1996 and 1995, sales of products  manufactured by the Company  accounted for 62%
and 54%,  respectively,  of total sales,  and sales of products  manufactured by
others  accounted for 38% and 46%,  respectively,  of total sales. The increased
percentage of sales attributable to products  manufactured by the Company is due
to increased  sales of such  products by PB  Southeast  and  increased  sales in
Arizona and California.

         Gross profit for the year ended  December 31, 1996 was  $4,128,447,  or
24% of revenues,  as compared to  $1,564,723,  or 23% of revenues,  for the year
ended December 31, 1995. The increase in gross profits is due to the increase in
the Company's revenues. Gross profit margin percentage for 1996 did not increase
significantly from 1995.

         Selling, general and administrative expenses increased to $3,969,462 in
1996  from  $2,198,757  in 1995.  The  $1,770,705,  or 81%,  increase  is due to
operating   expenses  of  the   companies   acquired  in  the  PB   Acquisition,
administrative  expenses  resulting from the creation of staff  positions at the
Company's  headquarters,  and increased selling expenses  associated with market
expansion. If the Company expands its marketing efforts to additional cities, it
is expected that the Company will incur  additional  selling expenses for
                                       13
<PAGE>
market entry. As a percentage of revenues,  selling,  general and administrative
expenses were 23% for 1996 and 32% for 1995. This percentage  decrease  resulted
from  economies  of scale  realized  from the PB  Acquisition,  which  increased
revenues without resulting in a corresponding increase in expenses.

         Depreciation  and  amortization  totaled  $460,197  for the year  ended
December  31,  1996 and  $319,493  for the year ended  December  31,  1995.  The
increase of  $140,704,  or 44%, is due to the  increase  in  depreciable  assets
resulting from the PB Acquisition  and the related  goodwill and  organizational
costs.  Moreover,  the 1996 period included  twelve months of  depreciation  and
amortization expense, while the 1995 period included only seven months.

         Net interest expense  increased to $390,466 for the year ended December
31, 1996 from $241,383 for the year ended  December 31, 1995.  This increase was
due  to  indebtedness  incurred  by  the  Company  in  connection  with  the  PB
Acquisition on May 31, 1995. Such  indebtedness is included for twelve months in
the 1996 period as compared to seven months in the 1995 period. The indebtedness
included assumed  mortgages  relating to the Company's  Arizona  facilities that
were sold on February 28, 1997, working capital lines, and indebtedness incurred
to finance the PB Acquisition.

         The  Company's  net losses for the years  ended  December  31, 1996 and
December 31, 1995 were  $691,678 and  $1,194,910,  respectively.  On a pro forma
basis, assuming the PB Acquisition occurred on January 1, 1995, the net loss for
the year ended  December  31, 1995 was  $1,664,045.  The  decreased  net loss is
attributable primarily to the revenue impact of market expansion.

Liquidity and Capital Resources

         Net working capital was $4,185,602 at December 31, 1996, with a current
ratio of 2.2:1.  At December 31, 1995,  the  Company's  net working  capital was
$363,303,  with a current  ratio of 1.2:1.  The  increase in working  capital is
primarily attributable to net proceeds from sales of Common Stock of $6,186,564,
reduced  by the  Company's  cash  operating  loss of  $568,047  for the year and
equipment acquisitions of $675,620.

         The Company is in the final stages of  construction  of a 61,000 square
foot  facility  in  Goodyear,  Arizona.  The  construction  was  financed  by  a
construction loan from the National Bank of Arizona in the amount of $2,400,000.
The loan is secured by a first deed of trust on the land and the  building.  The
loan bears  interest  at the prime rate plus 2% (10.25% at December  31,  1996),
with the entire  principal  amount due on June 11, 1997. At December 31, 1996, a
total of $1,248,117,  had been advanced under the  construction  loan.  Prior to
December  27, 1996,  the  construction  loan was also  secured by United  States
treasury  bills in an  aggregate  principal  amount  of  $1,400,000  and with an
assumed  collateral  value of  $1,250,000  (the  "Treasury  Bills"),  which were
provided by Westminster Capital, Inc. ("Westminster"). On December 27, 1996, the
Company replaced the Treasury Bills as collateral with a $1,250,000  certificate
of deposit and thereafter  applied the  certificate of deposit  against the loan
balance,  reducing the total amount of the construction  loan from $2,400,000 to
$1,150,000. While at the present time the Company has no commitment to refinance
the  construction  loan,  the  Company  desires  to  obtain  permanent  mortgage
financing to repay the loan.

         On July 26, 1996,  the Company  entered  into a  $1,000,000  Receivable
Financing Agreement,  to provide working capital, with First Community Financial
Corporation  (the "Credit  Agreement")  pursuant to which it initially  borrowed
$675,000,  a portion of which was used to retire the Company's  previous working
capital line. The Credit Agreement, as amended, expires on November 30, 1997 and
bears  interest  at the prime rate plus 3.50%,  with  minimum  monthly  interest
payments  of $2,500.  The  Company  may  borrow up to an amount  equal to 75% of
eligible receivables,  representing accounts receivable outstanding less than 60
days,  subject to  concentration  limits.  At December 31, 1996, the Company had
borrowed  $351,270 under the facility.  The Credit  Agreement  contains  various
covenants  that  impose  restrictions  on  certain  activities  by  the  Company
including, without limitation,  incurrence of additional indebtedness and liens,
disposition of assets, changes in management, and mergers or consolidations.
                                       14
<PAGE>
         On May 31, 1995,  the Company  issued  $2,700,000 of its 9% Convertible
Debentures with principal  installments beginning in July 1998 and maturing July
1,  2002 in  connection  with  the PB  Acquisition.  As of  December  31,  1996,
$2,299,591   principal  amount  of  the  9%  Convertible   Debentures   remained
outstanding,  and the Company  was not in  compliance  with a required  interest
coverage  ratio of 1:1 that the Company is  required  to  maintain  while the 9%
Convertible  Debentures are  outstanding.  As a result of the Company's  default
under this  requirement,  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
amount of, and accrued but unpaid  interest  on, the  Debentures.  However,  the
holders of the 9%  Convertible  Debentures  have  granted  the  Company a waiver
effective  through  September  30,  1997.  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 1.5:1;  and a current  ratio at the end of any fiscal  quarter of at
least 1.1:1. 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;  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. The 9% Convertible  Debentures,  and a
loan  agreement  entered into by and among the Company and the holders of the 9%
Convertible  Debentures  in connection  with the issuance of the 9%  Convertible
Debentures,  contain  various  covenants  that  impose  restrictions  on certain
activities by the Company including the incurrence of additional encumbrances on
assets, investments by the Company, the amendment of material agreements,  sales
of  assets  other  than  in  the  ordinary  course  of  business,  and  mergers,
consolidations or sales of substantially all of the Company's assets.

         The Company has entered into a variety of finance and operating  leases
for the  acquisition  of  equipment  and  vehicles.  The leases  generally  have
five-year  terms,  and in the case of  finance  leases,  contain  an  option  to
purchase the  equipment at lease-end for $1. In 1996,  the Company  entered into
leases with a fair market value of $186,220.

         As  of  December  31,  1996,   the  Company  has  net  operating   loss
carry-forwards  for federal  income tax purposes  aggregating  $1,500,000  which
begin to expire in 2010.

         As a result of the expansion of the Company's  operations,  the Company
may incur additional  operating losses in the future.  Expenditures  relating to
market and territory expansion, new product development and equipment relocation
may  adversely  affect  selling,   general  and   administrative   expenses  and
consequently  operating and net income. These types of expenditures are expensed
for accounting purposes as incurred,  while revenue generated from the result of
such expansion may benefit future periods.

         Management  believes  that  existing  working  capital,  together  with
available  borrowings  under the Credit Agreement and anticipated cash flow from
operations,  will be sufficient to finance the  operations of the Company for at
least the next twelve months.  This belief is based upon 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  financing  to meet its  business  requirements.  There can be no
assurance  that such  financing  will be available  or, if  available,  on terms
attractive to the Company.

Inflation

         While  inflation has not had a significant  effect on operations in the
last year, management recognizes that inflationary pressures may have an adverse
effect on the Company as a result of higher asset  replacement costs and related
depreciation and higher material costs. Additionally, the Company may be subject
to seasonal
                                       15
<PAGE>
price  increases  for raw  materials.  The  Company  attempts  to  minimize  the
fluctuation in seasonal costs by entering into purchase  commitments in advance,
which  have the effect of  smoothing  out price  volatility.  The  Company  will
attempt to minimize  overall price inflation,  if any,  through  increased sales
prices and productivity improvements.

Item 7.  Financial Statements

<TABLE>
<S>                                                                                       <C>
Reports                                                                                   Page
                                                                                          ----

        Report of independent accountants with respect to financial statements .........   25


Financial Statements

        Consolidated balance sheets as of December 31, 1996 and December 31, 1995  .....   26
        Consolidated statements of operations for the years ended December 31, 1996
        and 1995  ......................................................................   27
        Consolidated statements of shareholders' equity (deficit) for the years ended
        December 31, 1996 and 1995  ....................................................   28
        Consolidated statements of cash flows for the years ended December 31, 1996
        and 1995  ......................................................................   29
        Notes to financial statements ..................................................   30


Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

                None.
</TABLE>
                                       16
<PAGE>
                                    PART III

Item 9.  Directors and Executive Officers of the Company

         The executive  officers and  Directors of the Company,  and their ages,
are as follows:

     Name                Age       Position
     ----                ---       --------

Eric J. Kufel            30        President, Chief Executive Officer, Director

Jeffrey H. Strasberg     39        Vice President, Chief Financial Officer,
                                   Treasurer, Secretary

Scott D. Fullmer         33        Vice President - Sales and Marketing

Glen E. Flook            38        Vice President -  Manufacturing

James M. Poore           49        Vice President

Wendell T. Jones         56        Director of Sales - Arizona and California

Mark S. Howells          43        Chairman, Director

Jeffrey J. Puglisi       38        Director

David J. Brennan         49        Director

Parris H. Holmes, Jr.    52        Director

Robert C. Pearson        61        Director

         Eric J.  Kufel.  Mr.  Kufel has served as  President,  Chief  Executive
Officer and a Director of the Company since February 1997. From November 1995 to
January 1997, Mr. Kufel was Senior Brand Manager at The Dial Corporation and was
responsible for the operating results of Purex Laundry Detergent. From June 1994
to November 1995,  Mr. Kufel was Senior Brand Manager for The Coca-Cola  Company
where he was  responsible  for the  marketing  and  development  of Minute  Maid
products.  From  January  1993 to November  1995,  Mr. Kufel was employed by The
Kellogg  Company  in  various   capacities   including  being   responsible  for
introducing  the Healthy  Choice line of cereal and executing the marketing plan
for Kellogg's Frosted Flakes cereal. Mr. Kufel earned a Masters of International
Management  from the American  Graduate  School of  International  Management in
December 1992.

         Jeffrey H. Strasberg. Mr. Strasberg has served as Vice President, Chief
Financial Officer,  Treasurer and Secretary of the Company since July 1995. From
January  1993 to January  1995,  he was Vice  President  - Finance  for  Pacific
Atlantic Systems Leasing,  Inc., a seller and lessor of computer  systems.  From
1984  to  1993,  Mr.  Strasberg  served  in  various  officer   capacities  with
subsidiaries of PacifiCorp,  an electric utility with  headquarters in Portland,
Oregon, including Assistant Controller with NERCO, Inc., a mining company. Prior
to 1984, Mr. Strasberg was an audit manager with Price Waterhouse. Mr. Strasberg
is a certified public accountant.

         Scott D. Fullmer.  Mr. Fullmer has served as Vice President - Sales and
Marketing of the Company since  February  1997.  From September 1993 to February
1997,  Mr.  Fullmer  served  in  various  capacities  with The Dial  Corporation
including  Senior Brand Manager where he was  responsible for managing the sales
and advertising for Dial Soap. From February 1992 to September 1993, Mr. Fullmer
was Senior Product  Manager for Sara Lee Corp. From April 1989 to February 1992,
Mr. Fullmer served in various  capacities with Borden,  Inc.  including  Product
Manager, Snack Foods, where he was responsible for managing the merchandising of
selected  snack food products  including  potato  chips.  From May 1986 to April
1989, Mr. Fullmer was in sales management at Frito Lay, Inc.
                                       17
<PAGE>
         Glen E. Flook.  Mr. Flook has served as Vice President -  Manufacturing
since March 1997.  From January 1994 to February 1997, Mr. Flook was employed by
The Dial  Corporation  as a Plant  Manager for a  manufacturing  operation  that
generated $40 million in annual revenues. From January 1983 to January 1994, Mr.
Flook served in various capacities with Frito-Lay, Inc., including Plant Manager
and Production Manager.

         James M. Poore. Mr. Poore has served as a Vice President of the Company
since June 1995.  Mr. Poore  co-founded  PB Foods in 1986 and served as its Vice
President,  Secretary,  Treasurer and Director  until the PB  Acquisition in May
1995.  In  addition,  Mr.  Poore  served as the  Secretary  and a Director of PB
Distributing  from January 1990 to May 1995,  and as Chairman of the Board and a
Director of PB Texas from May 1991 to May 1995. In 1983,  he co-founded  Groff's
of Texas,  Inc., a potato chip manufacturer in Brookshire,  Texas, and served as
its President until January 1986.

         Wendell T. Jones.  Since February 1997, Mr. Jones has been the Director
of Sales-Arizona  and  California.  Previously,  Mr.  Jones was  National  Sales
Manager of the Company from January  1996 to February  1997.  From 1969 to 1996,
Mr. Jones served in various capacities at Frito-Lay, Inc., including Director of
Sales, Operations Manager and Manager - Trade Development.

         Mark S.  Howells.  Mr.  Howells  has served as  Chairman of the Company
since March 1995.  For the period from March 1995 to August  1995,  Mr.  Howells
also served as President  and Chief  Executive  Officer of the  Company.  He has
served as the  Chairman  of PB  Southeast  since its  inception  in May 1993 and
served as its  President  and Chief  Executive  Officer  from May 1993 to August
1994.  Since 1988,  Mr. Howells has devoted a majority of his time to serving as
the  President  and  Chairman of Arizona  Securities  Group,  Inc., a registered
securities broker-dealer.

         Jeffrey J. Puglisi. Mr. Puglisi has served as a Director of the Company
since March 1995.  From March 1996 to August  1996,  Mr.  Puglisi also served as
Vice Chairman of the Company. For the period from August 1995 to March 1996, Mr.
Puglisi served as Chief  Executive  Officer of the Company.  For the period from
March 1995 to August 1995, Mr. Puglisi served as Executive Vice President, Chief
Operating  Officer,  Secretary and  Treasurer of the Company.  He also served as
President,  Chief  Executive  Officer and a Director of PB Southeast from August
1994 to August 1995.  Since 1988, Mr. Puglisi has also served as the Senior Vice
President of Arizona Securities Group, Inc.

         David J. Brennan.  Mr.  Brennan has served as a Director of the Company
since March 1996.  From March 1996 to February  1997, Mr. Brennan also served as
the Company's  President and Chief  Executive  Officer.  From 1990 to 1995,  Mr.
Brennan  provided  consulting  services  to several  companies  involved  in the
Mexican food  industry  including  Signature  Brands  (which owns Food  Products
Corporation,  Inc.). From 1967 to 1990, Mr. Brennan served in various capacities
with  Food  Products   Corporation,   Inc.,  a  company  that  manufactured  and
distributed  tortilla and salty snack foods,  eventually  becoming President and
majority  owner. He also helped to establish the Tortilla  Industry  Association
and was a member of its Board of Directors from 1989 to 1992.

         Parris H.  Holmes,  Jr. Mr.  Holmes  has  served as a  Director  of the
Company  since  March  1995.  Since  August 1,  1996,  Mr.  Holmes has served as
Chairman  of the  Board and  Chief  Executive  Officer  of  Billing  Information
Concepts Corp., a third-party provider of billing clearing house and information
services to the  telecommunications  industry.  Prior to August 1996, Mr. Holmes
served as Chief  Executive  Officer of U. S. Long  Distance  Corp. ("USLD").  In
addition,  Mr.  Holmes  has  served  as  Chairman  of the  Board of USLD   since
September 1986. Mr. Holmes is also a director of Medical Polymers  Technologies,
Inc.,  a  biomedical   firm   specializing   in  development  of  polymer  based
technologies,  and a member of the Board of  Directors  of  Tanisys  Technology,
Inc., a developer and marketer of computer peripheral equipment.

         Mr. Holmes has advised the Company that the staff of the Commission has
determined  to  terminate  an  investigation  of  certain  transactions  in  the
securities  of USLD,  a company with  publicly  traded  securities  of which Mr.
Holmes is a director. The investigation had concerned whether
                                       18
<PAGE>
certain  persons  had  purchased  securities  while in  possession  of  material
non-public  information or disclosed this information to others.  Mr. Holmes has
also advised the Company that on December 18, 1996, the Commission filed a civil
injunctive  action in federal  court  alleging  that Mr.  Holmes  failed to file
timely twelve reports  regarding  certain  transactions made in 1991 and 1992 in
the stock of USLD, as required by Section 16(a) of the  Securities  Exchange Act
of 1934,  as amended.  Mr.  Holmes  settled  this action on December  18,  1996,
without admitting or denying the allegations of the complaint,  by consenting to
the entry of an  injunction  barring  future  violations  with  respect to these
requirements and paying a civil penalty of $50,000.

         Robert C. Pearson.  Mr. Pearson has served as a Director of the Company
since March 1996. Since 1994, Mr. Pearson has been an independent  financial and
management   consultant   specializing  in  investments   with  emerging  growth
companies. He has performed services for Renaissance Capital Partners ("RCP") in
connection  with the Company  and other RCP  investments.  RCP is the  operating
manager  of  Renaissance  (as  defined  below),  the  owner of a 9%  Convertible
Debenture. From 1990 to 1994, Mr. Pearson served as Executive Vice President and
Chief  Financial  Officer of Thomas Group,  Inc., a publicly  traded  consulting
firm.  Prior  to 1990,  Mr.  Pearson  was  Vice  President  -  Finance  of Texas
Instruments, Incorporated.

         Pursuant to the Debenture Loan Agreement, so long as the 9% Convertible
Debentures have not been fully converted into shares of Common Stock or redeemed
or paid by the  Company,  Renaissance  Capital  Growth & Income  Fund III,  Inc.
("Renaissance"),  a holder of a portion of the 9% Convertible Debentures,  shall
be entitled to designate a nominee to the Company's  Board of Directors  subject
to election by the  Company's  stockholders.  Mr.  Pearson was  designated  as a
nominee to the Board of Directors by Renaissance.


Items 9 - 12.  Documents Incorporated by Reference

         Information  with  respect to a portion of Item 9 and Items 10, 11, and
12 of Form 10-KSB is hereby  incorporated by reference into this Part III of the
Annual Report on Form 10-KSB from the Company's Proxy Statement  relating to the
Company's  1997 Annual Meeting of  Stockholders  to be filed by the Company with
the Securities and Exchange Commission on or before April 25, 1997.

Item 13.  Exhibits and Reports on Form 8-K

         The following documents are filed as part of this Annual Report on Form
10-KSB:

         (a) Financial Statements.

         (b) The following exhibits as required by Item 601 of Regulation S-B:

Exhibit
Number                           Description
------                           -----------

3.1 --   Certificate of Incorporation of the Company filed with the Secretary of
         State of the State of Delaware on February 23, 1995. (1)

3.2 --   Certificate  of Amendment to the Certificate  of  Incorporation  of the
         Company  filed with the  Secretary of State of the State of Delaware on
         March 3, 1995. (1)

3.3 --   By-Laws of the Company. (1)

4.1 --   Specimen Certificate for shares of Common Stock. (2)

4.2 --   Form of  Underwriter's Warrant issued by the Company to Paradise Valley
         Securities, Inc. on December 11, 1996. (3)

4.3 --   Convertible Debenture Loan Agreement dated May 31, 1995 (the "Debenture
         Loan Agreement") by and among the Company, PB Arizona, PB Distributing,
         PB Texas, PB  Southeast,  Renaissance and  Wells Fargo  Equity Capital,
         Inc. ("Wells Fargo.")(2)
                                       19
<PAGE>
4.4 --   9.00% Convertible Debenture dated May 31, 1995, in the principal amount
         of $2,100,000, issued by the Company to Renaissance. (1)

4.5 --   9.00% Convertible Debenture dated May 31, 1995, in the principal amount
         of $600,000, issued by the Company to Wells Fargo. (1)

10.1 --  Employment Agreement  dated  March 11, 1996, by and between the Company
         and David J. Brennan. (1)

10.2 --  Employment Agreement dated July 21, 1995, by and  between  the  Company
         and Jeffrey H. Strasberg, as amended. (1)

10.3 --  Employment Agreement  dated May 31, 1995, by and between PB Arizona and
         James M. Poore. (1)

10.4 --  Employment Agreement dated May 20, 1996, by and between the Company and
         Wendell T. Jones. (1)

10.5 --  Amendment dated January 28, 1997 amending  Employment  Agreement by and
         between the Company and Wendell T. Jones. (5)

10.6 --  Non-Qualified Stock  Option  Agreement  dated  August 1, 1995,  by  and
         between the Company and Mark S. Howells. (1)

10.7 --  Non-Qualified Stock  Option  Agreement  dated  August 1, 1995,  by  and
         between the Company and Mark S. Howells. (1)

10.8 --  Non-Qualified  Stock  Option  Agreement  dated  August 31, 1995, by and
         between the Company and Mark S. Howells. (1)

10.9 --  Non-Qualified  Stock Option  Agreement  dated February 29, 1996, by and
         between the Company and Mark S. Howells. (1)

10.10 -- Non-Qualified  Stock Option  Agreement  dated  August 1, 1995,  by and
         between the Company and Jeffrey J. Puglisi. (1)

10.11 -- Non-Qualified  Stock  Option  Agreement  dated  August 1, 1995,  by and
         between the Company and Jeffrey J. Puglisi. (1)

10.12 -- Non-Qualified  Stock  Option  Agreement  dated August 31, 1995,  by and
         between the Company and Jeffrey J. Puglisi. (1)

10.13 -- Non-Qualified  Stock  Option  Agreement dated February 29, 1996, by and
         between the Company and Jeffrey J. Puglisi. (1)

10.14 -- Non-Qualified  Stock  Option  Agreement  dated  August 1, 1995,  by and
         between the Company and Parris H. Holmes, Jr. (1)

10.15 -- Accounts  Receivable  Security  Agreement  dated July 26, 1996,  by and
         between PB Arizona and First Community  Financial  Corporation  ("First
         Community.")(1)

10.16 -- Guaranty and Subordination dated July 26, 1996, issued by PB Arizona to
         First Community.(1)

10.17 -- Multiple  Advance  Promissory  Note dated July 26,  1996,  issued by PB
         Arizona to First Community. (1)

10.18 -- Accounts  Receivable  Security  Agreement  dated July 26, 1996,  by and
         between PB Distributing and First Community, with exhibits. (1)

10-19 -- Guaranty and Subordination  Agreement dated July 26, 1996, issued by PB
         Distributing to First Community. (1)

10.20 -- Multiple  Advance  Promissory  Note dated July 26,  1996,  issued by PB
         Distributing to First Community. (1)

10.21 -- Security Agreement dated July 26, 1996, by and between PB Southeast and
         First Community. (1)

10.22 -- Security  Agreement  dated July 26,  1996,  by and between PB Texas and
         First Community. (1)

10.23 -- Form  of  Security  Agreements  dated  May  31,  1995,  by   and  among
         Renaissance,  Wells  Fargo  and each of the  Company,  PB  Arizona,  PB
         Southeast, PB Texas and PB Distributing. (1)

10.24 -- Commercial  Lease  dated  November 30, 1995, by and between the Company
         and Arizona Limited Partnership #1. (1)

10.25 -- Lease  Agreement  dated July 23, 1993,  by and among PB  Southeast  and
         Jerome Rosenblum, Fred Yazdian and Sol Rosenblum. (1)

10.26 -- Commercial Lease dated July 22, 1993, by and between PB Texas and North
         Shepherd Business Center Associates, as amended. (1)
                                       20
<PAGE>
10.27 -- Security  Agreement  dated October 14, 1993, by and among PB Southeast,
         Department  of  Economic  and  Community  Development  of the  State of
         Tennessee and Rutherford County, Tennessee. (1)

10.28 -- Master  Equipment  Lease  Agreement  dated  September  22, 1995, by and
         between Banc One Arizona Leasing  Corporation and PB Arizona ("Banc One
         Lease Agreement"), with equipment schedules. (1)

10.29 -- Corporate  Guaranty dated September 25, 1995, issued by PB Distributing
         to Banc One Arizona Leasing Corporation in connection with the Banc One
         Lease Agreement. (1)

10.30 -- Equipment  Lease  Agreement  dated December 12, 1995, by and between PB
         Arizona and FINOVA Capital Corporation. (1)

10.31 -- Guaranty  dated  December  12,  1995,  issued  by the Company to FINOVA
         Capital Corporation. (1)

10.32 -- Master Lease  Agreement (the "LCA Lease  Agreement")  dated February 1,
         1996,  by and between PB Arizona and LCA Capital  Corp.  (also known as
         LCA, a Division of Associates Commercial Corporation) ("LCA"). (1)

10.33 -- Purchase  Agreement  dated  February 1, 1996, by and between PB Arizona
         and LCA in connection with the LCA Lease Agreement. (1)

10.34 -- Corporate  Guaranty dated as of February 1, 1996, issued by the Company
         to LCA in connection with LCA Lease Agreement. (1)

10.35 -- Loan Agreement dated September 11, 1996, by and between the Company and
         National Bank of Arizona ("NBA"). (1)

10.36 -- Promissory  Note dated  September 11, 1996, in the principal  amount of
         $2,400,000, issued by the Company to NBA. (1)

10.37 -- Deed of  Trust,  Security  Agreement  and  Financing  Statement  dated
         September 11, 1996, by and between the Company and NBA. (1)

10.38 -- Assignment Of Permits,  Licenses,  Approvals,  Deposits,  Contracts and
         Documents dated September 11, 1996, by and between the Company and NBA.
         (1)

10.39 -- Specific Assignment of Development  Agreement dated September 11, 1996,
         by and between the Company and NBA. (1)

10.40 -- Development  Agreement  dated May 14, 1996, by  and between the Company
         and the City of Goodyear, Arizona. (1)

10.41 -- Agreement  dated  August 29,  1996,  by  and  between  the  Company and
         Westminster, as amended. (1)

10.42 -- Secured  Promissory  Note dated  September  11, 1996,  in the principal
         amount of $1,250,000, issued by the Company to Westminster. (1)

10.43 -- Unsecured  Environmental  Indemnity Agreement dated September 11, 1996,
         by the Company in favor of Westminster. (1)

10.44 -- Commercial  Pledge and Security  Agreement dated September 11, 1996, by
         and among the Company, NBA and Westminster. (1)

10.45 -- Subordinated Deed of Trust,  Security  Agreement,  Assignment of Leases
         and Rents and Fixture Filing dated September 11, 1996, by and among the
         Company, First American Title Insurance Company and Westminster. (1)

10.46 -- Standard Form of Agreement between Owner and Contractor dated August 8,
         1996, between the Company and Newcon, Inc. (1)

10.47 -- Agreement  for the  Purchase  and  Sale of  Assets  and  Assumption  of
         Liabilities  dated  November  11, 1994,  by and between PB Arizona,  PB
         Foods, James Poore, Donald Poore and Amelia Poore. (1)

10.48 -- Assignment  Letter dated March 8, 1995, by and between PB Southeast and
         PB Foods. (1)

10.49 -- Form  of  Independent   Distributor   Agreement  by   and  between   PB
         Distributing and independent distributors. (1)

10.50 -- Agreement for the Exclusive Right to Purchase,  Package, Distribute and
         Sell "Low Fat" Snack Foods dated September 11, 1996, by and between the
         Company and Great Snaxx. (Certain portions of this document are omitted
         pursuant to a confidential treatment request which  was granted  by the
         Commission.) (2)
                                       21
<PAGE>
10.51 -- Amendment No. 1 dated October 14, 1996, to Warrant dated  September 11,
         1996, issued by the Company to Westminster. (2)

10.52 -- Poore Brothers, Inc. 1995 Stock Option Plan, as amended. (2)

10.53 -- Waiver  Letter dated August 1, 1996,  from  Renaissance,  in connection
         with the Debenture Loan Agreement. (2)

10.54 -- Waiver  Letter dated August 27, 1996,  from Wells Fargo,  in connection
         with the Debenture Loan Agreement. (2)

10.55 -- Letter  Agreement  dated November 5, 1996,  amending the  Non-Qualified
         Stock Option  Agreement  dated  February  29, 1996,  by and between the
         Company and Mark S. Howells. (2)

10.56 -- Letter  Agreement  dated November 5, 1996,  amending the  Non-Qualified
         Stock Option  Agreement  dated  February  29, 1996,  by and between the
         Company and Jeffrey J. Puglisi. (2)

10.57 -- Non-Qualified  Stock  Option Agreement dated as of October 22, 1996, by
         and between the Company and Mark S. Howells. (2)

10.58 -- Letter  Agreement  dated as of  November  5, 1996,  by and  between the
         Company and Jeffrey J. Puglisi. (2)

10.59 -- Letter  Agreement  dated as of  November  5, 1996,  by and  between the
         Company and David J. Brennan. (2)

10.60 -- Stock  Option  Agreement  dated  October 22,  1996,  by and between the
         Company and David J. Brennan. (3)

10.61 -- Amendment to Accounts Receivable Security   Agreement dated November 1,
         1996, by and between PB Arizona and First Community. (2)

10.62 -- Amendment to Accounts  Receivable  Security Agreement dated November 1,
         1996, by and between PB Distributing and First Community. (2)

10.63 -- Letter Agreement dated December 4, 1996, by and between the Company and
         Jeffrey J. Puglisi, relating to stock options. (3)

10.64 -- Letter Agreement dated December 4, 1996, by and between the Company and
         Mark S. Howells, relating to stock options. (3)

10.65 -- Letter Agreement dated December 4. 1996, by and between the Company and
         Parris H. Holmes, Jr., relating to stock options. (3)

10.66 -- Letter Agreement dated December 4, 1996, by and between the Company and
         David J. Brennan, relating to stock options. (3)

10.67 -- Letter Agreement dated December 4, 1996, by and between the Company and
         Jeffrey H. Strasberg, relating to stock options. (3)

10.68 -- Letter Agreement dated November 1, 1996, by and among the Company, Mark
         S. Howells,  Jeffrey J. Puglisi, David J. Brennan and Parris H. Holmes,
         Jr. (2)

10.69 -- Form of Underwriting Agreement entered into on December 6, 1996, by and
         between the Company, Paradise Valley Securities,  Inc., Renaissance and
         Wells Fargo. (4)

10.70 -- Employment Agreement dated January 24, 1997, by and between the Company
         and Eric J. Kufel. (5)

10.71 -- First  Amendment  to  Employment  Agreement  dated  February  2,  1997,
         amending  Employment  Agreement by and between the Company and David J.
         Brennan. (5)

10.72 -- Employment Agreement dated February 4, 1997, by and between the Company
         and Scott D. Fullmer. (5)

10.73 -- Employment  Agreement  dated  February  14,  1997,  by and  between the
         Company and Glen E. Flook. (5)

10.74 -- Second Loan  modification  agreement  dated  January 10,  1997,  by and
         between the Company and NBA. (5)

10.75 -- Amendment to Accounts Receivable Security Agreement  dated December 30,
         1996, by and between PB Distributing and First Community. (5)

10.76 -- Amendment to Accounts  Receivable Security Agreement dated December 30,
         1996, by and between PB Arizona and First Community. (5)

10.77 -- Promissory Note Modification  Agreement dated December 30, 1996, by and
         between PB Distributing and First Community. (5)
                                       22
<PAGE>
10.78 -- Promissory Note Modification  Agreement dated December 30, 1996, by and
         between PB Arizona and First Community. (5)

10.79 -- Commercial Real Estate Purchase  Contract and Receipt for Deposit dated
         January 22, 1997, by and between the Company and D.F. Properties,  Inc.
         (5)

10.80 -- Warrant dated September 11, 1996, issued by the Company to Westminster.
         (1)

11.1 --  Statement regarding computation of per share earnings. (5)


21.1 -- List of Subsidiaries of the Company. (1)

27.1 -- Financial Data Schedule. (5)

  (1)   Incorporated  by reference to the  Company's  Registration  Statement on
        Form SB-2 filed with the Commission on September 20, 1996  (Registration
        No. 333-5594-LA).

  (2)   Incorporated  by   reference  to  Amendment   No. 1  to  the   Company's
        Registration  Statement  on Form  SB-2  filed  with  the  Commission  on
        November 8, 1996 (Registration No. 333-5594-LA).

  (3)   Incorporated   by  reference  to  Amendment   No.  3  to  the  Company's
        Registration  Statement  on Form  SB-2  filed  with  the  Commission  on
        December 5, 1996 (Registration No. 333-5594-LA).

  (4)   Incorporated   by  reference  to  Amendment   No.  4  to  the  Company's
        Registration  Statement  on Form  SB-2  filed  with  the  Commission  on
        December 6, 1996 (Registration No. 333-5594-LA).

  (5)   Filed herewith.


        (c)   Exhibits on Form 8-K.

                None.
                                       23
<PAGE>
                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  March 31, 1997                  POORE BROTHERS, INC.

                                        By: /s/ Eric J. Kufel
                                          ----------------------------
                                          Eric J. Kufel
                                          President and Chief Executive Officer

        Pursuant to the  requirements of the Securities Act of 1934, this report
has been signed below by the following  persons on behalf of the Registrant,  in
the capacities and on the dates indicated.

     Signature                               Title                    Date

/s/ Eric J. Kufel              President, Chief Executive         March 31, 1997
--------------------------        Officer and Director
Eric J. Kufel                 (Principal Executive Officer)


/s/ Jeffrey H. Strasberg      Vice President, Chief Financial     March 31, 1997
-------------------------     Officer, Treasurer and Secretary
Jeffrey H. Strasberg          (Principal Financial Officer and
                                Principal Accounting Officer)



/s/ Mark S. Howells          Chairman of the Board of Directors   March 31, 1997
--------------------------
Mark S. Howells



/s/ Jeffrey J. Puglisi                   Director                 March 31, 1997
--------------------------
Jeffrey J. Puglisi



/s/ David J. Brennan                     Director                 March 31, 1997
--------------------------
David J. Brennan



/s/ Parris H. Holmes, Jr.                Director                 March 31, 1997
--------------------------
Parris H. Holmes, Jr.



/s/ Robert C. Pearson                    Director                 March 31, 1997
--------------------------
Robert C. Pearson
                                       24
<PAGE>
                       Report of Independent Accountants


To the Shareholders and Board of Directors
Poore Brothers, Inc.

We have audited the accompanying  consolidated balance sheets of Poore Brothers,
Inc.  and  Subsidiaries  as of  December  31,  1996 and  1995,  and the  related
consolidated statements of operations,  shareholders' equity (deficit), and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of Poore
Brothers,  Inc.  and  Subsidiaries  as of December  31,  1996 and 1995,  and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.


/s/ COOPERS & LYBRAND L.L.P.

COOPERS & LYBRAND L.L.P.


Phoenix, Arizona
March 4, 1997
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                              ------------
                                                                         1996            1995
                                                                         ----            ----
<S>                                                                 <C>             <C>

                                     ASSETS
     Current assets:
       Cash and cash equivalents ................................   $  3,603,850    $    200,603
       Restricted certificate of deposit ........................      1,250,000
       Accounts receivable, net of allowance of $121,000 in 1996
         and $86,000 in 1995 ....................................      1,912,064       1,198,215
       Inventories ..............................................        863,309         681,791
       Other current assets .....................................        193,581           2,383
                                                                    ------------    ------------
          Total current assets ..................................      7,822,804       2,082,992

     Property and equipment, net ................................      4,032,343       1,593,479
     Goodwill, net ..............................................      2,295,617       2,415,385
     Organizational costs, net ..................................        174,614         226,048
     Other assets ...............................................         15,067          31,881
                                                                    ------------    ------------
          Total assets ..........................................   $ 14,340,445    $  6,349,785
                                                                    ============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
     Current liabilities:
       Accounts  payable ........................................   $  1,318,952    $    633,281
       Accrued and other current liabilities ....................        500,192         450,397
       Current portion of long-term debt ........................      1,818,058         636,011
                                                                    ------------    ------------
          Total current liabilities .............................      3,637,202       1,719,689

     Long-term debt, less current portion .......................      3,355,651       3,793,420
     Other liabilities ..........................................          6,000          20,379
                                                                    ------------    ------------
          Total liabilities .....................................      6,998,853       5,533,488
                                                                    ------------    ------------

     Shareholders' equity
       Common stock, $.01 par value;  15,000,000 shares authorized,
        shares issued and outstanding 6,648,824 (1996),
        3,598,924 (1995) ........................................         66,488          35,989
       Additional paid-in capital ...............................      9,702,940       2,516,466
       Accumulated deficit ......................................     (2,427,836)     (1,736,158)
                                                                    ------------    ------------
          Total shareholders' equity ............................      7,341,592         816,297
                                                                    ------------    ------------

          Total liabilities and shareholders' equity ............   $ 14,340,445    $  6,349,785
                                                                    ============    ============
</TABLE>
   The accompanying notes are an integral part of these financial statements.
                                       26
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                          Years ended December 31,
                                                          ------------------------
                                                           1996            1995
                                                           ----            ----
<S>                                                     <C>             <C>
Revenues ............................................   $ 17,219,641    $  6,868,923

Cost of sales .......................................     13,091,194       5,304,200
                                                        ------------    ------------

   Gross profit .....................................      4,128,447       1,564,723

Selling, general and administrative expenses ........      3,969,462       2,198,757

Depreciation and amortization .......................        460,197         319,493
                                                        ------------    ------------

   Operating loss ...................................       (301,212)       (953,527)
                                                        ------------    ------------
Interest income .....................................         13,211

Interest expense ....................................       (403,677)       (241,383)
                                                        ------------    ------------
   Total ............................................       (390,466)       (241,383)
                                                        ------------    ------------

Net loss ............................................  $    (691,678)   $ (1,194,910)
                                                        ============    ============

Loss per common share and common share
   equivalent ......... .............................  $       (0.15)   $      (0.35)
                                                        ============    ============

Loss per common share-assuming full dilution                  *               *

Weighted average common and common
        equivalent shares outstanding ............ ..      4,493,307       3,448,601
                                                        ============    ============
*Anti-dilutive.
</TABLE>
   The accompanying notes are an integral part of these financial statements.
                                       27
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>

                                                    Common Stock
                                              ------------------------       Paid-in      Accumulated
                                                Shares        Amount         Capital        Deficit         Total
                                                ------        ------         -------        -------         -----

<S>                                          <C>           <C>            <C>            <C>            <C>
Balance, December 31, 1994 ..............     1,107,322    $    11,073    $   363,854    $  (541,248)   $  (166,321)
   Conversion of notes payable to related
     parties to common stock ............       161,668          1,617        141,011                       142,628
   Issuance of common stock in
     connection with acquisition ........       300,200          3,002        321,570                       324,572
   Sale of common stock .................     2,029,734         20,297      1,690,031                     1,710,328
   Net loss .............................                                                 (1,194,910)    (1,194,910)
                                             ----------    -----------    -----------    -----------    -----------
Balance, December 31, 1995 ..............     3,598,924         35,989      2,516,466     (1,736,158)       816,297
   Purchases of common stock ............       (50,100)          (501)       (56,209)                      (56,710)
   Conversion of convertible debentures .       367,348          3,674        396,735                       400,409
   Sales of common stock ................     2,732,652         27,326      6,215,948                     6,243,274
   Issuance of financing warrant ........                                     630,000                       630,000
   Net loss .............................                                                   (691,678)      (691,678)
                                             ----------    -----------    -----------    -----------    -----------
Balance, December 31, 1996 ..............     6,648,824    $    66,488    $ 9,702,940    $(2,427,836)   $ 7,341,592
                                             ==========    ===========    ===========    ===========    ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.
                                       28


<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                    Years ended December 31,
                                                                    ------------------------
                                                                       1996          1995
                                                                       ----          ----
<S>                                                               <C>            <C>
Cash flows from operating activities:
  Net loss ....................................................   $  (691,678)   $(1,194,910)
  Adjustments to reconcile net loss to net cash used
  in operating activities:
     Depreciation and amortization ............................       460,197        319,493
     Bad debt expense .........................................        60,230         50,861
     Change in operating assets and liabilities,
     net of effects of acquisition:
          Accounts receivable .................................      (767,179)       197,089
          Inventories .........................................      (181,518)      (159,286)
          Other assets and liabilities ........................      (172,786)           585
          Accounts payable and accrued liabilities ............       724,687         45,906
                                                                  -----------    -----------
Net cash provided by (used in) operating activities ...........      (568,047)      (740,262)
                                                                  -----------    -----------
Cash flows from investing activities:
     Payment for acquisition, net of cash acquired ............                   (3,145,269)
     Purchase of equipment ....................................      (675,620)       (68,421)
                                                                  -----------    -----------
Net cash used in investment activities ........................      (675,620)    (3,213,690)
                                                                  -----------    -----------
Cash flows from financing activities:
     Proceeds from issuance and purchase of common
     stock, net ...............................................     7,579,072      1,854,328
     Stock issuance costs .....................................    (1,392,508)      (144,000)
     Proceeds from issuance of debt ...........................                    2,700,000
     Debt issuance costs ......................................                     (257,170)
     Investment in restricted certificate of deposit ..........    (1,250,000)
     Payments made on long-term debt ..........................      (267,920)       (51,603)
     Net increase (decrease) in working capital line ..........       (21,730)        53,000
                                                                  -----------    -----------
Net cash provided by financing activities .....................     4,646,914      4,154,555
                                                                  -----------    -----------
Net increase in cash and cash equivalents .....................     3,403,247        200,603
Cash and cash equivalents at beginning of period ..............       200,603
                                                                  -----------    -----------
Cash and cash equivalents at end of period ....................   $ 3,603,850    $   200,603
                                                                  ===========    ===========

Supplemental disclosures of cash flow information:
  Summary of noncash investing and financing activities:
     Conversion of debt to common stock .......................   $   400,409    $   142,628
     Construction loan for new facility .......................     1,248,117
     Warrants issued ..........................................       630,000
     Capital lease obligation incurred - equipment acquisition.       186,220        195,317
     Long-term debt issued in connection with acquisition .....                      500,000
     Stock issued in connection with acquisition ..............                      324,572
  In conjunction with the acquisition (see Note 2), the Company
  purchased and assumed the following amounts:
     Fair value of assets acquired ............................                    5,612,882
     Purchase price ...........................................                   (4,052,631)
     Liabilities assumed ......................................                    1,560,251
  Cash paid during the year for interest, net of amounts
  capitalized .................................................       416,764        251,311
</TABLE>
   The accompanying notes are an integral part of these financial statements.
                                       29
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

1.       Organization and Summary of Significant Accounting Policies:

         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. See Note 2. The exchange transaction with PB Southeast
has been  accounted  for  similar to a pooling  since both  entities  had common
ownership  and  control  immediately  prior to the  transaction.  The  financial
information  for the  period  prior  to the May 31,  1995  exchange  transaction
relates  solely to the results of operations of PB Southeast,  the operations of
which have been continued by the Company.

         The Company  manufactures  and distributes  potato chip and other snack
food  products  under the Poore  BrothersTM brand name, as well as private label
potato  chips  and  also  distributes  a wide  variety  of  other  independently
manufactured food items.

Principles of Consolidation

         The  consolidated  financial  statements  include the accounts of Poore
Brothers, Inc. and all of its controlled  subsidiaries.  In all situations,  the
Company  owns  from  94% to  100%  of the  voting  interests  of the  controlled
subsidiaries.

         All  significant   intercompany  amounts  and  transactions  have  been
eliminated.

Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

         Cash equivalents  consist of highly liquid  investments with a maturity
of three months or less when purchased.

Restricted Certificate of Deposit

        Restricted  certificate  of deposit  represents  amounts  segregated  as
collateral for a construction loan.

Inventory

         Inventories are stated at the lower of first-in,  first-out (FIFO) cost
or market.

Property and Equipment

         Property and equipment are recorded at cost. Cost includes expenditures
for major improvements and replacements.  Maintenance and repairs are charged to
operations when incurred. When assets are retired or
                                       30
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

1.      Organization and Summary of Significant Accounting Policies: (Continued)

otherwise  disposed  of, the  related  costs and  accumulated  depreciation  are
removed  from  the  appropriate  accounts,  and  the  resulting  gain or loss is
included in operations.

         During  construction,  the  Company  capitalizes  interest  monthly  by
applying  the  effective  interest  rate on certain  borrowings  to the  average
balance of the expenditures.  Capitalized  interest for 1996 was $687,177 and $0
in 1995. Total interest costs incurred were $1,090,854 and $251,311 for 1996 and
1995, respectively.

         Depreciation  expense is computed using the  straight-line  method over
the estimated useful lives of the assets, ranging from 2 to 30 years.

Loss Per Share

         Loss per common  share and common  share  equivalent  ("loss per common
share") is computed by dividing the net loss by the weighted  average  number of
shares of Common  Stock and common  stock  equivalents  outstanding  during each
period.  Pursuant to the Securities  and Exchange  Commission  Staff  Accounting
Bulletin  ("SAB")  No. 83,  Company  issuance of Common  Stock,  and options and
warrants to purchase  Common Stock  granted by the Company  during the 12 months
immediately  preceding the initial filing date of the public  offering have been
included in the calculation of weighted average number of shares of Common Stock
outstanding  as if the  underlying  shares  were  outstanding  for  all  periods
presented  (even if  anti-dilutive,  using  the  treasury  stock  method  and an
offering price of $3.50 per share).  The effect on loss per common share for the
outstanding  options and warrants issued prior to the one year period  preceding
the initial  public  offering  have been excluded from the loss per common share
computation  as they are  anti-dilutive.  For 1996, the principles of SAB No. 83
were applied for the first three  quarters of the year before the initial public
offering became effective.  For the fourth quarter, the principles of Accounting
Principles Board Opinion No. 15 were followed.  Accordingly,  the effect on loss
per common share of the  outstanding  options and warrants in the fourth quarter
have been  excluded from the  computation  as they are  anti-dilutive.  Loss per
common share,  assuming full dilution,  is not applicable for loss periods as it
is anti-dilutive.

Intangible Assets

         Organizational  costs are  recorded  at cost.  Amortization  expense is
computed using the  straight-line  method over a five-year  period.  Goodwill is
amortized under the straight-line method over twenty years. The Company assesses
the recoverability of goodwill at each balance sheet date by determining whether
amortization  of the assets  over their  original  estimated  useful life can be
recovered through  estimated future  undiscounted  operating  income,  excluding
amortization.

Revenue Recognition

         Sales  and  related  cost of sales  are  recognized  upon  shipment  of
products.

Income Taxes

         Deferred tax assets and  liabilities  are  recognized  for the expected
future tax  consequences  of events  that have been  included  in the  financial
statements  or income tax  returns.  Deferred  tax assets  and  liabilities  are
determined based on the difference between the financial statement and tax basis
of assets and  liabilities  using  enacted  rates  expected  to apply to taxable
income in the years in which those  differences  are expected to be recovered or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.
                                       31
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

1.      Organization and Summary of Significant Accounting Policies: (Continued)

Stock-Based Compensation

        In  October  1995,  the  Financial  Accounting  Standards  Board  issued
Financial  Accounting Standard No. 123, Accounting for Stock-Based  Compensation
("FAS 123"), which defines a fair value based method of  accounting for employee
stock options or similar equity  instruments.  However, it also allows an entity
to continue to account for these plans according to Accounting  Principles Board
Opinion  No. 25 ("APB 25"), provided  pro forma disclosures  of net  income  and
earnings  per share are made as if the fair  value  based  method of  accounting
defined by FAS 123 had been  applied.  The  Company  has  elected to continue to
measure  compensation  expense cost related to employee stock  purchase  options
using APB 25, and in Note 9 provides required pro forma disclosures.

2.      Business Acquisition:

         On May 31,  1995,  the Company  acquired (i)  substantially  all of the
assets,  subject to certain  liabilities of Poore Brothers  Foods,  Inc.; (ii) a
100% equity  interest in Poore  Brothers  Distributing,  Inc.;  and (iii) an 80%
equity  interest  in Poore  Brothers  of  Texas,  Inc.  Over the  course  of the
remainder of 1995, the Company  acquired an additional  equity interest in Poore
Brothers of Texas,  Inc. of 14% bringing the Company's  total equity interest to
94%. The total purchase price for these  acquisitions  was  $4,052,631,  and the
assets acquired were primarily property and equipment,  accounts  receivable and
inventory.  The purchase was financed  with $500,000 of notes  payable,  300,000
shares of Common Stock issued to the sellers, and by the issuance of Convertible
Debentures and the sale of Common Stock in a private offering.

         The  above  acquisitions  have been  accounted  for as  purchases  and,
accordingly, the results of their operations subsequent to acquisition have been
included in the Company's  results.  In connection  with the  acquisitions,  the
Company recorded goodwill which is being amortized on a straight-line basis over
a twenty-year period.

         Presented  below  are the  results  of  operations  for the year  ended
December 31, 1995 on a pro forma basis as if the above acquisitions had occurred
at the beginning of 1995:

          Revenues ................................................ $11,456,320
          Net loss ................................................  (1,664,045)
          Net loss per common share and common share equivalent ...       (0.39)


3.       Concentrations of Credit Risk:

         The Company's cash and restricted cash are placed with major banks. The
Company,  in the normal  course of  business,  maintains  balances  in excess of
Federal  insurance  limits.  The  balance  in excess of the  insurance  limit at
December 31, 1996 was $4,376,179.

         Financial instruments subject to credit risk consist primarily of trade
accounts  receivable.  In the normal  course of  business,  the Company  extends
unsecured credit to its customers.  Substantially all of the Company's customers
are  distributors  whose  sales are  concentrated  to  retailers  in the grocery
industry,  in the southern and western United States. The Company investigates a
customer's credit worthiness before extending credit.
                                       32
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS



4.       Inventories:

         Inventories consist of the following:

                                                           December 31,
                                                           ------------
                                                         1996           1995
                                                         ----           ----

         Finished goods ............................   $609,918       $610,108
         Raw materials .............................    253,391         71,683
                                                       --------       --------
                                                       $863,309       $681,791
                                                       ========       ========


5.      Property and Equipment:

        Property and equipment consist of the following:

                                                             December 31,
                                                             ------------
                                                          1996          1995
                                                          ----          ----

Buildings and improvements .......................   $ 2,652,548    $   658,735
Equipment ........................................     1,307,417        916,428
Land .............................................       401,842        142,302
Vehicles .........................................       251,559        193,553
Furniture and office equipment ...................       118,965         63,869
                                                     -----------    -----------
                                                       4,732,331      1,974,887
Less accumulated depreciation and amortization ...      (699,988)      (381,408)
                                                     -----------    -----------
                                                     $ 4,032,343    $ 1,593,479
                                                     ===========    ===========


         Included in equipment are assets which are under capital leases with an
original cost of $463,857 and  accumulated  amortization  of $33,888 at December
31, 1996, and original cost of $277,637 and accumulated  amortization of $18,128
at December 31, 1995.

         Depreciation  expense  was  $284,409  and  $221,262  for 1996 and 1995,
respectively.

         The  Company is  completing  the  construction  of a new  manufacturing
facility  in  Arizona.  Included  in land,  buildings  and  improvements  is the
carrying value of the current Arizona manufacturing facility of the Company that
was subsequently  sold. At December 31, 1996, the Company  reflected a charge of
$30,000 in its Statement of Operations to reduce the carrying  value of the sold
facility to its net realizable value of $710,000 (see Note 14.)
                                       33
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS


6.       Long-Term Debt:

         Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                              December 31,
                                                                              ------------
                                                                           1996         1995
                                                                           ----         ----
<S>                                                                     <C>          <C>
Convertible Debentures; interest rate is at 9%; interest and
     principal due in monthly installments over varying
     periods through 2002; collateralized by land, buildings,
     equipment and intangibles ......................................   $2,299,591   $2,700,000

Construction loan due June 11, 1997; interest rate at bank
     prime plus 2% (10.25% at December 31, 1996);
     collateralized by first deed of trust on land and building
     and certificate of deposit totaling $1,250,000 .................    1,248,117

Notes payable due May 31, 2000; interest rate is at bank
     prime rate plus 1.75% (10.00% at December 31, 1996) ............      500,000      500,000

Note payables; due in monthly installments through
     December 2000; interest rates ranging from 3% to
     11.75%; collateralized by equipment and vehicles ...............      234,071      290,363

Working capital line; interest rate is at bank prime plus
     4.50% (12.75% at December 31, 1996); collateralized
     by accounts receivable and inventories; due November
     30, 1997 .......................................................      351,270

Bank operating line; interest rate is at bank prime plus
     1.75% (10.50% at December 31, 1995); collateralized
     by accounts receivable and inventories .........................                   373,000

Mortgage loans due 1997 to 1998; interest at bank prime
     rate plus 1.75% (10.00% at December 31, 1996);
     collateralized by land and buildings ...........................      156,740      301,399

Capital lease obligations ...........................................      383,920      264,669
                                                                        ----------   ----------
                                                                         5,173,709    4,429,431
Less current portion ................................................    1,818,058      636,011
                                                                        ----------   ----------
                                                                        $3,355,651   $3,793,420
                                                                        ==========   ==========
</TABLE>

         Annual  maturities  under  long-term  debt at December  31, 1996 are as
follows:

                 1997 ..................................  $1,818,058
                 1998 ..................................     326,818
                 1999 ..................................     385,081
                 2000 ..................................     879,923
                 2001 ..................................     307,424
                 Thereafter ............................   1,456,405
                                                          ----------
                                                          $5,173,709
                                                          ==========

         In September 1996, the Company entered into a $2,400,000 loan agreement
to finance the  construction  of its new Arizona  facility  collateralized  by a
first deed of trust on the land and building and additionally  collateralized by
U.S.  treasury bills provided by an independent  investor.  As consideration for
the  treasury  bills,  the Company  issued to the investor a warrant  which,  as
amended, entitles the investor to purchase
                                       34
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS


6.       Long-Term Debt:  (Continued)

300,000  shares  of  Common  Stock at an  exercise  price of $1.40 per share and
expires September 11, 2006. In connection with the warrant, the Company recorded
an increase to Additional paid-in capital and Other assets (debt issuance costs)
of $630,000 which represents the fair value of the warrant at the date of award.
The recorded asset was amortized as interest  expense and capitalized as part of
the new Arizona  facility  through December 1996, at which time the U.S treasury
bills provided by the investor as collateral were replaced by the Company with a
$1,250,000 certificate of deposit.

         Various debt agreements of the Company contain covenants  requiring the
maintenance of financial  ratios.  The most  restrictive  covenants  require the
Company to maintain an interest coverage ratio of 1.1:1, minimum working capital
of  $1,000,000  and a  calculated  minimum  amount of  shareholders' equity.  At
December 31, 1996, the Company was in violation of the interest  coverage ratio.
The Company has  received  waivers  from  lenders  for this  covenant  violation
through September 30, 1997.

         Based  on the  borrowing  rates  currently  available  to the  Company,
management  estimates that the fair value of the long-term debt approximates the
carrying value as of December 31, 1996 and 1995, respectively.

7.       Commitments and Contingencies:

         At December 31, 1996,  the Company was obligated  under  non-cancelable
leases for real property  used in its  operations.  Rental  expense under leases
that meet the  criteria of  operating  leases were  $171,612 and $73,699 for the
years 1996 and 1995.  Minimum  future rental  commitments  under  non-cancelable
long-term leases as of December 31, 1996 are as follows:


                                             Capital    Operating
                                             Leases      Leases       Total
                                             ------      ------       -----
     1997 ...............................   $116,881    $121,316    $238,197
     1998 ...............................    114,440      91,040     205,480
     1999 ...............................    111,651      34,632     146,283
     2000 ...............................     91,706      34,632     126,338
     2001 ...............................     14,837                  14,837
                                            --------    --------    --------
     Total ..............................    449,515    $281,620    $731,135
                                                        ========    ========
     Less amount representing interest        65,595
                                            --------
     Present value ......................   $383,920
                                            ========


8.       Capital Stock:

         In connection with the acquisition of the Poore Brothers companies (see
Note 2), the Company issued 300,000 shares of Common Stock to the sellers of the
companies. The Company has the right to repurchase these shares for an aggregate
purchase price of $500,000 by May 31, 1998.

         At issuance,  the Company's  Convertible  Debentures  (see Note 6) were
convertible into 2,477,065 shares of Common Stock at an effective price of $1.09
per share, subject to anti-dilution  adjustments.  In December 1996, $400,409 of
such  debentures  were converted into 367,348 shares of Common Stock,  leaving a
debt balance convertible into 2,109,717 shares of Common Stock.
                                       35
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

8.       Capital Stock:  (Continued)

         The Company has authorized  50,000 shares of Preferred Stock,  $100 par
value per share, of which there are no shares issued or outstanding.

9.       Stock Options:

         The Company's 1995 Stock Option Plan (the "Plan"), as amended in August
1996,  provides  for the  issuance  of options to purchase  1,000,000  shares of
Common Stock.  The options granted  pursuant to the Plan expire over a five-year
period and  generally  vest over  three-year  periods.  In  addition  to options
granted  under the Plan,  the  Company  also  issued  non-qualified  options  to
purchase Common Stock to certain  Directors  which were  exercisable on issuance
and expire ten years from date of grant.  All  options are issued at fair market
value and are  noncompensatory.  Fair market  value is  determined  based on the
price of sales  of  Common  Stock  occurring  at or near the time of the  option
award.  Outstanding options have exercise prices ranging from $1.08 to $3.50 per
share. Stock option activity is as follows:

                                        Plan Options        Non-Plan Options
                                        ------------        ----------------
                                               Average                 Average
                                   Options  Option Price   Options  Option Price
                                 Outstanding  per Share  Outstanding  per Share
                                 -----------  ---------  -----------  ---------

Balance, December 31, 1994 .......       0                       0
     Granted ..................... 485,000      $1.08      600,000     $1.08
                                   -------                 -------
Balance, December 31, 1995 ....... 485,000       1.08      600,000      1.08
     Granted ..................... 420,000       1.69      220,000      1.46
     Canceled ....................(250,000)      1.08
                                   -------                 -------
Balance, December 31, 1996 ....... 655,000       1.47      820,000      1.18
                                   =======                 =======

         At December 31, 1996, outstanding Plan options had an average remaining
term of 4.1 years.  Plan  options  that were  exercisable  at December  31, 1996
totaled 122,334,  with an average exercise price per share of $1.88. At December
31, 1995,  there were 10,000 Plan options that were  exercisable  at an exercise
price of $1.08 per share.  Non-Plan  options at December 31, 1996 had an average
remaining term of 8.3 years.

         Had  compensation  cost for the Company's stock options been determined
based  on the  fair  value at the  date of  grant  for  awards  in 1995 and 1996
consistent  with the  provisions of FAS 123, the Company's net loss and net loss
per share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                                   1996
                                                                                   ----
<S>                                                                           <C>
        Net loss - as reported .............................................. $  (691,678)
        Net loss - pro forma ................................................    (907,000)
        Net loss per common share and common share equivalent - as reported..       (0.15)
        Net loss per common share and common share equivalent - pro forma ...       (0.20)
</TABLE>

         The assumption regarding the stock options issued was that 100% of such
options vested when granted, rather than the 64% currently vested as required by
the awards.  The fair value of options  granted prior to the  Company's  initial
public offering was computed using the minimum value calculation method. For all
other  options,  the fair value of each option grant is estimated on the date of
grant  using  the   Black-Scholes   option-pricing   model  with  the  following
weighted-average assumptions: dividend yield of 0%; expected volatility of 102%;
risk-free interest rate of 6.14%; and expected lives of 5 years.
                                       36
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

10.      Income Taxes:

         For the period prior to the exchange  transaction  on May 31, 1995,  PB
Southeast had elected to be taxed as an S Corporation  under Section 1362 of the
Internal  Revenue  Code,  and as  such,  taxes  on  net  earnings  were  payable
personally by the shareholders.

         There was no current or deferred benefit for income taxes for the years
ended December 31, 1995 and 1996.

         The  following  table  provides  a  reconciliation  between  the amount
determined by applying the statutory  federal income tax rate to the pretax loss
and benefit for income taxes:

                                                     Years ended December 31,
                                                     ------------------------
                                                      1996               1995
                                                      ----               ----
Benefit at statutory rate ................         $ 235,170          $ 337,588
Valuation allowance ......................          (265,000)          (379,000)
State income tax, net ....................            29,830             41,412
                                                   ---------          ---------
                                                   $       0          $       0
                                                   =========          =========

         The income tax effects of loss carryforwards and temporary  differences
between financial and income tax reporting that give rise to the deferred income
tax assets and liabilities are as follows:

                                                             December 31,
                                                             ------------
                                                           1996          1995
                                                           ----          ----

Net operating loss carryforward ....................    $ 658,000     $ 393,000
Accrued bad debt expense ...........................       48,000        34,000
Accrued liabilities ................................       14,000        17,000
                                                        ---------     ---------
     Gross deferred tax assets .....................      720,000       444,000
Deferred tax asset valuation allowance .............     (655,000)     (379,000)
Gross deferred tax liabilities (depreciation and
     amortization) .................................      (65,000)      (65,000)
                                                        ---------     ---------
Net deferred tax assets ............................    $       0     $       0
                                                        =========     =========


         Gross deferred tax assets are reduced by a valuation allowance based on
management's estimate that it is more likely than not that the tax benefits will
not be realized.

         At December 31, 1996,  the Company has net operating  losses  available
for federal and state income taxes of  approximately  $1,500,000  which begin to
expire in the year 2010 if not used.

11.      Major Customers:

         One  Arizona  grocery  chain  comprised  $2,820,000,  or  16%,  of  the
Company's  consolidated  revenues for the year ended  December 31, 1996. For the
year ended December 31, 1995, two Arizona grocery chains  comprised  $1,057,714,
or 15%, and $724,560, or 11%, of the Company's consolidated revenues.

12.      Litigation:

         On June 19, 1996 , James Gossett and an associated  entity  commenced a
lawsuit in an Arizona state court against two directors of the Company,  Mark S.
Howells and Jeffrey J. Puglisi, and the Company's
                                       37
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

12.      Litigation:  (Continued)

subsidiary,  PB Southeast,  alleging,  inter alia,  that Mr. Gossett had an oral
agreement  with Mr.  Howells  to receive up to a 49%  ownership  interest  in PB
Southeast,  that Messrs. Howells and Puglisi breached fiduciary duties and other
obligations  to Mr.  Gossett and that he is entitled  to exchange  such  alleged
stock interest for shares in the Company.  Mr. Gossett  further  alleges that PB
Southeast  and  Messrs.  Howells  and  Puglisi  failed  to honor the terms of an
alleged  distribution  agreement  between  Poore  Brothers  Foods,  Inc. and Mr.
Gossett's   associated  entity,   whereby  such  entity  was  granted  exclusive
distribution  rights to Poore  Brothers  products in  California.  The complaint
seeks  unspecified  amounts  of  damages,  fees and  costs.  In  February  1997,
plaintiffs  filed  pleadings  indicating they are seeking $3 million in damages;
plaintiffs  may not be limited by this damage amount at trial.  Messrs.  Howells
and Puglisi and PB Southeast have filed an answer and  counterclaim  against Mr.
Gossett, denying the major provisions of the complaint, alleging various acts of
nonperformance  and  breaches of fiduciary  duty on the part of Mr.  Gossett and
seeking various  compensatory  and punitive  damages.  The Company has agreed to
indemnify  Messrs.   Howells  and  Puglisi  in  connection  with  this  lawsuit.
Management  of the  Company  believes  the  complaint  has no merit and that the
Company  has  defenses  to the  action.  However,  the  ultimate  outcome of the
proceeding is not presently determinable.

13.      Related Parties:

         In connection  with a sale of stock in March 1996,  Arizona  Securities
Group, Inc. received a fee of $46,875. Arizona Securities Group, Inc. is managed
and owned by Messrs. Howells and Puglisi.

         In connection with the sale of Common Stock and Convertible  Debentures
in the May 31, 1995  acquisitions of the Poore Brothers  companies,  the Company
paid Arizona Securities Group, Inc. $120,000 in sales commissions and $22,000 as
reimbursement  of expenses  incurred  in its  services as  Placement  Agent.  On
January 23, 1995, PB Southeast  entered into an agreement with Parris H. Holmes,
Jr., a  director,  pursuant to which PB  Southeast  borrowed  $140,000  from Mr.
Holmes,  evidenced  by three 7%  promissory  notes with an  aggregate  principal
amount of $140,000,  which were repaid by the Company on June 2, 1995.  In 1995,
Mr. Holmes purchased  420,000 shares of Common Stock of the Company for $280. In
addition,  in 1995,  Mr.  Holmes  provided  certain  consulting  services  to PB
Southeast at a cost of $35,000.

14.      Subsequent Events:

         In January 1997, the Company sold 337,500  additional  shares of Common
Stock pursuant to an  over-allotment  option  granted to the  underwriter of its
Initial Public Offering. Net proceeds from the sale approximated $1,000,000.

         In January 1997, the Company modified its construction loan by applying
a  certificate  of deposit  totaling  $1,250,000  against the  outstanding  loan
proceeds.  The  maximum  amount  of the  loan was  reduced  from  $2,400,000  to
$1,150,000.

         On February 28, 1997,  in  connection  with the  construction  of a new
manufacturing  facility,  the Company sold  existing  land and buildings for net
proceeds of approximately  $710,000. The carrying value of the disposed property
approximated  the net  proceeds  and the sale had an  immaterial  impact  on the
results  of  operations.  Proceeds  from the sale were  used to pay off  related
mortgage debt and notes payable totaling approximately $650,000.
                                       38
<PAGE>
                                 EXHIBIT INDEX

Exhibit
Number                           Description

3.1 --   Certificate of Incorporation of the Company filed with the Secretary of
         State of the State of Delaware on February 23, 1995. (1)

3.2 --   Certificate  of Amendment to the Certificate  of  Incorporation  of the
         Company  filed with the  Secretary of State of the State of Delaware on
         March 3, 1995. (1)

3.3 --   By-Laws of the Company. (1)

4.1 --   Specimen Certificate for shares of Common Stock. (2)

4.2 --   Form of  Underwriter's Warrant issued by the Company to Paradise Valley
         Securities, Inc. on December 11, 1996. (3)

4.3 --   Convertible Debenture Loan Agreement dated May 31, 1995 (the "Debenture
         Loan Agreement") by and among the Company, PB Arizona, PB Distributing,
         PB Texas, PB  Southeast,  Renaissance and  Wells Fargo  Equity Capital,
         Inc. ("Wells Fargo.")(2)

4.4 --   9.00% Convertible Debenture dated May 31, 1995, in the principal amount
         of $2,100,000, issued by the Company to Renaissance. (1)

4.5 --   9.00% Convertible Debenture dated May 31, 1995, in the principal amount
         of $600,000, issued by the Company to Wells Fargo. (1)

10.1 --  Employment Agreement  dated  March 11, 1996, by and between the Company
         and David J. Brennan. (1)

10.2 --  Employment Agreement dated July 21, 1995, by and  between  the  Company
         and Jeffrey H. Strasberg, as amended. (1)

10.3 --  Employment Agreement  dated May 31, 1995, by and between PB Arizona and
         James M. Poore. (1)

10.4 --  Employment Agreement dated May 20, 1996, by and between the Company and
         Wendell T. Jones. (1)

10.5 --  Amendment dated January 28, 1997 amending  Employment  Agreement by and
         between the Company and Wendell T. Jones. (5)

10.6 --  Non-Qualified Stock  Option  Agreement  dated  August 1, 1995,  by  and
         between the Company and Mark S. Howells. (1)

10.7 --  Non-Qualified Stock  Option  Agreement  dated  August 1, 1995,  by  and
         between the Company and Mark S. Howells. (1)

10.8 --  Non-Qualified  Stock  Option  Agreement  dated  August 31, 1995, by and
         between the Company and Mark S. Howells. (1)

10.9 --  Non-Qualified  Stock Option  Agreement  dated February 29, 1996, by and
         between the Company and Mark S. Howells. (1)

10.10 -- Non-Qualified  Stock Option  Agreement  dated  August 1, 1995,  by and
         between the Company and Jeffrey J. Puglisi. (1)

10.11 -- Non-Qualified  Stock  Option  Agreement  dated  August 1, 1995,  by and
         between the Company and Jeffrey J. Puglisi. (1)

10.12 -- Non-Qualified  Stock  Option  Agreement  dated August 31, 1995,  by and
         between the Company and Jeffrey J. Puglisi. (1)

10.13 -- Non-Qualified  Stock  Option  Agreement dated February 29, 1996, by and
         between the Company and Jeffrey J. Puglisi. (1)

10.14 -- Non-Qualified  Stock  Option  Agreement  dated  August 1, 1995,  by and
         between the Company and Parris H. Holmes, Jr. (1)

10.15 -- Accounts  Receivable  Security  Agreement  dated July 26, 1996,  by and
         between PB Arizona and First Community  Financial  Corporation  ("First
         Community.")(1)

10.16 -- Guaranty and Subordination dated July 26, 1996, issued by PB Arizona to
         First Community.(1)

10.17 -- Multiple  Advance  Promissory  Note dated July 26,  1996,  issued by PB
         Arizona to First Community. (1)
<PAGE>
Exhibit
Number                           Description

10.18 -- Accounts  Receivable  Security  Agreement  dated July 26, 1996,  by and
         between PB Distributing and First Community, with exhibits. (1)

10-19 -- Guaranty and Subordination  Agreement dated July 26, 1996, issued by PB
         Distributing to First Community. (1)

10.20 -- Multiple  Advance  Promissory  Note dated July 26,  1996,  issued by PB
         Distributing to First Community. (1)

10.21 -- Security Agreement dated July 26, 1996, by and between PB Southeast and
         First Community. (1)

10.22 -- Security  Agreement  dated July 26,  1996,  by and between PB Texas and
         First Community. (1)

10.23 -- Form  of  Security  Agreements  dated  May  31,  1995,  by   and  among
         Renaissance,  Wells  Fargo  and each of the  Company,  PB  Arizona,  PB
         Southeast, PB Texas and PB Distributing. (1)

10.24 -- Commercial  Lease  dated  November 30, 1995, by and between the Company
         and Arizona Limited Partnership #1. (1)

10.25 -- Lease  Agreement  dated July 23, 1993,  by and among PB  Southeast  and
         Jerome Rosenblum, Fred Yazdian and Sol Rosenblum. (1)

10.26 -- Commercial Lease dated July 22, 1993, by and between PB Texas and North
         Shepherd Business Center Associates, as amended. (1)

10.27 -- Security  Agreement  dated October 14, 1993, by and among PB Southeast,
         Department  of  Economic  and  Community  Development  of the  State of
         Tennessee and Rutherford County, Tennessee. (1)

10.28 -- Master  Equipment  Lease  Agreement  dated  September  22, 1995, by and
         between Banc One Arizona Leasing  Corporation and PB Arizona ("Banc One
         Lease Agreement"), with equipment schedules. (1)

10.29 -- Corporate  Guaranty dated September 25, 1995, issued by PB Distributing
         to Banc One Arizona Leasing Corporation in connection with the Banc One
         Lease Agreement. (1)

10.30 -- Equipment  Lease  Agreement  dated December 12, 1995, by and between PB
         Arizona and FINOVA Capital Corporation. (1)

10.31 -- Guaranty  dated  December  12,  1995,  issued  by the Company to FINOVA
         Capital Corporation. (1)

10.32 -- Master Lease  Agreement (the "LCA Lease  Agreement")  dated February 1,
         1996,  by and between PB Arizona and LCA Capital  Corp.  (also known as
         LCA, a Division of Associates Commercial Corporation) ("LCA"). (1)

10.33 -- Purchase  Agreement  dated  February 1, 1996, by and between PB Arizona
         and LCA in connection with the LCA Lease Agreement. (1)

10.34 -- Corporate  Guaranty dated as of February 1, 1996, issued by the Company
         to LCA in connection with LCA Lease Agreement. (1)

10.35 -- Loan Agreement dated September 11, 1996, by and between the Company and
         National Bank of Arizona ("NBA"). (1)

10.36 -- Promissory  Note dated  September 11, 1996, in the principal  amount of
         $2,400,000, issued by the Company to NBA. (1)

10.37 -- Deed of  Trust,  Security  Agreement  and  Financing  Statement  dated
         September 11, 1996, by and between the Company and NBA. (1)

10.38 -- Assignment Of Permits,  Licenses,  Approvals,  Deposits,  Contracts and
         Documents dated September 11, 1996, by and between the Company and NBA.
         (1)

10.39 -- Specific Assignment of Development  Agreement dated September 11, 1996,
         by and between the Company and NBA. (1)

10.40 -- Development  Agreement  dated May 14, 1996, by  and between the Company
         and the City of Goodyear, Arizona. (1)

10.41 -- Agreement  dated  August 29,  1996,  by  and  between  the  Company and
         Westminster, as amended. (1)

10.42 -- Secured  Promissory  Note dated  September  11, 1996,  in the principal
         amount of $1,250,000, issued by the Company to Westminster. (1)
<PAGE>
Exhibit
Number                           Description

10.43 -- Unsecured  Environmental  Indemnity Agreement dated September 11, 1996,
         by the Company in favor of Westminster. (1)

10.44 -- Commercial  Pledge and Security  Agreement dated September 11, 1996, by
         and among the Company, NBA and Westminster. (1)

10.45 -- Subordinated Deed of Trust,  Security  Agreement,  Assignment of Leases
         and Rents and Fixture Filing dated September 11, 1996, by and among the
         Company, First American Title Insurance Company and Westminster. (1)

10.46 -- Standard Form of Agreement between Owner and Contractor dated August 8,
         1996, between the Company and Newcon, Inc. (1)

10.47 -- Agreement  for the  Purchase  and  Sale of  Assets  and  Assumption  of
         Liabilities  dated  November  11, 1994,  by and between PB Arizona,  PB
         Foods, James Poore, Donald Poore and Amelia Poore. (1)

10.48 -- Assignment  Letter dated March 8, 1995, by and between PB Southeast and
         PB Foods. (1)

10.49 -- Form  of  Independent   Distributor   Agreement  by   and  between   PB
         Distributing and independent distributors. (1)

10.50 -- Agreement for the Exclusive Right to Purchase,  Package, Distribute and
         Sell "Low Fat" Snack Foods dated September 11, 1996, by and between the
         Company and Great Snaxx. (Certain portions of this document are omitted
         pursuant to a confidential treatment request which  was granted  by the
         Commission.) (2)

10.51 -- Amendment No. 1 dated October 14, 1996, to Warrant dated  September 11,
         1996, issued by the Company to Westminster. (2)

10.52 -- Poore Brothers, Inc. 1995 Stock Option Plan, as amended. (2)

10.53 -- Waiver  Letter dated August 1, 1996,  from  Renaissance,  in connection
         with the Debenture Loan Agreement. (2)

10.54 -- Waiver  Letter dated August 27, 1996,  from Wells Fargo,  in connection
         with the Debenture Loan Agreement. (2)

10.55 -- Letter  Agreement  dated November 5, 1996,  amending the  Non-Qualified
         Stock Option  Agreement  dated  February  29, 1996,  by and between the
         Company and Mark S. Howells. (2)

10.56 -- Letter  Agreement  dated November 5, 1996,  amending the  Non-Qualified
         Stock Option  Agreement  dated  February  29, 1996,  by and between the
         Company and Jeffrey J. Puglisi. (2)

10.57 -- Non-Qualified  Stock  Option Agreement dated as of October 22, 1996, by
         and between the Company and Mark S. Howells. (2)

10.58 -- Letter  Agreement  dated as of  November  5, 1996,  by and  between the
         Company and Jeffrey J. Puglisi. (2)

10.59 -- Letter  Agreement  dated as of  November  5, 1996,  by and  between the
         Company and David J. Brennan. (2)

10.60 -- Stock  Option  Agreement  dated  October 22,  1996,  by and between the
         Company and David J. Brennan. (3)

10.61 -- Amendment to Accounts Receivable Security   Agreement dated November 1,
         1996, by and between PB Arizona and First Community. (2)

10.62 -- Amendment to Accounts  Receivable  Security Agreement dated November 1,
         1996, by and between PB Distributing and First Community. (2)

10.63 -- Letter Agreement dated December 4, 1996, by and between the Company and
         Jeffrey J. Puglisi, relating to stock options. (3)

10.64 -- Letter Agreement dated December 4, 1996, by and between the Company and
         Mark S. Howells, relating to stock options. (3)
<PAGE>
Exhibit
Number                           Description

10.65 -- Letter Agreement dated December 4. 1996, by and between the Company and
         Parris H. Holmes, Jr., relating to stock options. (3)

10.66 -- Letter Agreement dated December 4, 1996, by and between the Company and
         David J. Brennan, relating to stock options. (3)

10.67 -- Letter Agreement dated December 4, 1996, by and between the Company and
         Jeffrey H. Strasberg, relating to stock options. (3)

10.68 -- Letter Agreement dated November 1, 1996, by and among the Company, Mark
         S. Howells,  Jeffrey J. Puglisi, David J. Brennan and Parris H. Holmes,
         Jr. (2)

10.69 -- Form of Underwriting Agreement entered into on December 6, 1996, by and
         between the Company, Paradise Valley Securities,  Inc., Renaissance and
         Wells Fargo. (4)

10.70 -- Employment Agreement dated January 24, 1997, by and between the Company
         and Eric J. Kufel. (5)

10.71 -- First Amendment to Employent Agreement dated February 2, 1997, amending
         Employment  Agreement by and between the Company and David J.  Brennan.
         (5)

10.72 -- Employment Agreement dated February 4, 1997, by and between the Company
         and Scott D. Fullmer. (5)

10.73 -- Employment  Agreement  dated  February  14,  1997,  by and  between the
         Company and Glen E. Flook. (5)

10.74 -- Second loan  modification  agreement  dated  January 10,  1997,  by and
         between the Company and NBA. (5)

10.75 -- Amendment to Accounts Receivable Security Agreement  dated December 30,
         1996, by and between PB Distributing and First Community. (5)

10.76 -- Amendment to Accounts  Receivable Security Agreement dated December 30,
         1996, by and between PB Arizona and First Community. (5)

10.77 -- Promissory Note Modification  Agreement dated December 30, 1996, by and
         between PB Distributing and First Community. (5)

10.78 -- Promissory Note Modification  Agreement dated December 30, 1996, by and
         between PB Arizona and First Community. (5)

10.79 -- Commercial Real Estate Purchase  Contract and Receipt for Deposit dated
         January 22, 1997, by and between the Company and D.F. Properties,  Inc.
         (5)

10.80 -- Warrant dated September 11, 1996, issued by the Company to Westminster.
         (1)

11.1 --  Statement regarding computation of per share earnings. (5)


21.1 -- List of Subsidiaries of the Company. (1)

27.1 -- Financial Data Schedule. (5)

  (1)   Incorporated  by reference to the  Company's  Registration  Statement on
        Form SB-2 filed with the Commission on September 20, 1996  (Registration
        No. 333-5594-LA).

  (2)   Incorporated  by reference to Amendment No. 1 to Company's  Registration
        Statement  on Form SB-2 filed with the  Commission  on  November 8, 1996
        (Registration No. 333-5594-LA).

  (3)   Incorporated   by  reference  to  Amendment   No.  3  to  the  Company's
        Registration  Statement  on Form  SB-2  filed  with  the  Commission  on
        December 5, 1996 (Registration No. 333-5594-LA).

  (4)   Incorporated   by  reference  to  Amendment   No.  4  to  the  Company's
        Registration  Statement  on Form  SB-2  filed  with  the  Commission  on
        December 6, 1996 (Registration No. 333-5594-LA).

  (5)   Filed herewith.