UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

             For the transition period from ________ to ___________

                         Commission File Number: 1-14556

                              POORE BROTHERS, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                  86-0786101
     (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                  Identification No.)

                           3500 South La Cometa Drive
                             Goodyear, Arizona 85338
               (Address of principal executive offices)(Zip Code)

       Registrant's telephone number, including area code: (623) 932-6200

                           ---------------------------

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

            Title of Class             Name of exchange on which registered
     ----------------------------      ------------------------------------
     Common Stock, $.01 par value                     Nasdaq

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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 [ ]

Indicate by check mark if disclosure  of  delinquent  filers in response to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate  market value of the voting stock (Common  Stock,  $.01 par value)
held by  non-affiliates of the Registrant was $15,031,234 based upon the closing
market price on March 23, 2003.

The number of issued and outstanding  shares of Common Stock, $.01 par value, as
of March 23, 2003 was 16,729,911.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions  of  the  Proxy  Statement  for  the  Registrant's  Annual  Meeting  of
Shareholders to be held on May 20, 2003 are  incorporated by reference into Part
III of this Form 10-K.
<PAGE>
                                TABLE OF CONTENTS

                                     PART I

Item 1.    Description of Business                                             4
Item 2.    Description of Property                                            14
Item 3.    Legal Proceedings                                                  15
Item 4.    Submission of Matters to a Vote of Security Holders                15

                                     PART II

Item 5.    Market for Registrant's Common Equity and Related
             Stockholder Matters                                              15
Item 6.    Selected Financial Data                                            15
Item 7.    Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                        16
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk         21
Item 8.    Financial Statements and Supplementary Data                        22
Item 9.    Changes in and Disagreements with Auditors on Accounting
             and Financial Disclosure                                         22

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant                 22
Item 11.   Executive Compensation                                             23
Item 12.   Security Ownership of Certain Beneficial Owners and Management     23
Item 13.   Certain Relationships and Related Transactions                     23

                                     PART IV

Item 14.   Controls and Procedures                                            23
Item 15.   Exhibits, Financial Statement Schedules, and Reports of
             Form 8-K                                                         24

                                       2
<PAGE>
            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This  Annual  Report on Form  10-K,  including  all  documents  incorporated  by
reference,  includes "forward-looking"  statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act") and Section
12E of the  Securities  Exchange  Act of  1934,  as  amended,  and  the  Private
Securities  Litigation  Reform  Act of  1995,  and  Poore  Brothers,  Inc.  (the
"Company")  desires to take advantage of the "safe harbor"  provisions  thereof.
Therefore,  the Company is including this  statement for the express  purpose of
availing  itself of the  protections  of the safe harbor with  respect to all of
such forward-looking  statements.  In this Annual Report on Form 10-K, the words
"anticipates,"  "believes," "expects," "intends," "estimates," "projects," "will
likely  result,"  "will  continue,"  "future" and similar terms and  expressions
identify  forward-looking  statements.  The  forward-looking  statements in this
Annual Report on Form 10-K reflect the  Company's  current views with respect to
future events and financial  performance.  These forward-looking  statements are
subject to certain risks and uncertainties, including specifically the Company's
relatively brief operating history,  significant historical operating losses and
the possibility of future  operating  losses,  the possibility  that the Company
will need  additional  financing due to future  operating  losses or in order to
implement the Company's business strategy,  the possible diversion of management
resources from the day-to-day operations of the Company as a result of strategic
acquisitions,  potential difficulties resulting from the integration of acquired
businesses  with  the  Company's  business,  other  acquisition-related   risks,
significant competition, risks related to the food products industry, volatility
of the market price of the Company's common stock, par value $.01 per share (the
"Common  Stock"),  the possible  de-listing  of the Common Stock from the Nasdaq
SmallCap Market if the Company fails to satisfy the applicable  listing criteria
(including  a minimum  share  price) in the  future  and those  other  risks and
uncertainties  discussed  herein,  that  could  cause  actual  results to differ
materially from historical results or those anticipated. In light of these risks
and  uncertainties,   there  can  be  no  assurance  that  the   forward-looking
information  contained in this Annual Report on Form 10-K will in fact transpire
or prove to be accurate.  Readers are  cautioned  to consider the specific  risk
factors  described herein and in "Risk Factors," and not to place undue reliance
on the forward-looking  statements  contained herein, which speak only as of the
date hereof.  The Company  undertakes  no  obligation  to publicly  revise these
forward-looking  statements to reflect  events or  circumstances  that may arise
after the date hereof. All subsequent written or oral forward-looking statements
attributable  to the  Company  or persons  acting on its  behalf  are  expressly
qualified in their entirety by this section.

                                       3
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS

     Poore Brothers, Inc. and its subsidiaries (collectively, "the Company") are
engaged in the development, production, marketing and distribution of innovative
salted snack food products that are sold primarily  through  grocery  retailers,
mass merchandisers,  club stores and vend distributors across the United States.
The Company (i)  manufactures and sells T.G.I.  Friday's(R)  brand salted snacks
under license from TGI Friday's Inc., (ii) manufactures and sells its own brands
of salted snack food products including Poore Brothers(R), Bob's Texas Style(R),
and Boulder Potato Company(R) brand  batch-fried  potato chips and Tato Skins(R)
brand potato snacks,  (iii) manufactures  private label potato chips for grocery
retail chains in the southwest,  and (iv)  distributes  snack food products that
are manufactured by others.

     For  the  fiscal  year  ended  December  28,  2002,  net  revenues  totaled
$59,348,471.  In fiscal 2002, approximately 93% of revenues were attributable to
products  manufactured  by the Company  (89%  branded  snack food  products,  5%
private label products) and  approximately  7% of revenues were  attributable to
the  distribution  by the Company of snack food products  manufactured  by other
companies.  For the fiscal year ended  December 31, 2001,  net revenues  totaled
$53,904,816.  In fiscal 2001, approximately 91% of revenues were attributable to
products  manufactured  by the Company  (84%  branded  snack food  products,  7%
private label products) and  approximately  9% of revenues were  attributable to
the  distribution  by the Company of snack food products  manufactured  by other
companies.  For the fiscal year ended  December 31, 2000,  net revenues  totaled
$39,055,082.  In fiscal 2000, approximately 87% of revenues were attributable to
products  manufactured  by the Company (72%  branded  snack food  products,  15%
private label products) and  approximately  13% of revenues were attributable to
the  distribution  by the Company of snack food products  manufactured  by other
companies.  The Company sells its T.G.I. Friday's(R) brand salted snack products
to retailers,  mass  merchandisers  and club stores directly and the rest of its
products to retailers and vend operators through independent  distributors.  See
Note  10  "BUSINESS  SEGMENTS  AND  SIGNIFICANT   CUSTOMERS"  to  the  financial
statements included in Item 8.

     The  Company  produces  T.G.I.  Friday's(R)  brand  salted  snacks and Tato
Skins(R)  brand  potato  snacks  utilizing a sheeting  and frying  process  that
includes patented technology.  The Company licenses the patented technology from
a third party and has an  exclusive  right to use the  technology  within  North
America until the patents expire between 2004 and 2006. T.G.I. Friday's(R) brand
salted  snacks and Tato  Skins(R)  brand  potato  snacks are  offered in several
different  flavors and  formulations.  These  products are  manufactured  at the
Company's  leased  facility  in  Bluffton,  Indiana.  The Company  acquired  the
Bluffton,  Indiana  manufacturing  operation  in  October  1999  as  part of its
acquisition of Wabash Foods,  LLC ("Wabash  Foods").  In December  2002,  Warner
Bros.  Consumer  Products  granted the Company rights to introduce an innovative
new brand of salted snacks featuring Looney  Tunes(TM)  characters.  The Company
plans  to  launch  the new  brand  nationwide  in the  summer  of  2003  under a
multi-year  agreement  that grants the Company  exclusive  salted snack category
brand  licensing and promotional  rights for Looney  Tunes(TM)  characters.  See
"PRODUCTS" and "PATENTS AND TRADEMARKS".

     Poore Brothers(R), Bob's Texas Style(R) and Boulder Potato Company(R) brand
potato  chips are  manufactured  with a  batch-frying  process  that the Company
believes  produces  potato  chips with  enhanced  crispness  and  flavor.  Poore
Brothers(R)  potato  chips are  currently  offered in 11  flavors,  Bob's  Texas
Style(R) potato chips are currently  offered in six flavors,  and Boulder Potato
Company(R) potato chips are currently offered in seven flavors. The Company also
manufactures  potato chips for sale on a private  label basis using a continuous
frying process.  The Company's  potato chips are manufactured at a Company-owned
facility in Goodyear, Arizona. See "PRODUCTS" and "MARKETING AND DISTRIBUTION."

     The   Company's   business   objective  is  to  be  a  leading   developer,
manufacturer,  marketer and distributor of innovative branded salted snack foods
by providing high quality  products at  competitive  prices that are superior in
taste,  texture,  flavor variety and brand personality to comparable products. A
significant  element of the Company's growth strategy is to develop,  acquire or
license  innovative  salted  snack food brands that  provide  strategic  fit and
possess strong national brand equity in order to expand, complement or diversify
the Company's existing business. The Company also plans to increase sales of its
existing products,  increase  distribution  revenues and continue to improve its
manufacturing capacity utilization. See "BUSINESS STRATEGY."

     The Company's  executive offices are located at 3500 South La Cometa Drive,
Goodyear, Arizona 85338, and its telephone number is (623) 932-6200.

                                       4
<PAGE>
COMPANY HISTORY

     The  Company,  a  Delaware  corporation,  was  formed  in 1995 as a holding
company to acquire a potato chip  manufacturing and distribution  business which
had been founded by Donald and James Poore in 1986.

     In December 1996, the Company  completed an initial public  offering of its
Common Stock,  pursuant to which  2,250,000  shares of Common Stock were offered
and sold to the public at an offering price of $3.50 per share.  Of such shares,
1,882,652  shares were sold by the  Company.  The initial  public  offering  was
underwritten by Paradise Valley Securities,  Inc. (the  "Underwriter").  The net
proceeds to the Company from the sale of the  1,882,652  shares of Common Stock,
after deducting  underwriting  discounts and commissions and the expenses of the
offering payable by the Company,  were approximately  $5,300,000.  On January 6,
1997,  337,500  additional  shares of Common Stock were sold by the Company upon
the exercise by the  Underwriter  of an  over-allotment  option granted to it in
connection  with  the  initial  public  offering.   After  deducting  applicable
underwriting  discounts  and  expenses,  the Company  received  net  proceeds of
approximately $1,000,000 from the sale of such additional shares.

     On November 4, 1998,  the Company  acquired the business and certain assets
of Tejas Snacks,  L.P., a Texas-based potato chip manufacturer,  including Bob's
Texas Style(R) potato chips brand, inventories and certain capital equipment. In
consideration for these assets, the Company issued 523,077  unregistered  shares
of Common Stock with a fair value at the time of $450,000 and paid approximately
$1,250,000 in cash.

     On October 7, 1999, the Company  acquired Wabash Foods,  including the Tato
Skins(R),  O'Boisies(R),  and Pizzarias(R) trademarks for a total purchase price
of $12,763,000.  The Company acquired all of the membership  interests of Wabash
Foods from Pate Foods  Corporation in exchange for (i) the issuance of 4,400,000
unregistered shares of Common Stock, (ii) the issuance of a five-year warrant to
purchase  400,000  unregistered  shares of Common Stock at an exercise  price of
$1.00  per  share,   and  (iii)  the  effective   assumption  of  $8,073,000  in
liabilities.

     On June 8, 2000, the Company acquired  Boulder Natural Foods,  Inc. and the
business and certain related assets and liabilities of Boulder Potato Company, a
Colorado-based  potato chip marketer and  distributor.  The assets  included the
Boulder Potato  Company(R) and Boulder  Chips(TM)  brand,  accounts  receivable,
inventories,  certain  other  intangible  assets and specified  liabilities.  In
consideration  for  these  assets  and  liabilities,  the  Company  paid a total
purchase  price of  $2,637,000,  consisting  of:  (i) the  issuance  of  725,252
unregistered shares of Common Stock with a fair value at the time of $1,235,000,
(ii) a cash payment of $301,000,  (iii) the issuance of a promissory note to the
seller  in the  amount of  $830,000,  and (iv) the  assumption  of  $271,000  in
liabilities.   In  addition,  the  Company  was  required  to  issue  additional
unregistered  shares of Common Stock to the seller on each of the first two (and
may on the third)  anniversaries  of the  closing of the  acquisition.  Any such
issuances will be dependent upon, and will be calculated  based upon,  increases
in sales of Boulder Potato Company(R) products as compared to previous periods.

     In October 2000, the Company launched its T.G.I.  Friday's(R)  brand salted
snacks pursuant to a license  agreement with TGI Friday's Inc., which expires in
2014.

     On December 27, 2001,  the Company  completed the sale of 586,855 shares of
Common  Stock  at an  offering  price  of  $2.13  per  share  to BFS US  Special
Opportunities  Trust PLC, a fund managed by  Renaissance  Capital,  in a private
placement transaction.

     In December 2002, Warner Bros. Consumer Products granted the Company rights
to introduce an innovative new brand of salted snacks featuring Looney Tunes(TM)
characters.  The Company plans to launch the new brand  nationwide in the summer
of 2003 under a multi-year  agreement that grants the Company  exclusive  salted
snack  category  brand  licensing and  promotional  rights for Looney  Tunes(TM)
characters.

BUSINESS STRATEGY

     The   Company's   business   objective  is  to  be  a  leading   developer,
manufacturer,  marketer and distributor of innovative branded salted snack foods
by providing high quality  products at  competitive  prices that are superior in
taste,  texture,  flavor variety and brand personality to comparable products. A
significant  element of the Company's growth strategy is to develop,  acquire or
license  innovative  salted  snack food brands that  provide  strategic  fit and
possess strong national brand equity in order to expand, complement or diversify
the Company's existing business. The Company also plans to increase sales of its
existing products,  increase  distribution  revenues and continue to improve its
manufacturing  capacity  utilization.  The  primary  elements  of the  Company's
business strategy are as follows:

                                       5
<PAGE>
          DEVELOP,   ACQUIRE  OR  LICENSE   INNOVATIVE   SNACK  FOOD  BRANDS.  A
     significant element of the Company's growth strategy is to develop, acquire
     or license  innovative  salted snack food brands that provide strategic fit
     and possess strong national brand equity in order to expand,  complement or
     diversify the Company's  existing  business.  The acquisitions of the Bob's
     Texas  Style(R),  Tato  Skins(R) and Boulder  Potato  Company(R)  brands in
     November 1998,  October 1999 and June 2000,  respectively,  were three such
     strategic  acquisitions.  In addition, in October 2000 the Company launched
     the  T.G.I.  Friday's(R)  brand  salted  snacks  under a  license  from TGI
     Friday's Inc. In December 2002, Warner Bros.  Consumer Products granted the
     Company  rights to  introduce  an  innovative  new  brand of salted  snacks
     featuring Looney Tunes(TM) characters.  The Company plans to launch the new
     brand  nationwide in the summer of 2003 under a multi-year  agreement  that
     grants the Company  exclusive  salted snack  category  brand  licensing and
     promotional  rights for  Looney  Tunes(TM)  characters.  The  Company  will
     continue  to seek to  develop,  acquire or license  additional  brands with
     strong, differentiated snack food product opportunities.

          BUILD  BRANDED  SNACK FOOD  REVENUES.  The Company  plans to build the
     market share of its branded  products through  continued trade  advertising
     and  promotional  activity in  selected  markets  and  channels.  Marketing
     efforts include,  among other things,  joint advertising with distributors,
     supermarkets and other manufacturers,  in-store advertisements and in-store
     displays.  The Company also participates in selected event sponsorships and
     marketing  relationships with the Arizona  Diamondbacks  baseball team. The
     Company  believes  that these  events offer  opportunities  to conduct mass
     sampling to motivate  consumers to try its branded products.  Opportunities
     to achieve new or expanded  distribution  in  alternate  channels,  such as
     airlines and the national vend channel, will continue to be targeted.

          IMPROVE MANUFACTURING CAPACITY UTILIZATION.  The Company's Arizona and
     Indiana facilities are currently  operating at approximately  sixty percent
     and forty percent of their respective capacities. The Company believes that
     additional  improvements to manufactured products' gross profit margins are
     possible with the achievement of the business  strategies  discussed above.
     Depending  on  product  mix,  the  Company   believes   that  the  existing
     manufacturing  facilities  could  produce,  in the  aggregate,  up to  $150
     million in annual revenue volume and thereby  further reduce  manufacturing
     product costs.

          The Company  currently has  arrangements  with several  California and
     Arizona grocery chains for the manufacture and  distribution by the Company
     of their  respective  private  label  potato  chips,  in various  types and
     flavors  as  specified  by  them.   The  Company   believes  that  contract
     manufacturing   opportunities   exist.   While  they  are  extremely  price
     competitive  and can be short in duration,  the Company  believes that they
     provide a  profitable  opportunity  for the Company to improve the capacity
     utilization  of its  facilities.  The  Company  intends to seek  additional
     private label  customers  located near its facilities  who demand  superior
     product quality at a reasonable price.

PRODUCTS

     MANUFACTURED   SNACK   FOOD   PRODUCTS.   The   Company   produces   T.G.I.
Friday's(R)brand  salted snacks and Tato Skins(R)brand potato crisps utilizing a
sheeting and frying  process.  T.G.I.  Friday's(R)brand  salted  snacks and Tato
Skins(R)brand  potato  crisps  are  offered  in several  different  flavors  and
formulations.

     Poore  Brothers(R),  Bob's Texas  Style(R),  and Boulder Potato  Company(R)
brand  potato  chips are  marketed by the Company as premium  products  based on
their  distinctive  combination  of cooking  method and  variety of  distinctive
flavors.  Poore  Brothers(R)  potato chips are currently  offered in 11 flavors,
Bob's Texas  Style(R)  potato chips are  currently  offered in six flavors,  and
Boulder Potato Company(R) potato chips are currently offered in seven flavors.

     The Company  currently has agreements  with several  California and Arizona
grocery chains pursuant to which the Company produces their  respective  private
label potato chips in the styles and flavors specified by such grocery chains.

     DISTRIBUTED  SNACK  FOOD  PRODUCTS.   The  Company  purchases  and  resells
throughout  Arizona snack food products  manufactured  by others.  Such products
include pretzels, popcorn, dips, and meat snacks.

MANUFACTURING

     The Company's  manufacturing  facility in Bluffton,  Indiana includes three
fryer lines that can produce an  aggregate of up to  approximately  9,000 pounds
per hour of T.G.I.  Friday's(R)  and Tato Skins(R) brand  products.  The Indiana

                                       6
<PAGE>
facility is currently operating at approximately forty percent of capacity.  The
T.G.I.  Friday's(R)  and Tato Skins(R) brand  products are produced  utilizing a
sheeting and frying process that includes  patented  technology  utilized by the
Company.  The  Company  licenses  the  technology  from a third party and has an
exclusive  right to use the  technology  within North  America until the patents
expire between 2004 and 2006. See "PATENTS AND TRADEMARKS."

     The Company believes that a key element of the success to date of the Poore
Brothers(R),  Bob's Texas  Style(R) and Boulder Potato  Company(R)  brand potato
chips  has  been  the  Company's  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,  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  although the batch frying
process  produces less volume,  it is superior to  conventional  continuous line
cooking methods because it enhances crispness and flavor through greater control
over temperature and other cooking conditions.

     In  September  1997,  the  Company  consolidated  all of its  manufacturing
operations  into its present  facility  in  Goodyear,  Arizona,  which was newly
constructed at the time and, in connection therewith, discontinued manufacturing
operations at a facility in LaVergne,  Tennessee. In 1999, the Company purchased
and installed  additional  batch frying equipment in the Arizona  facility.  The
Arizona facility has the capacity to produce up to approximately 3,500 pounds of
potato  chips per hour,  including  1,400 pounds of batch fried  branded  potato
chips per hour and 2,100 pounds of  continuous  fried private label potato chips
per hour. The Company owns additional  batch frying  equipment which, if needed,
could be installed  without  significant time or cost, and which would result in
increased capacity to produce the batch fried potato chips. The Arizona facility
is currently operating at approximately sixty percent of capacity.

     On  October  28,  2000,  the  Company  experienced  a fire  at the  Arizona
facility,  causing a  temporary  shutdown  of  manufacturing  operations  at the
facility.  There was extensive damage to the roof and equipment utilities in the
potato chip processing  area.  Third party  manufacturers  agreed to provide the
Company  with  production   volume  to  satisfy  nearly  all  of  the  Company's
anticipated  customers'  needs  during the  shutdown.  The Company  continued to
season and package the bulk product received from third party manufacturers. The
Company resumed full production in March 2001.

     There can be no assurance that the Company will obtain sufficient  business
to recoup  the  Company's  investments  in its  manufacturing  facilities  or to
increase the utilization  rates of such facilities.  See "ITEM 2. DESCRIPTION OF
PROPERTY."

MARKETING AND DISTRIBUTION

     The Company's  T.G.I.  Friday's(R),  Tato Skins(R),  and Poore  Brothers(R)
brand snack food  products  have  achieved  significant  market  presence in the
vending  channel  nationwide  through an  independent  network  of  brokers  and
distributors,  particularly  in the  mid-west and eastern  regions.  The Company
attributes the success of its products in these markets to consumer loyalty. The
Company believes this loyalty results from the products'  differentiated  taste,
texture and flavor variety which result from its manufacturing processes.

     During 2001, the Company retained Crossmark, Inc., a leading national sales
and marketing agency with employees and offices nationwide. Crossmark represents
T.G.I.  Friday's(R)  brand  salted  snacks on behalf  of Poore  Brothers  in the
grocery and  convenience  store channels.  The Company's own sales  organization
sells T.G.I.  Friday's(R)  brand salted snacks in the club,  mass, drug and vend
channels.

     The Company's  potato chip products are  distributed  primarily by a select
group of independent distributors.  Poore Brothers(R) brand potato chip products
have  achieved  significant  market  presence in Arizona,  New Mexico,  Southern
California,  Hawaii,  Missouri,  Ohio and Michigan.  The  Company's  Bob's Texas
Style(R) brand potato chip products have achieved significant market presence in
south/central  Texas,  including Houston,  San Antonio and Austin. The Company's
Boulder Potato  Company(R) brand potato chip products have achieved  significant
market presence in Colorado and in natural food stores across the country.

     The Company's Arizona  distribution  business operates  throughout Arizona,
with 50  independently  operated  service  routes.  Each route is operated by an
independent  distributor who  merchandises as many as 143 items at major grocery
store  chains in  Arizona,  such as  Albertson's,  Basha's,  Fry's,  and Safeway
stores.  In  addition to  servicing  major  supermarket  chains,  the  Company's
distributors  service many independent grocery stores, club stores, and military
facilities  throughout Arizona. In addition to Poore Brothers(R) brand products,
the Company  distributes  throughout  Arizona a wide variety of snack food items
manufactured by other companies,  including  pretzels,  popcorn,  dips, and meat
snacks.

                                       7
<PAGE>
     Outside of Arizona,  the Company selects brokers and  distributors  for its
branded products primarily on the basis of quality of service, call frequency on
customers,  financial  capability and relationships  they have with supermarkets
and vending distributors, including access to "shelf space" for snack food.

     Successful  marketing of the  Company's  products  depends,  in part,  upon
obtaining  adequate shelf space for such products,  particularly in supermarkets
and vending machines.  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,  demand for the Company's  products,  relative  availability of shelf
space and general  competitive  conditions.  The  Company may incur  significant
shelf  space,  consumer  marketing  or other  promotional  costs as a  necessary
condition of entering into competition or maintaining market share in particular
markets  or  channels.  Any such  costs  may  materially  affect  the  Company's
financial performance.

     The Company's marketing programs are designed to increase product trial and
build brand awareness in core markets.  Most of the Company's marketing spending
is focused on trade  advertising  and trade  promotions  designed to attract new
consumers to the products at a reduced  retail price.  The  Company's  marketing
programs also include  selective  event  sponsorship  designed to increase brand
awareness  and  to  provide  opportunities  to  mass  sample  branded  products.
Sponsorship of the Arizona Diamondbacks  typifies the Company's efforts to reach
targeted  consumers and provide them with a sample of the Company's  products to
encourage new and repeat purchases.

SUPPLIERS

     The  principal  raw  materials  used by the  Company are  potatoes,  potato
flakes,  wheat flour,  corn 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,  potato flakes, wheat flour and corn
are  widely  available  year-round.  The  Company  uses a variety of oils in the
production of its products and the Company believes that alternative sources for
such oils, as well as alternative oils, are readily abundant and available.  The
Company  also uses  seasonings  and  packaging  materials  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 required  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

     Two  customers  of the  Company,  Vending  Services  of America  ("VSA",  a
national vending distributor) and Wal*Mart (including its SAM's Clubs) accounted
for 13% and 21%, respectively, of the Company's 2002 net revenues. The remainder
of the  Company's  revenues  were  derived  from  sales to a  limited  number of
additional   customers,   either  grocery   chains,   club  stores  or  regional
distributors,  none of which  individually  accounted  for more  than 10% of the
Company's  sales in 2002. A decision by any of the Company's  major customers to
cease or  substantially  reduce their  purchases  could have a material  adverse
effect on the Company's business.

     All of the Company's revenues are attributable to external customers in the
United States and all of its assets are located in the United States.

MARKET OVERVIEW AND COMPETITION

     According to the Snack Food Association ("SFA"), the U.S. market for salted
snack foods  reached  $21.8 billion at retail in 2001 (the latest year for which
data is  available)  with  potato  chips,  tortilla  chips  and  potato  crisps,
accounting  for nearly 50% of the market,  and corn snacks,  popcorn,  pretzels,
nuts,  meat snacks and other products  accounting for the balance.  Total salted
snack sales, in dollar terms,  increased in each of the last ten years,  ranging
from an  increase of 8.5% (in 1997) to 0.3% (in 1995),  with a 2001  increase of
5.1%.  Potato  chip,  tortilla  chips and  potato  crisps  combined  sales  have
similarly  increased,  with 2001 retail sales of $10.2 billion,  a 6.2% increase
over 2000 sales of $9.6 billion.

                                       8
<PAGE>
     The Company's  products compete generally against other salted snack foods,
including  potato chips and tortilla  chips.  The salted snack food  industry is
large and highly  competitive and is dominated  primarily by Frito-Lay,  Inc., a
subsidiary of PepsiCo,  Inc.  Frito-Lay,  Inc. possesses  substantially  greater
financial,  production,  marketing,  distribution  and other  resources than the
Company and brands that are more widely recognized than the Company's  products.
Numerous  other  companies  that are  actual  or  potential  competitors  of the
Company,  many with  greater  financial  and  other  resources  (including  more
employees  and more  extensive  facilities)  than the  Company,  offer  products
similar to those of the Company.  In addition,  many of such competitors offer a
wider range of products than offered by the Company.  Local or regional  markets
often have significant smaller competitors,  many of whom offer products similar
to those of the Company.  Expansion of the Company's operations into new markets
has and will  continue  to  encounter  significant  competition  from  national,
regional and local  competitors that may be greater than that encountered by the
Company in its existing markets. In addition, such competitors may challenge the
Company's position in its existing markets.  While the Company believes that its
innovative  products  and  methods  of  operation  will  enable  it  to  compete
successfully, there can be no assurance of its ability to do so.

     The  principal  competitive  factors  affecting the market of the Company's
products  include  product quality and taste,  brand awareness among  consumers,
access to shelf  space,  price,  advertising  and  promotion,  variety of snacks
offered,  nutritional content, product packaging and package design. The Company
competes in the market principally on the basis of product quality and taste.

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 FDA. In May 1994, regulations under the NLEA concerning
labeling of food products,  including permissible use of nutritional claims such
as "fat-free" and "low-fat," became  effective.  The Company believes that it is
complying  in all  material  respects  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 be passed that could require
the Company to alter the taste or  composition  of its  products or impose other
obligations  on the Company.  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 28, 2002, the Company had 260 full-time employees, including
225 in  manufacturing  and  distribution,  15 in sales and  marketing  and 20 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.

PATENTS AND TRADEMARKS

     The  Company  produces  T.G.I.  Friday's(R)  brand  salted  snacks and Tato
Skins(R)  brand  potato  crisps  utilizing a sheeting  and frying  process  that
includes  patented  technology  that the  Company  licenses  from Miles  Willard
Technologies,  LLC,  an  Idaho  limited  liability  company  ("Miles  Willard").
Pursuant to the license  agreement  between the Company and Miles  Willard,  the
Company has an  exclusive  right to use the  patented  technology  within  North
America until the patents expire between 2004 and 2006. In consideration for the
use of these patents,  the Company is required to make royalty payments to Miles
Willard on sales of products manufactured utilizing the patented technology.

     The Company licenses the T.G.I.  Friday's(R)  brand salted snacks trademark
from TGI Friday's Inc.  under a license  agreement with a term expiring in 2014.
Pursuant to the  license  agreement,  the  Company is  required to make  royalty
payments on sales of T.G.I.  Friday's(R)  brand  salted  snack  products  and is
required to achieve  certain  minimum  sales levels by certain  dates during the
contract term.

     In December 2002, Warner Bros. Consumer Products granted the Company rights
to introduce an innovative new brand of salted snacks (called Crunch  Toons(TM))
featuring  Looney  Tunes(TM)  characters,  including Bugs Bunny,  Tweety and the
Tasmanian  Devil.  The Company  plans to launch the new brand  nationwide in the

                                       9
<PAGE>
summer of 2003 under a multi-year  agreement  that grants the Company  exclusive
salted  snack  category  brand  licensing  and  promotional  rights  for  Looney
Tunes(TM) characters.

     The Company owns the  following  trademarks,  which are  registered  in the
United  States:  Poore  Brothers(R),  An  Intensely  Different  Taste(R),  Texas
Style(R), Boulder Potato Company(R), Tato Skins(R), O'Boisies(R),  Pizzarias(R),
Braids(R)  and  Knots(R).   The  Company  considers  its  trademarks  to  be  of
significant  importance in the Company's  business.  The Company is not aware of
any  circumstances  that would have a material  adverse  effect on the Company's
ability to use its trademarks.

RISK FACTORS

     BRIEF OPERATING HISTORY; SIGNIFICANT PRIOR NET LOSSES; ACCUMULATED DEFICIT;
SIGNIFICANT FUTURE EXPENSES DUE TO IMPLEMENTATION OF BUSINESS STRATEGY. Although
certain of the  Company's  subsidiaries  have  operated for several  years,  the
Company  as a whole has a  relatively  brief  operating  history  upon  which an
evaluation  of its  prospects  can be made.  Such  prospects  are subject to the
substantial  risks,  expenses and  difficulties  frequently  encountered  in the
establishment and growth of a new business in the snack food industry,  which is
characterized   by  a  significant   number  of  market   entrants  and  intense
competition,  as well as risk factors described herein. Although the Company has
been  profitable  since fiscal 1999,  the Company  experienced  significant  net
losses  in prior  fiscal  years.  At  December  28,  2002,  the  Company  had an
accumulated  deficit of $1,849,893 and net working  capital of  $1,959,971.  See
"ITEM 6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF RESULTS OF  OPERATIONS  AND
FINANCIAL CONDITION."

     Even if the Company is successful in developing, acquiring and/or licensing
new  brands,  and  increasing  distribution  and sales  volume of the  Company's
existing products, it may be expected to incur substantial  additional expenses,
including advertising and promotional costs, "slotting" expenses (i.e., the cost
of obtaining shelf space in certain grocery  stores),  and integration  costs of
any future acquisitions. 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 be
profitable in the future.

     NEED FOR  ADDITIONAL  FINANCING.  A  significant  element of the  Company's
business strategy is the development, acquisition and/or licensing of innovative
salted snack food brands,  for the purpose of  expanding,  complementing  and/or
diversifying  the Company's  business.  In connection with each of the Company's
previous  brand  acquisitions  (Bob's  Texas  Style(R)  in November  1998,  Tato
Skins(R) and Pizzarias(R) in October 1999, and Boulder Potato Company(R) in June
2000), the Company borrowed funds or assumed additional indebtedness in order to
satisfy a substantial  portion of the  consideration  required to be paid by the
Company. See "BUSINESS -- COMPANY HISTORY" and "ITEM 6. MANAGEMENT'S  DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS  AND FINANCIAL  CONDITION -- LIQUIDITY AND
CAPITAL  Resources." The Company may, in the future,  require  additional  third
party financing (debt or equity) as a result of any future operating  losses, in
connection with the expansion of the Company's business through  non-acquisition
means, in connection with any additional  acquisitions completed by the Company,
or to provide working capital for general  corporate  purposes.  There can be no
assurance  that any such required  financing will be available or, if available,
on terms  attractive to the Company.  Any third party financing  obtained by the
Company  may  result  in  dilution  of the  equity  interests  of the  Company's
shareholders.

     ACQUISITION-RELATED  RISKS.  In recent years, a significant  element of the
Company's   business  strategy  has  been  the  pursuit  of  selected  strategic
acquisition  opportunities  for the purpose of expanding,  complementing  and/or
diversifying  the  Company's  business.  Strategic  acquisitions  are  likely to
continue to  comprise  an element of the  Company's  business  strategy  for the
foreseeable future.  However, no assurance can be given that the Company will be
able  to  continue  to  identify,   finance  and  complete  additional  suitable
acquisitions  on acceptable  terms, or that future  acquisitions,  if completed,
will be successful. Any future acquisitions, could divert management's attention
from the daily  operations  of the  Company  and  otherwise  require  additional
management,  operational  and  financial  resources.  Moreover,  there can be no
assurance  that the  Company  will be able to  successfully  integrate  acquired
companies or their  management  teams into the  Company's  operating  structure,
retain  management teams of acquired  companies on a long-term basis, or operate
acquired companies  profitably.  Acquisitions may also involve a number of other
risks,  including adverse short-term effects on the Company's operating results,
dependence on retaining key personnel and customers,  and risks  associated with
unanticipated liabilities or contingencies.

     SUBSTANTIAL  LEVERAGE;  FINANCIAL COVENANTS PURSUANT TO U.S. BANCORP CREDIT
AGREEMENT;  POSSIBLE  ACCELERATION  OF  INDEBTEDNESS.  At December 28, 2002, the
Company had outstanding  indebtedness under a credit agreement with U.S. Bancorp

                                       10
<PAGE>
(the "U.S.  Bancorp  Credit  Agreement")  in the aggregate  principal  amount of
$3,312,455.  The indebtedness under the U.S. Bancorp Credit Agreement is secured
by substantially all of the Company's assets.  The Company is required to comply
with certain financial  covenants  pursuant to the U.S. Bancorp Credit Agreement
so long as borrowings from U.S. Bancorp  thereunder remain  outstanding.  Should
the Company be in default under any of such covenants,  U.S.  Bancorp shall have
the right, upon written notice and after the expiration of any applicable period
during which such default may be cured,  to demand  immediate  payment of all of
the then unpaid principal and accrued but unpaid interest under the U.S. Bancorp
Credit  Agreement.  At December 28, 2002, the Company was in compliance with all
financial  covenants under the U.S. Bancorp Credit Agreement  (including minimum
annual  operating  results,  minimum fixed charge coverage and minimum  tangible
capital  requirements).  There can be no  assurance  that the Company will be in
compliance with the financial  covenants in the future.  Any acceleration of the
borrowings  under the U.S.  Bancorp  Credit  Agreement  prior to the  applicable
maturity dates could have a material adverse effect upon the Company.  See "ITEM
6.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION--LIQUIDITY  AND CAPITAL  RESOURCES."  In addition to the  indebtedness
under the US Bancorp Credit Agreement,  the Company has significant  secured and
unsecured  indebtedness  pursuant  to a number of other  agreements  with  other
lenders.  At December 28, 2002,  the  aggregate  principal  amount of such other
indebtedness  was $1,897,667.  The  acceleration  of the Company's  indebtedness
under any such agreements could have a material adverse effect upon the Company.

     VOLATILITY OF MARKET PRICE OF COMMON STOCK.  The market price of the Common
Stock has  experienced  a high level of volatility  since the  completion of the
Company's initial public offering in December 1996.  Commencing with an offering
price of $3.50 per share in the initial public offering, the market price of the
Common Stock  experienced  a  substantial  decline,  reaching a low of $0.50 per
share  (based on last  reported  sale  price of the  Common  Stock on the Nasdaq
SmallCap  Market) on December 22, 1998.  During fiscal 2002, the market price of
the Common Stock (based on last  reported  sale price of the Common Stock on the
Nasdaq SmallCap  Market) ranged from a high of $3.40 per share to a low of $1.49
per share.  The last  reported  sales  price of the  Common  Stock on the Nasdaq
SmallCap Market on March 23, 2003 was $2.00 per share. There can be no assurance
as to the future market price of the Common Stock.  See "COMPLIANCE  WITH NASDAQ
LISTING MAINTENANCE REQUIREMENTS."

     COMPLIANCE WITH NASDAQ LISTING MAINTENANCE  REQUIREMENTS.  In order for the
Company's  Common Stock to continue to be listed on the Nasdaq SmallCap  Market,
the Company is required  to be in  compliance  with  certain  continued  listing
standards.  One of such  requirements is that the bid price of listed securities
be equal to or greater than $1.00. If, in the future, the Company's Common Stock
fails to be in compliance with the minimum closing bid price  requirement for at
least thirty  consecutive  trading days or the Company fails to be in compliance
with any other  Nasdaq  continued  listing  requirements,  then the Common Stock
could be de-listed from the Nasdaq SmallCap  Market.  Upon any such  de-listing,
trading,  if any,  in the Common  Stock would  thereafter  be  conducted  in the
over-the-counter  market  on the  so-called  "pink  sheets"  or the  "Electronic
Bulletin  Board"  of  the  National  Association  of  Securities  Dealers,  Inc.
("NASD").  As a consequence  of any such  de-listing,  an investor could find it
more difficult to dispose of, or to obtain  accurate  quotations as to the price
of, the  Company's  Common  Stock.  See  "VOLATILITY  OF MARKET  PRICE OF COMMON
STOCK."

     COMPETITION.  The market for salted snack foods,  such as those sold by the
Company, including potato chips, tortilla chips, dips, pretzels and meat snacks,
is large and intensely competitive. Competitive factors in the salted 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 taste and
quality.

     The snack food industry is primarily  dominated by Frito-Lay,  Inc.,  which
has  substantially  greater  financial and other  resources than the Company and
sells brands that are more widely  recognized  than are the Company's  products.
Numerous  other  companies  that are  actual  or  potential  competitors  of the
Company,  many with  greater  financial  and  other  resources  (including  more
employees  and more  extensive  facilities)  than the  Company,  offer  products
similar to those of the Company.  In addition,  many of such competitors offer a
wider  range of products  than that  offered by the  Company.  Local or regional
markets often have  significant  smaller  competitors,  many of whom offer batch
fried products similar to those of the Company.  Expansion of Company operations
into new markets has and will continue to encounter significant competition from
national,  regional  and  local  competitors  that  may  be  greater  than  that
encountered  by  the  Company  in  its  existing  markets.  In  addition,   such
competitors may challenge the Company's position in its existing markets.  While
the Company believes that its innovative  products and methods of operation 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

                                       11
<PAGE>
additional  shelf  space.  Whether  or not the  Company  incurs  such costs in a
particular  market is dependent upon a number of factors,  including  demand for
the  Company's  products,  relative  availability  of shelf  space  and  general
competitive  conditions.  The Company may incur significant shelf space or other
promotional  costs as a necessary  condition  of entering  into  competition  or
maintaining  market share in  particular  markets or stores.  If incurred,  such
costs may materially affect the Company's financial performance.

     NO  ASSURANCE  OF CONSUMER  ACCEPTANCE  OF  COMPANY'S  EXISTING  AND FUTURE
PRODUCTS.  Consumer preferences for snack foods are continually changing and are
extremely difficult to predict.  The ability of the Company to generate revenues
in new markets will depend upon customer  acceptance of the Company's  products.
There can be no assurance that the Company's products will achieve a significant
degree of market acceptance, that acceptance, if achieved, will be sustained for
any significant  period or that product life cycles will be sufficient to permit
the Company to recover start-up and other associated  costs. In addition,  there
can be no assurance that the Company will succeed in the  development of any new
products or that any new products  developed by the Company will achieve  market
acceptance or generate meaningful revenue for the Company.

     UNCERTAINTIES AND RISKS OF FOOD PRODUCT INDUSTRY. The food product industry
in which the Company is engaged is subject to numerous  uncertainties  and risks
outside of the Company's control.  Profitability in the food product industry is
subject  to  adverse  changes  in  general  business  and  economic  conditions,
oversupply  of  certain  food  products  at the  wholesale  and  retail  levels,
seasonality,  the risk that a food  product  may be banned or its use limited or
declared unhealthful, the risk that product tampering may occur that may require
a recall of one or more of the Company's products,  and the risk that sales of a
food product may decline due to perceived health  concerns,  changes in consumer
tastes or other reasons beyond the control of the Company.

     FLUCTUATIONS  IN  PRICES  OF  SUPPLIES;  DEPENDENCE  UPON  AVAILABILITY  OF
SUPPLIES AND  PERFORMANCE OF SUPPLIERS.  The Company's  manufacturing  costs are
subject to fluctuations in the prices of potatoes,  potato flakes,  wheat flour,
corn and oil, as well as other ingredients of the Company's products.  Potatoes,
potato flakes, wheat flour and corn are widely available year-round. The Company
uses a  variety  of oils in the  production  of its  products.  The  Company  is
dependent on its suppliers to provide the Company with products and  ingredients
in adequate supply and on a timely basis. Although the Company believes that its
requirements  for products and ingredients are readily  available,  and that its
business success is not dependent on any single supplier, the failure of certain
suppliers to meet the Company's performance specifications, quality standards or
delivery  schedules  could  have a  material  adverse  effect  on the  Company's
operations.  In particular,  a sudden scarcity, a substantial price increase, or
an unavailability of product  ingredients could materially  adversely affect the
Company's  operations.  There can be no assurance that  alternative  ingredients
would be available when needed and on commercially attractive terms, if at all.

     LACK OF  PROPRIETARY  MANUFACTURING  METHODS FOR CERTAIN  PRODUCTS;  FUTURE
EXPIRATION OF PATENTED TECHNOLOGY LICENSED BY THE COMPANY.  The Company licenses
patented technology from a third party in connection with the manufacture of its
T.G.I.  Friday's(R)  and Tato Skins(R) brand products and has an exclusive right
to use such  technology  within North America until the patents  expire  between
2004 and 2006. In addition,  the Company expects to utilize patented  technology
from one or more third  parties in  connection  with the  manufacture  of future
products.  Upon the  expiration  of such  patents,  competitors  of the Company,
certain of which may have significantly  greater resources than the Company, may
utilize the patented  technology in the manufacture of products that are similar
to those currently manufactured,  or that may in the future be manufactured,  by
the Company with such patented  technology.  The entry of any such products into
the  marketplace  could  have a  material  adverse  effect  on sales  of  T.G.I.
Friday's(R)  and  Tato  Skins(R)  brand  products,  as well as any  such  future
products, by the Company.

     The taste and  quality of Poore  Brothers(R),  Bob's  Texas  Style(R),  and
Boulder Potato  Company(R)  brand potato chips is largely due to two elements of
the  Company's  manufacturing  process:  its use of batch  frying and its use of
distinctive  seasonings  to produce a variety of flavors.  The Company  does not
have exclusive  rights to the use of either element;  consequently,  competitors
may incorporate such elements into their own processes.

     DEPENDENCE UPON KEY SNACK FOOD BRANDS;  DEPENDENCE UPON T.G.I.  FRIDAY'S(R)
LICENSE  AGREEMENT  AND  FUTURE  LICENSE  AGREEMENTS.   The  Company  derives  a
substantial  portion of its revenue from a limited  number of snack food brands.
For the year ended  December 28, 2002,  approximately  73% of the  Company's net
revenues were  attributable  to the T.G.I.  Friday's(R)  brand  products and the
Poore Brothers(R)  brand products.  A decrease in the popularity of a particular
snack food brand  during  any year could have a material  adverse  effect on the
Company's business,  financial condition and results of operations. There can be
no  assurance  that any of the  Company's  snack food brands  will retain  their
historical levels of popularity or increase in popularity.  Decreased sales from
any one of the key snack food brands without a  corresponding  increase in sales
from other existing or newly  introduced  products would have a material adverse
effect on the Company's financial condition and results of operations.

                                       12
<PAGE>
     Furthermore,  the T.G.I.  Friday's(R)  brand products are  manufactured and
sold by the Company  pursuant to a license  agreement by and between the Company
and TGI Friday's Inc. which expires in 2014.  Pursuant to the license agreement,
the  Company  is  subject to various  requirements  and  conditions  (including,
without limitation, minimum sales targets). The failure of the Company to comply
with  certain of such  requirements  and  conditions  could  result in the early
termination of the license agreement by TGI Friday's Inc. Any termination of the
license agreement, whether at the expiration of its term or prior thereto, could
have a material adverse effect on the Company's  financial condition and results
of operations.

     The Company may  introduce one or more new product lines in the future that
will be manufactured and sold pursuant to additional  license  agreements by and
between the Company and one or more third parties.  Pursuant to any such license
agreements,  the  Company  will  likely be subject to various  requirements  and
conditions  (including  minimum  sales  targets).  The failure of the Company to
comply with  certain of such  requirements  and  conditions  could result in the
early  termination of such  additional  license  agreements.  Depending upon the
success of any such new product lines,  a termination of the applicable  license
agreements,  whether  at the  expiration  of  their  respective  terms  or prior
thereto,  could  have a  material  adverse  effect  on the  Company's  financial
condition and results of operations.

     DEPENDENCE  UPON MAJOR  CUSTOMERS.  Two  customers of the Company,  Vending
Services  of  America  ("VSA",  a national  vending  distributor)  and  Wal*Mart
(including  its SAM's Clubs),  accounted for 13% and 21%,  respectively,  of the
Company's  2002 net  revenues,  with the remainder of the Company's net 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  revenues  for 2002. A decision by any major
customer to cease or  substantially  reduce its purchases  could have a material
adverse effect on the Company's business.

     RELIANCE ON KEY EMPLOYEES; NON-COMPETE AGREEMENTS. The Company's success is
dependent in large part upon the abilities of its executive officers,  including
Eric J. Kufel, President and Chief Executive Officer, Glen E. Flook, Senior Vice
President-Operations,  and Thomas W.  Freeze,  Senior Vice  President  and Chief
Financial Officer.  The inability of the Company's executive officers to perform
their duties or the  inability of the Company to attract and retain other highly
qualified  personnel  could have a material  adverse  effect upon the  Company's
business and  prospects.  The Company does not  maintain,  nor does it currently
contemplate obtaining,  "key man" life insurance with respect to such employees.
The  employment  of the  executive  officers of the  Company is on an  "at-will"
basis.  The  Company  has  non-compete  agreements  with  all of  its  executive
officers. See "ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY."

     GOVERNMENTAL REGULATION.  The packaged food industry is subject to numerous
federal, state and local governmental  regulations,  including those relating to
the  preparation,  labeling  and  marketing  of food  products.  The  Company is
particularly  affected  by the  Nutrition  Labeling  and  Education  Act of 1990
("NLEA"),  which requires specified  nutritional  information to be disclosed on
all  packaged  foods.  The Company  believes  that the  labeling on its products
currently meets these requirements.  The Company does not believe that complying
with the NLEA  regulations  materially  increases  the  Company's  manufacturing
costs. There can be no assurance, however, that new laws or regulations will not
be passed that could  require the Company to alter the taste or  composition  of
its products. Such changes could affect sales of the Company's products and have
a material adverse effect on the Company.

     PRODUCT  LIABILITY CLAIMS. As a manufacturer and marketer of food products,
the Company may be subjected to various product liability  claims.  There can be
no assurance that the product liability insurance maintained by the Company will
be adequate to cover any loss or exposure  for product  liability,  or that such
insurance will continue to be available on terms acceptable to the Company.  Any
product  liability claim not fully covered by insurance,  as well as any adverse
publicity from a product  liability claim,  could have a material adverse effect
on the financial condition or results of operations of the Company.

     SIGNIFICANT  SHAREHOLDERS;  POSSIBLE CHANGE IN CONTROL.  As a result of the
Wabash Foods acquisition,  Capital Foods, LLC ("Capital Foods") (an affiliate of
the former owner of Wabash Foods) became the single  largest  shareholder of the
Company, currently holding approximately 27% of the outstanding shares of Common
Stock  (without  giving effect to the possible  exercise of warrants to purchase
250,000 shares of Common Stock also held by Capital Foods). Accordingly, Capital
Foods is in a position to exercise  substantial  influence  on the  business and
affairs of the Company.  In addition,  Renaissance  Capital Group,  Inc. manages
three funds,  Renaissance  Capital Growth & Income Fund III,  Inc.,  Renaissance
U.S.  Growth & Income  Trust PLC,  and BFS US Special  Opportunities  Trust PLC,
which are  currently  the  beneficial  owners of  approximately  12%, 6% and 7%,
respectively,  of the outstanding shares of Common Stock of the Company. Capital
Foods,  Renaissance  Capital  Growth & Income Fund III, Inc.,  Renaissance  U.S.
Growth & Income  Trust  PLC,  and BFS US  Special  Opportunities  Trust  PLC are
hereinafter referred to collectively as the "Significant Shareholders". Although
the  Company  is not  aware  of any  plans  or  proposals  on  the  part  of any

                                       13
<PAGE>
Significant  Shareholder  to recommend or undertake  any material  change in the
management or business of the Company,  there is no assurance that a Significant
Shareholder will not adopt or support any such plans or proposals in the future.

    Apart from transfer  restrictions arising under applicable provisions of the
securities  laws,  there are no  restrictions  on the ability of the Significant
Shareholders to transfer any or all of their  respective  shares of Common Stock
at any time. One or more of such transfers could have the effect of transferring
effective control of the Company, including to one or more parties not currently
known to the Company.

     POSSIBILITY  THE COMPANY  WILL BE  REQUIRED  TO REGISTER  SHARES OF CERTAIN
STOCKHOLDERS FOR RESALE; SHARES AVAILABLE FOR FUTURE SALE. On December 27, 2001,
the Company  completed  the sale of 586,855  shares of Common  Stock,  $0.01 par
value,  to BFS US Special  Opportunities  Trust PLC  ("BFS"),  a fund managed by
Renaissance  Capital Group,  Inc., in a private placement  transaction.  The net
proceeds of the transaction were utilized by the Company to reduce the Company's
outstanding  indebtedness.  In  connection  with such  transaction,  the Company
granted demand and piggyback  registration rights to BFS. Pursuant to the demand
registration rights, the Company may be required,  upon demand of BFS, to file a
registration  statement (the "BFS  Registration  Statement") with the Securities
and Exchange Commission covering the resale of the shares of Common Stock issued
to BFS in the  transaction.  The Company  will be  required to pay all  expenses
relating to any such registration,  other than underwriting  discounts,  selling
commissions  and stock  transfer taxes  applicable to the shares,  and any other
fees and expenses  incurred by the holder(s) of the shares  (including,  without
limitation, legal fees and expenses) in connection with the registration.

     Approximately  7,374,156  shares of  outstanding  Common  Stock and 956,156
shares of Common  Stock  issuable  upon the  exercise of warrants  issued by the
Company are subject to "piggyback"  registration  rights granted by the Company,
pursuant  to which  such  shares of Common  Stock  may be  registered  under the
Securities Act and, as a result,  become freely tradable in the future. All or a
portion of such shares may, at the election of the holders thereof,  be included
in the BFS Registration Statement and, upon the effectiveness of thereof, may be
sold in the public markets.

     No  prediction  can be made as to the effect,  if any, that future sales of
shares of  Common  Stock  will  have on the  market  price of the  Common  Stock
prevailing from time to time.  Sales of substantial  amounts of Common Stock, or
the perception that these sales could occur,  could adversely affect  prevailing
market  prices for the Common  Stock and could impair the ability of the Company
to raise additional capital through the sale of its equity securities or through
debt financing.

     CERTAIN   ANTI-TAKEOVER   PROVISIONS.    The   Company's   Certificate   of
Incorporation  authorizes  the issuance of up to 50,000  shares of "blank check"
preferred  stock  with  such  designations,  rights  and  preferences  as may be
determined  from  time to time by the Board of  Directors  of the  Company.  The
Company  may  issue  such  shares  of  preferred  stock  in the  future  without
shareholder approval.  The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future.  The issuance of preferred stock,  while
providing  desirable  flexibility in connection with possible  acquisitions  and
other corporate  purposes,  could have the effect of  discouraging,  delaying or
preventing a change of control of the Company,  and preventing holders of Common
Stock from realizing a premium on their shares.  In addition,  under Section 203
of the Delaware General Corporation Law (the "DGCL"),  the Company is prohibited
from  engaging  in any  business  combination  (as defined in the DGCL) with any
interested  shareholder  (as defined in the DGCL) unless certain  conditions are
met. This statutory provision could also have an anti-takeover effect.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company  leases a 140,000  square foot facility  located on 15 acres of
land in Bluffton,  Indiana,  approximately 20 miles south of Ft. Wayne, Indiana.
The Company has entered into a lease  expiring in April 2018 with respect to the
facility with two five-year renewal options.  Current lease payments are $20,000
per month. The lease payments are subject to an annual CPI-based  increase.  The
Company  produces its T.G.I.  Friday's(R)  brand salted snacks and Tato Skins(R)
brand potato snacks at the Bluffton, Indiana facility.

     The Company owns a 60,000 square foot facility located on 7.7 acres of land
in  Goodyear,  Arizona,   approximately  15  miles  west  of  Phoenix,  Arizona.
Construction  of this facility was  completed in June 1997. In August 1997,  the
Company  completed  the  transition  of all of its Arizona  operations  into the
facility.  The site will enable the Company to expand the facility in the future
to a total building size of  approximately  120,000 square feet. The facility is
financed  by a mortgage  with  Morgan  Guaranty  Trust  Company of New York that

                                       14
<PAGE>
matures in June 2012. The Company  produces its Poore  Brothers(R),  Bob's Texas
Style(R)  and Boulder  Potato  Company(R)  brand  potato  chips,  as well as its
private label potato chips at the Goodyear, Arizona facility.

     The Company is  responsible  for all  insurance  costs,  utilities and real
estate taxes in connection  with its facilities.  The Company  believes that its
facilities are adequately covered by insurance.

ITEM 3. LEGAL PROCEEDINGS

     The  Company is  periodically  a party to various  lawsuits  arising in the
ordinary  course of business.  Management  believes,  based on discussions  with
legal  counsel,  that the  resolution  of such lawsuits will not have a material
effect on the Company's financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Stock is traded on the Nasdaq SmallCap Market tier of
the Nasdaq Stock Market under the symbol "SNAK".  There were approximately 3,500
shareholders of record on March 23, 2003. 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.
Additionally, certain debt agreements of the Company limit the Company's ability
to declare and pay dividends.

     The following table sets forth the range of high and low sale prices of the
Company's  Common  Stock as  reported  on the  Nasdaq  SmallCap  Market for each
quarter of the fiscal years ended December 28, 2002 and December 31, 2001.

                                                           SALES PRICES
                                                          ---------------
     PERIOD OF QUOTATION                                  HIGH        LOW
     -------------------                                  ----        ---
     Fiscal 2001:
       First Quarter                                      $3.19      $2.31
       Second Quarter                                     $3.34      $2.54
       Third Quarter                                      $3.99      $2.25
       Fourth Quarter                                     $3.12      $2.28

     Fiscal 2002:
       First Quarter                                      $2.72      $2.20
       Second Quarter                                     $3.40      $2.35
       Third Quarter                                      $2.97      $2.20
       Fourth Quarter                                     $3.02      $1.49

ITEM 6. SELECTED FINANCIAL DATA 1998

                           FIVE YEAR FINANCIAL SUMMARY
                  (IN MILLIONS EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                 2002           2001           2000           1999           1998
                                             ------------   ------------   ------------   ------------   ------------
<S>                                          <C>            <C>            <C>            <C>            <C>
STATEMENTS OF EARNINGS DATA
Net revenues (a)                             $       59.3   $       53.9   $       39.1   $       21.5   $       12.2
Gross profit (a)                                     11.3           10.9            7.7            4.0            2.3
Operating income (loss)                               2.7            2.1            1.9            0.9           (0.4)
Net income (loss)                                     2.6            1.0            0.7            0.1           (0.9)

Net income (loss) per share - diluted        $       0.15   $       0.06   $       0.05   $       0.01   $      (0.12)
Weighted average common shares                 17,826,953     17,198,648     15,129,593      9,134,414      7,210,810
</TABLE>

                                       15
<PAGE>
<TABLE>
<S>                                          <C>            <C>            <C>            <C>            <C>
BALANCE SHEET DATA
Net working capital                          $        2.0   $        2.0   $        0.8   $        0.8   $        0.8
Total assets                                         31.8           31.7           30.3           26.1           12.9
Long-term debt                                        4.1            8.7            9.0           10.7            5.7
Shareholders' equity                                 20.7           16.8           14.3           11.3            5.3
</TABLE>

     (a)  Data for fiscal  years 1998 - 2001 has been  restated  for adoption of
          Emerging Issues Task Force (EITF) Issue No. 01-9 effective  January 1,
          2002.  See Note 1  "Organization,  Business and Summary of Significant
          Accounting Policies - New Pronouncements" to the financial  statements
          included in Item 8.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The following  discussion  summarizes the significant factors affecting the
consolidated  operating  results,  financial  condition,  liquidity  and capital
resources of the Company. This discussion should be read in conjunction with the
financial   statements   under  Item  8  and  the   "Cautionary   Statement   on
Forward-Looking Statements" on page 4.

     Significant  changes to the Company's business mix and nonrecurring  events
that have been  recorded  over the last three years  affect the  comparisons  of
fiscal 2002, 2001, and 2000 operations.  Consequently,  comparative  results are
more  difficult  to analyze and  explain.  Where  practicable,  this  discussion
addresses not only the financial  results as reported,  but also the key results
and factors affecting Poore Brothers' on-going business.

     In 2001, the Emerging  Issues Task Force (EITF) issued EITF Issue No. 01-9,
"Accounting for  Consideration  Given by a Vendor to a Customer or a Reseller of
the Vendor's Products," (EITF Issue No. 01-9). EITF Issue No. 01-9 addresses the
accounting  for  certain  consideration  given by a  vendor  to a  customer  and
provides   guidance  on  the  recognition,   measurement  and  income  statement
classification  for sales  incentives.  In general,  the guidance  requires that
consideration  from a vendor to a retailer be recorded as a reduction in revenue
unless certain  criteria are met. The Company adopted the provisions of the EITF
Issue No. 01-9  effective  in the first  quarter of 2002 and as a result,  costs
previously   recorded  as  expense  have  been  reclassified  and  reflected  as
reductions in revenue.  The Company was also  required to reclassify  amounts in
prior periods in order to conform to the revised  presentation of these costs if
practicable.  As a result of adopting EITF Issue No. 01-9,  the Company  reduced
both net revenues and selling,  general and administrative  expenses in 2001 and
2000 by $3,761,072 and $2,687,925 respectively.  There was no change to the 2001
and 2000 previously reported net income as a result of this change.

     Effective  January 1, 2002,  the  Company  changed the fiscal year from the
twelve  calendar  months  ending on December 31 each year to the 52-week  period
ending on the last Saturday  occurring in the month of December of each calendar
year. Accordingly,  fiscal 2002 commenced January 1, 2002 and ended December 28,
2002.

RESULTS OF OPERATIONS

     YEAR ENDED DECEMBER 28, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2001

     For fiscal 2002,  net revenues  reached $59.3  million,  up 10% from fiscal
2001 net revenues of $53.9.  The Company's  revenue increase was attributable to
growth from T.G.I Friday's(R) brand salted snacks,  which accounted for over 60%
of revenues.  T.G.I.  Friday's(R) growth was partially offset by lower shipments
of Tato Skins(R) and Poore  Brothers(R)  brand snacks in the vending channel due
to deliberate  cannibalization by T.G.I. Friday's(R) brand salted snacks, and by
lower shipments of private label potato chips. Revenues from the Company's other
kettle-cooked  potato  chip  brands  and  distributed  products  rose  modestly.
Revenues in fiscal 2001 included  approximately  $1.2 million from the Company's
Texas merchandising operation which was sold in the fourth quarter of 2001.

                                       16
<PAGE>
     Net income for the year was $2.6 million,  or $0.16 per basic and $0.15 per
diluted  share,  an increase of 152%  compared to fiscal 2001 net income of $1.0
million,  or $0.07 per basic and $0.06 per diluted share. The Company's improved
profitability  was principally  attributable  to increased  revenue and improved
operating efficiencies, which also allowed the Company to significantly increase
promotional  spending  to  support  continued  growth,  particularly  for T.G.I.
Friday's(R) brand salted snacks. In addition, the Company recorded an income tax
credit of $242,837 in fiscal 2002 compared to an income tax provision of $43,000
in fiscal  2001.  The change  primarily  reflects  the  income tax  benefit of a
deferred valuation allowance reversal in the third quarter.

     Manufacturing  efficiencies  improved as a result of  increased  production
volumes due to higher revenues,  and gross profit increased 3% to $11.3 million,
or 19.1% of net revenue,  despite the higher promotional spending.  Profits were
also  positively  affected by both lower  selling,  general  and  administrative
expenses  and  lower  interest  expense.  Selling,  general  and  administrative
expenses  declined 2% to $8.6 million,  or 14.6% of net revenue,  despite higher
revenues due to tight spending controls and no intangibles  amortization expense
as a result of the adoption of SFAS No. 142.  Interest  expense  declined 48% to
$0.5 million due to reduced  indebtedness,  improved working capital  management
and lower interest rates.

     YEAR ENDED DECEMBER31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000

     For fiscal 2001,  net revenues  reached $53.9  million,  up 38% compared to
fiscal  2000 net  revenues  of $39.1  million.  Revenue  growth for the year was
driven by a 45%  increase in  manufactured  products  segment  revenues  and was
attributable  to the  rollout of T.G.I.  Friday's(R)  brand  salted  snacks into
nearly all  distribution  channels.  The distributed  products  segment revenues
declined 8% to $4.8  million due to lower  promotional  activity and the sale of
the Company's Texas merchandising operation in early November.

     Gross profit for the year ended December 31, 2001,  was $10.9  million,  or
20% of net  revenues,  as compared to $7.7  million or 19% of net  revenues  for
fiscal 2000. The $3.2 million  increase,  or 42%, in gross profit  resulted from
the increased volume in manufactured products.

     Selling,  general and administrative expenses increased to $8.8 million, or
16.4% of net revenues for the year ended December 31, 2001, from $5.8 million or
14.7% of net revenues for fiscal 2000. This represents a $3.0 million  increase,
or 51.7%,  compared to fiscal 2000, primarily due to an increase of $2.0 million
in sales and marketing  spending to support the increased sales volume primarily
in connection with support of T.G.I. Friday's(R) brand products.

     Net interest expense  decreased to $1.0 million for the year ended December
31, 2001,  from $1.2 million for fiscal 2000.  This decrease was principally due
to lower interest rates on certain of the Company's indebtedness.

     The  Company's  net income for the year ended  December  31,  2001 was $1.0
million,  and the net  income  for the year  ended  December  31,  2000 was $0.7
million. This increase in net income was attributable primarily to the increased
gross profit offset by higher selling, general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

     Net working  capital was $1,960,000 (a current ratio of 1.3:1),  $2,015,000
(a current  ratio of 1.3:1) and $771,000 (a current  ratio of 1.1:1) at December
28, 2002, December 31, 2001 and December 31, 2000, respectively.  For the fiscal
year ended December 28, 2002, the Company generated cash flow of $5,842,000 from
operating  activities,  principally  from  operating  income and a  decrease  in
accounts receivable,  invested $581,000 in new equipment, and made $5,393,000 in
payments on long-term debt.

     On October  28,  2000,  the  Company  experienced  a fire at the  Goodyear,
Arizona  manufacturing  plant,  causing a temporary  shutdown  of  manufacturing
operations at the facility. There was extensive damage to the roof and equipment
utilities in the potato chip processing area. Third party manufacturers provided
the  Company  with  production  volume to satisfy  nearly  all of the  Company's
customers'  needs  during the  shutdown.  The  Company  continued  to season and
package  the  bulk  product  received  from  third  party  manufacturers.   Full
production at the Arizona facility resumed in March 2001.

     On October 7, 1999, the Company signed a new $9.15 million Credit Agreement
with U.S.  Bancorp (the "U.S.  Bancorp Credit  Agreement")  consisting of a $3.0
million  working capital line of credit (the "U.S.  Bancorp Line of Credit"),  a
$5.8 million term loan (the "U.S. Bancorp Term Loan A") and a $350,000 term loan
(the "U.S.  Bancorp  Term Loan B").  Borrowings  under the U.S.  Bancorp  Credit

                                       17
<PAGE>
Agreement  were  used to pay off  indebtedness  under the  Company's  previously
existing Wells Fargo Credit Agreement,  to refinance indebtedness assumed by the
Company in connection with the Wabash Foods acquisition,  and for future general
working  capital  needs.  The U.S.  Bancorp Line of Credit bears  interest at an
annual rate of prime plus 1%. The U.S.  Bancorp Term Loan A bears interest at an
annual rate of prime and requires  monthly  principal  payments of approximately
$74,000  commencing  February 1, 2000, plus interest,  until maturity on July 1,
2006.  The U.S.  Bancorp Term Loan B had an annual  interest  rate of prime plus
2.5%,  required  monthly  principal  payments  of  approximately  $29,000,  plus
interest,  and matured in March 2001.  Pursuant to the terms of the U.S. Bancorp
Credit  Agreement,  the  Company  issued to U.S.  Bancorp a warrant  (the  "U.S.
Bancorp  Warrant")  to purchase  50,000  shares of Common  Stock for an exercise
price of $1.00 per share.  The U.S.  Bancorp  Warrant is  exercisable  until its
termination on October 7, 2004 and provides the holder thereof certain piggyback
registration rights.

     In June 2000,  the U.S Bancorp  Credit  Agreement was amended to include an
additional  $300,000 term loan (the "U.S. Bancorp Term Loan C") and to refinance
a $715,000  non-interest  bearing  note due to U.S.  Bancorp  on June 30,  2000.
Proceeds  from the U.S.  Bancorp  Term Loan C were used in  connection  with the
Boulder  acquisition.  The U.S.  Bancorp Term Loan C had an annual rate of prime
plus 2% and required monthly principal payments of approximately  $12,500,  plus
interest,  until maturity in August 2002. The Company made a payment of $200,000
on the $715,000  non-interest  bearing note and refinanced the balance in a term
loan (the  "U.S.  Bancorp  Term Loan D").  The U.S.  Bancorp  Term Loan D had an
annual  rate of  prime  plus  2% and  required  monthly  principal  payments  of
approximately $21,500, plus interest, until maturity in June 2002.

     In April 2001, the U.S.  Bancorp  Credit  Agreement was amended to increase
the U.S.  Bancorp Line of Credit from $3.0 million to $5.0 million,  establish a
$0.5 million capital expenditure line of credit (the "CapEx Term Loan"),  extend
the U.S.  Bancorp Line of Credit  maturity date from October 2002 to October 31,
2003, and modify certain  financial  covenants.  In June 2002, the U.S.  Bancorp
Credit  Agreement was amended to extend the U.S. Bancorp Line of Credit maturity
date from  October 31, 2003 to October  31,  2005 and modify  certain  financial
covenants.  The Company borrowed  $241,430 under the CapEx Term Loan in December
2001.  The CapEx Term Loan bears interest at an annual rate of prime plus 1% and
requires monthly  principal  payments of approximately  $10,000,  plus interest,
until maturity on October 31, 2003 when the balance is due.

     The U.S.  Bancorp  Credit  Agreement  is  secured by  accounts  receivable,
inventories,  equipment and general  intangibles.  Borrowings  under the line of
credit are  limited to 80% of  eligible  receivables  and up to 60% of  eligible
inventories.  At  December  28,  2002,  the  Company  had a  borrowing  base  of
$3,174,000  under the U.S.  Bancorp  Line of  Credit.  The U.S.  Bancorp  Credit
Agreement  requires  the  Company to be in  compliance  with  certain  financial
performance  criteria,  including a minimum  annual  operating  results ratio, a
minimum  tangible  capital base and a minimum fixed charge  coverage  ratio.  At
December  28,  2002,  the Company was in  compliance  with all of the  financial
covenants.  Management  believes that the fulfillment of the Company's plans and
objectives will enable the Company to attain a sufficient level of profitability
to  remain  in  compliance  with  these  financial  covenants.  There  can be no
assurance,  however,  that the Company  will attain any such  profitability  and
remain in compliance.  Any acceleration  under the U.S. Bancorp Credit Agreement
prior to the scheduled  maturity of the U.S.  Bancorp Line of Credit or the U.S.
Bancorp Term Loans could have a material adverse effect upon the Company.

     As of  December  28,  2002,  there was no  outstanding  balance on the U.S.
Bancorp Line of Credit, $3,181,685 on the U.S. Bancorp Term Loan A, and $130,770
on the CapEx Term Loan.

     The   Company's   Goodyear,   Arizona   manufacturing,   distribution   and
headquarters  facility is subject to a $1.9  million  mortgage  loan from Morgan
Guaranty  Trust  Company of New York,  bears  interest at 9.03% per annum and is
secured by the building and the land on which it is located. The loan matures on
July 1, 2012; however monthly principal and interest installments of $18,425 are
determined based on a twenty-year amortization period.

     The following  table outlines the Company's  future  contractual  financial
obligations as of December 28, 2002, due by period:

<TABLE>
<CAPTION>
                                            LESS THAN 1
                                 TOTAL         YEAR       1 - 3 YEARS   4 - 5 YEARS  AFTER 5 YEARS
                              -----------   -----------   -----------   -----------  -------------
<S>                           <C>           <C>           <C>           <C>           <C>
Long-term debt ............   $ 5,210,122   $ 1,105,004   $ 1,867,437   $   603,908   $ 1,633,773
Operating leases ..........     7,114,645       980,270     1,868,336     1,595,148     2,670,891
                              -----------   -----------   -----------   -----------   -----------
Total contractual cash
obligations ...............   $12,324,767   $ 2,085,274   $ 3,735,773   $ 2,199,056   $ 4,304,664
                              ===========   ===========   ===========   ===========   ===========
</TABLE>

                                       18
<PAGE>
     The Company has entered into a variety of capital and operating  leases for
the  acquisition of equipment and vehicles.  The leases  generally have three to
seven-year  terms,  bear interest at rates from 8.2% to 11.3%,  require  monthly
payments and expire at various times through 2008 and are  collateralized by the
related equipment.

     Rental expense under operating leases was $956,000 and $506,900 for each of
fiscal 2002 and 2001,  respectively.  Minimum  future rental  commitments  under
non-cancelable leases as of December 28, 2002 are as follows:

                                            CAPITAL      OPERATING
YEAR                                         LEASES        LEASES        TOTAL
----                                       ----------    ----------   ----------
2003 ...................................   $   46,484    $  980,270   $1,026,754
2004 ...................................           --       952,300      952,300
2005 ...................................           --       916,036      916,036
2006 ...................................           --       888,325      888,325
2007 ...................................           --       706,823      706,823
Thereafter .............................           --     2,670,891    2,670,891
                                           ----------    ----------   ----------
Total ..................................       46,484    $7,114,645   $7,161,129
Less amount representing interest ......         (705)   ==========   ==========
                                           ----------
Present value ..........................   $   45,779
                                           ==========

     At  December  31,  2001,  the  Company  had  outstanding  a 9%  Convertible
Debenture  due July 1, 2002 in the  principal  amount of $427,656  held by Wells
Fargo Small  Business  Investment  Company,  Inc.  ("Wells Fargo SBIC").  The 9%
Convertible Debenture was secured by land, building,  equipment and intangibles.
Interest on the 9%  Convertible  Debenture  was paid by the Company on a monthly
basis.  Monthly principal  payments of approximately  $5,000 were required to be
made by the Company on the Wells  Fargo SBIC 9%  Convertible  Debenture  through
June 2002 and the remaining balance was due on July 1, 2002. In June 2002, Wells
Fargo SBIC converted its 9% Convertible  Debenture  holdings into 401,497 shares
of Common Stock. In November 1999,  Renaissance Capital converted 50% ($859,047)
of its 9% Convertible Debenture holdings into 859,047 shares of Common Stock and
agreed  unconditionally  to convert into Common Stock the remaining $859,047 not
later than December 31, 2000. In December 2000,  Renaissance  Capital  converted
the remaining 859,047 shares of its 9% Convertible Debentures into Common Stock.

     On December 27, 2001,  the Company  completed the sale of 586,855 shares of
Common  Stock  at an  offering  price  of  $2.13  per  share  to BFS US  Special
Opportunities  Trust PLC, a fund managed by  Renaissance  Capital,  in a private
placement transaction.  The net proceeds of the transaction were utilized by the
Company for general corporate  purposes and to reduce the Company's  outstanding
indebtedness.  The Company has  granted BFS US Special  Opportunities  Trust PLC
both demand and  piggyback  registration  rights  with  respect to the shares of
Common Stock purchased in the offering.

     The Company plans to support its  introduction of Crunch Toons(TM) with the
most comprehensive advertising, consumer promotion and public relations campaign
in the Company's history.  In the second half of 2003, the Company will launch a
multi-million dollar national television advertising campaign,  newspaper coupon
program, and public relations activities,  as well as feature on-pack promotions
such as free  Looney  Tunes(TM)  tattoos.  Due to  approximately  $4  million in
planned  spending  during the year for the  aforementioned  activities and other
costs  associated  with  the  launch,  the  Company  expects  to  be  marginally
profitable for 2003.

     At December  28, 2002,  the Company had net  operating  loss  carryforwards
available for federal income taxes of approximately $2.6 million.  The Company's
accumulated  net operating  loss  carryforwards  will begin to expire in varying
amounts between 2010 and 2018.

MANAGEMENT'S PLANS

     In connection with the  implementation of the Company's  business strategy,
the Company may incur additional operating losses in the future and is likely to
require future debt or equity financings (particularly in connection with future
strategic   acquisitions).    Expenditures   relating   to   acquisition-related
integration  costs,  trade  and  consumer  marketing  programs  and new  product
development  may  adversely  affect  operating  expenses  and  consequently  may
adversely  affect  operating  and net income.  These types of  expenditures  are
expensed for accounting  purposes as incurred,  while revenue generated from the
result of such investments may benefit future periods.  Management believes that
cash flow from operations,  during the next twelve months,  along with available
working capital and borrowing facilities,  should enable the Company to meet its

                                       19
<PAGE>
operating  cash  requirements  through  2003.  The  belief  is based on  current
operating  plans  and  certain  assumptions,  including  those  relating  to the
Company's future revenue levels and expenditures,  industry and general economic
conditions and other conditions. If any of these factors change, the Company may
require  future debt or equity  financings  to meet its  business  requirements.
There can be no assurance that any required  financings will be available or, if
available, on terms attractive to the Company.

INFLATION AND SEASONALITY

     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 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     In December 2001, the Securities and Exchange Commission issued an advisory
requesting  that all  registrants  describe  their three to five most  "critical
accounting  policies".  The Securities and Exchange Commission  indicated that a
"critical  accounting policy" is one which is both important to the portrayal of
the Company's  financial  condition and results and requires  management's  most
difficult,  subjective  or complex  judgments,  often as a result of the need to
make estimates  about the effect of matters that are inherently  uncertain.  The
Company believes that the following accounting policies fit this definition:

     ALLOWANCE  FOR DOUBTFUL  ACCOUNTS.  The Company  maintains an allowance for
     doubtful  accounts for estimated losses resulting from the inability of its
     customers to make  required  payments.  If the  financial  condition of the
     Company's  customers  were to  deteriorate,  resulting in an  impairment of
     their ability to make payments,  additional allowances may be required. The
     allowance  for doubtful  accounts was $409,000 and $219,000 at December 28,
     2002 and December 31, 2001, respectively.

     INVENTORIES.  The  Company's  inventories  are  stated at the lower of cost
     (first-in,  first-out)  or market.  The Company  identifies  slow moving or
     obsolete  inventories and estimates  appropriate  loss  provisions  related
     thereto.  Historically,  these loss provisions  have not been  significant;
     however,  if  actual  market  conditions  are  less  favorable  than  those
     projected by management, additional inventory write-downs may be required.

     GOODWILL  AND   TRADEMARKS.   Goodwill  and  trademarks  are  reviewed  for
     impairment  annually,  or more frequently if impairment  indicators  arise.
     Goodwill is required to be tested for  impairment  between the annual tests
     if an event occurs or circumstances change that more-likely-than-not reduce
     the fair value of a reporting  unit below its  carrying  value.  Intangible
     assets  with  indefinite  lives are  required  to be tested for  impairment
     between  the  annual  tests  if an event  occurs  or  circumstances  change
     indicating that the asset might be impaired.  The Company  believes at this
     time that the carrying values and useful lives continue to be appropriate.

     ADVERTISING AND PROMOTIONAL EXPENSES. The Company expenses production costs
     of  advertising  the first time the  advertising  takes  place,  except for
     cooperative advertising costs which are expensed when the related sales are
     recognized.  Costs  associated with obtaining  shelf space (i.e.  "slotting
     fees") are  expensed in the period in which such costs are  incurred by the
     Company.  Anytime the Company  offers  consideration  (cash or credit) as a
     trade advertising or promotion  allowance to a purchaser of products at any
     point along the distribution chain, the amount is accrued and recorded as a
     reduction in revenue.  Any  marketing  programs that deal directly with the
     consumer are recorded in selling, general and administrative expenses.

     INCOME  TAXES.  The Company has been  profitable  since 1999;  however,  it
     experienced significant net losses in prior fiscal years resulting in a net
     operating  loss  ("NOL")  carryforward  for federal  income tax purposes of
     approximately  $4.7  million  at  December  31,  2001.  Generally  accepted
     accounting principles require that the Company record a valuation allowance
     against  the  deferred  tax asset  associated  with this NOL if it is "more
     likely than not" that the Company  will not be able to utilize it to offset
     future taxes.  During the third quarter of 2002, the Company concluded that
     it is more likely than not that its  deferred  tax asset at that time would
     be realized  and also began  providing  for income taxes at a rate equal to
     the combined federal and state effective rates,  which  approximates  39.2%
     under current tax rates, rather than the 7.5% rate previously being used to
     record a tax  provision  for only certain  state income  taxes.  Subsequent
     revisions to the estimated net  realizable  value of the deferred tax asset
     could  cause the  provision  for income  taxes to vary  significantly  from
     period to period,  although  the cash tax payments  will remain  unaffected
     until the benefit of the NOL is utilized.

                                       20
<PAGE>
     The above listing is not intended to be a comprehensive  list of all of the
Company's  accounting  policies.  In many cases the  accounting  treatment  of a
particular transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application. See the
Company's audited financial  statements and notes thereto which begin on page 34
of this Annual Report on Form 10-K which contain  accounting  policies and other
disclosures  required by  auditing  standards  generally  accepted in the United
States.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statements  of  Financial  Accounting  Standards  ("SFAS")  No.  141,  "BUSINESS
COMBINATIONS" and SFAS No. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS". SFAS No.
141  requires  companies  to apply the  purchase  method of  accounting  for all
business combinations initiated after June 30, 2001 and prohibits the use of the
pooling-of-interests  method. SFAS No. 142 changes the method by which companies
recognize  intangible  assets in purchase  business  combinations  and generally
requires  identifiable  intangible  assets  to  be  recognized  separately  from
goodwill.  In addition, it eliminates the amortization of all existing and newly
acquired  goodwill  on a  prospective  basis and  requires  companies  to assess
goodwill  for  impairment,  at least  annually,  based on the fair  value of the
reporting  unit.  Upon  adoption  on  January 1, 2002,  the  Company  ceased the
amortization of goodwill and other  intangible  assets with indefinite  lives in
accordance with SFAS No. 142.  Goodwill and trademark  amortization  expense was
approximately $652,000 and $603,000 for 2001 and 2000 respectively.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "ACCOUNTING  FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED  ASSETS".  SFAS No. 144 supersedes SFAS No.
121,  "ACCOUNTING  FOR THE  IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR  LONG-LIVED
ASSETS TO BE DISPOSED OF" and the  accounting  and  reporting  provisions of APB
Opinion No. 30,  "REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF
DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY
OCCURRING  EVENTS AND  TRANSACTIONS".  SFAS No. 144 modifies the method by which
companies account for certain asset impairment losses.  There was no effect from
adopting SFAS No. 144 on January 1, 2002.

     In 2001, the Emerging  Issues Task Force (EITF) issued EITF Issue No. 01-9,
"Accounting for  Consideration  Given by a Vendor to a Customer or a Reseller of
the Vendor's Products," (EITF Issue No. 01-9). EITF Issue No. 01-9 addresses the
accounting  for  certain  consideration  given by a  vendor  to a  customer  and
provides   guidance  on  the  recognition,   measurement  and  income  statement
classification  for sales  incentives.  In general,  the guidance  requires that
consideration  from a vendor to a retailer be recorded as a reduction in revenue
unless certain  criteria are met. The Company adopted the provisions of the EITF
Issue No. 01-9  effective  in the first  quarter of 2002 and as a result,  costs
previously   recorded  as  expense  have  been  reclassified  and  reflected  as
reductions in revenue.  The Company was also  required to reclassify  amounts in
prior periods in order to conform to the revised  presentation of these costs if
practicable.  As a result of adopting EITF Issue No. 01-9,  the Company  reduced
both net revenues and selling,  general and administrative  expenses in 2001 and
2000 by $3,761,072 and $2,687,925 respectively.  There was no change to the 2001
and 2000 previously reported net income as a result of this change.

     See Note 1 to the financial statements in Item 8 for a discussion regarding
recently  issued  accounting   standards,   including   Statement  of  Financial
Accounting Standards (SFAS) Nos. 141-148 and EITF Issue No. 01-9.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  principal  market  risks to which  the  Company  is  exposed  that may
adversely impact the Company's results of operations and financial  position are
changes in certain raw material  prices and interest  rates.  The Company has no
market risk sensitive instruments held for trading purposes.

     Raw  materials  used by the  Company  are exposed to the impact of changing
commodity  prices.  The Company's  most  significant  raw material  requirements
include potatoes, potato flakes, wheat flour, corn and oil. The Company attempts
to minimize the effect of future price  fluctuations  related to the purchase of
raw materials primarily through forward purchasing to cover future manufacturing
requirements, generally for periods from one to 18 months. Futures contracts are
not used in combination with the forward purchasing of these raw materials.  The
Company's  procurement practices are intended to reduce the risk of future price
increases,  but also may potentially  limit the ability to benefit from possible
price decreases.

     The Company also has interest rate risk with respect to interest expense on
variable rate debt, with rates based upon changes in the prime rate.  Therefore,
the Company has an exposure to changes in those rates.  At December 28, 2002 and
December  31,  2001,  the Company had $3.0  million and $8.0 million of variable
rate debt  outstanding.  A hypothetical  10% adverse change in weighted  average
interest rates during fiscal 2002 and 2001 would have had an unfavorable  impact
of $0.03  million and $0.08  million  respectively,  on both the  Company's  net
earnings and cash flows.

     The Company's  primary  concentration  of credit risk is related to certain
trade accounts receivable. In the normal course of business, the Company extends
unsecured credit to its customers.  In 2002 and 2001,  substantially  all of the
Company's customers were distributors or retailers whose sales were concentrated
in the grocery industry,  throughout the United States. The Company investigates
a customer's  credit  worthiness  before extending credit. At December 28, 2002,
two  customers  accounted  for  approximately  27%  of  the  Company's  accounts
receivable.

                                       21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                            PAGE
                                                                            ----
REPORTS
Independent Auditors Reports with respect to financial statements for the
  years ended December 28, 2002, December 31, 2001 and December 31, 2000     30

FINANCIAL STATEMENTS
Consolidated balance sheets as of December 28, 2002 and December 31, 2001    32
Consolidated statements of income for the years ended December 28, 2002,
  December 31, 2001 and December 31, 2000                                    33
Consolidated statements of shareholders' equity for the years ended
  December 28,  2002, December 31, 2001 and December 31, 2000                34
Consolidated statements of cash flows for the years ended December 28,
  2002, December 31, 2001 and December 31, 2000                              35
Notes to consolidated financial statements                                   36

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE

     Information with respect to this Item 9 is hereby incorporated by reference
from the  Company's  "Current  Report on Form 8-K" filed by the Company with the
Securities and Exchange Commission on May 14, 2002.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

     Name                   Age                      Position
     ----                   ---                      --------
     Eric J. Kufel          36     President, Chief Executive Officer, Director
     Glen E. Flook          44     Senior Vice President-Operations
     Thomas W. Freeze       51     Senior Vice President, Chief Financial
                                     Officer, Treasurer, Secretary, and Director
     Mark S. Howells        49     Chairman, Director
     Thomas E. Cain         48     Director
     James W. Myers         68     Director
     Robert C. Pearson      67     Director
     Aaron M. Shenkman      62     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 1995 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
November  1994 to June  1995 Mr.  Kufel  was  Brand  Manager  for The  Coca-Cola
Company,  and from June 1994 to November  1994,  Mr. Kufel was  Assistant  Brand
Manager for The Coca-Cola Company. From January 1993 to June 1994, 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.

GLEN E. FLOOK.  Mr. Flook has served as Senior Vice  President-Operations  since
May 2000 and as Vice  President-Manufacturing  from March 1997 to May 2000. From
January 1994 to February 1997, Mr. Flook was employed by The Dial Corporation as
a Plant Manager.  From January 1983 to January 1994, Mr. Flook served in various
capacities with Frito-Lay, Inc., including Plant Manager and Production Manager.

                                       22
<PAGE>
THOMAS W. FREEZE. Mr. Freeze has served as Senior Vice President since May 2000,
as Chief Financial  Officer,  Secretary and Treasurer since April 1997, and as a
Director since October 1999. From April 1997 to May 2000, Mr. Freeze served as a
Vice President of the Company.  From April 1994 to April 1997, Mr. Freeze served
as Vice President,  Finance and  Administration - Retail of New England Business
Service,  Inc.  From  October  1989 to April  1994,  Mr.  Freeze  served as Vice
President, Treasurer and Secretary of New England Business Service, Inc.

MARK S. HOWELLS.  Mr. Howells has served as Chairman of the Board 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 served
as the  Chairman  of the  Board  of Poore  Brothers  Southeast,  Inc.,  a former
subsidiary of the Company, from its inception in May 1993 until it was dissolved
in 1999 and served as its President and Chief Executive Officer from May 1993 to
August 1994.  From 1988 to May 2000,  Mr.  Howells  served as the  President and
Chairman  of  Arizona   Securities   Group,   Inc.,  a   registered   securities
broker-dealer. Since May 2000, Mr. Howells has devoted a majority of his time to
serving  as the  President  and  Chairman  of  MS.Howells  & Co.,  a  registered
securities broker-dealer.

THOMAS E. CAIN. Mr. Cain has served as a Director since September 2000. Mr. Cain
has been Chief Executive Officer of Focus Capital Group LLC since December 2001.
From 1999 to 2001, Mr. Cain was Chairman of Frontstep  distribution.com and from
1991 to 1999, Mr. Cain was President and Chief Executive Officer of Distribution
Architects International,  Inc., a distribution and logistics software developer
and  marketer.  Mr.  Cain has  extensive  experience  in  software  development,
e-commerce and supply chain management.

JAMES W. MYERS. Mr. Myers has served as a Director since January 1999. Mr. Myers
has been President of Myers Management & Capital Group,  Inc., a consulting firm
specializing in strategic,  organizational  and financial  advisory  services to
CEO's, since January 1996. From December 1989 to December 1995, Mr. Myers served
as  President  of Myers,  Craig,  Vallone & Francois,  Inc.,  a  management  and
corporate finance consulting firm. Previously, Mr. Myers was an executive with a
variety of consumer goods companies.

ROBERT C.  PEARSON.  Mr.  Pearson has served as a Director of the Company  since
March 1996.  Mr.  Pearson has been Senior Vice  President-Corporate  Finance for
Renaissance  Capital Group, Inc. since April 1997.  Previously,  Mr. Pearson had
been  an  independent  financial  and  management  consultant   specializing  in
investments  with emerging growth  companies.  Renaissance  Capital Group is the
investment  manager of  Renaissance  Capital Growth & Income Fund III, Inc., the
former owner of a 9%  Convertible  Debenture and currently a shareholder  of the
Company.  See "ITEM 6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  RESULTS  OF
OPERATIONS AND FINANCIAL CONDITION - LIQUIDITY AND CAPITAL Resources". 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.  Mr.
Pearson is currently a director of Advance  Power  Technology,  Inc. (a publicly
traded  semiconductor  manufacturer),  and  CaminoSoft  Corp. (a  distributor of
consumables for laser printers).

AARON M.  SHENKMAN.  Mr.  Shenkman has served as a Director of the Company since
June 1997.  He has  served as the  General  Partner  of Managed  Funds LLC since
October  1997.  He  served  as the  Vice-Chairman  of  Helen  of Troy  Corp.,  a
distributor  of personal care  products,  from March 1997 to October 1997.  From
February 1984 to February 1997, Mr.  Shenkman was the President of Helen of Troy
Corp.  From 1993 to 1996,  Mr.  Shenkman  also served as a Director of Craftmade
International, a distributor of ceiling fans.

ITEMS 10-13. DOCUMENTS INCORPORATED BY REFERENCE

     Information with respect to a portion of Item 10 and Items 11, 12 and 13 of
Form 10-K is hereby  incorporated  by reference into this Part III of the Annual
Report of Form 10-K from the Company's Proxy Statement relating to the Company's
2003  Annual  Meeting  of  Shareholders  to be  filed  by the  Company  with the
Securities and Exchange Commission on or about April 15, 2003.

                                     PART IV
ITEM 14. CONTROLS AND PROCEDURES

As required by Securities and Exchange Commission Rule 13a-15 promulgated
under the Securities  Exchange Act of 1934, as amended,  within 90 days prior to
the filing date of this report,  the Company  carried out an  evaluation  of the
effectiveness of the design and operation of the Company's  disclosure  controls
and  procedures.  This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's President
and Chief Executive  Officer and the Company's Chief  Financial  Officer.  Based
upon that evaluation,  the Company's  President and Chief Executive  Officer and

                                       23
<PAGE>
the Company's Chief Financial  Officer  concluded that the Company's  disclosure
controls  and  procedures  are  effective.  Subsequent  to the date the  Company
carried  out its  evaluation,  there  have been no  significant  changes  in the
Company's internal controls or in other factors which could significantly affect
internal controls.

    Disclosure  controls and procedures are controls and other  procedures  that
are  designed to ensure that  information  required to be  disclosed  in Company
reports  filed or  submitted  under the  Exchange  Act is  recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and  forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information  required  to be  disclosed  in  Company  reports  filed  under  the
Securities  Exchange Act of 1934, as amended, is accumulated and communicated to
management,  including the Company's Chief Executive Officer and Chief Financial
Officer,   as  appropriate,   to  allow  timely  decisions   regarding  required
disclosure.

ITEM 15.  EXHIBITS AND REPORTS OF FORM 8-K

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

     (a)  1. FINANCIAL STATEMENTS

          REPORTS
          Report of independent auditors with respect to financial statements
            for the years ended December 28, 2002, December 31, 2001 and
            December 31, 2000
          FINANCIAL STATEMENTS
          Consolidated balance sheets as of December 28, 2002 and December 31,
            2001
          Consolidated statements of income for the years ended December 28,
            2002, December 31, 2001 and December 31, 2000
          Consolidated statements of shareholders' equity for the years ended
            December 28, 2002, December 31, 2001 and December 31, 2000
          Consolidated  statements  of cash  flows for the  years  ended
            December 28, 2002, December 31, 2001 and December 31, 2000
          Notes to consolidated financial statements

     (b)  2. FINANCIAL SCHEDULES

          Schedules have been omitted because of the absence of conditions under
          which they are required or because information required is included in
          the Company's financial statements or notes thereto.

     (c)  3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K:


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 --    Certificate of Amendment to the  Certificate of  Incorporation  of the
          Company  filed with the Secretary of State of the State of Delaware on
          October  7,  1999.   (Incorporated   by  reference  to  the  Company's
          definitive  Proxy  Statement on Schedule 14A filed with the Securities
          and Exchange Commission on September 15, 1999.)
3.4 --    By-Laws of the Company. (1)
4.1 --    Specimen Certificate for shares of Common Stock. (1)
4.2 --    Convertible  Debenture Loan Agreement  dated May 31, 1995 by and among
          the Company (and certain of its subsidiaries), Renaissance Capital and
          Wells Fargo. (1)
4.3 --    9.00% Convertible  Debenture dated May 31, 1995, issued by the Company
          to Renaissance Capital. (1)
4.4 --    9.00% Convertible  Debenture dated May 31, 1995, issued by the Company
          to Wells Fargo. (1)
4.5 --    Form of Warrant issued as of February 1998 to Renaissance  Capital and
          Wells Fargo. (3)
4.6 --    Warrant  dated  November  4,  1998,  issued by the  Company to Norwest
          Business Credit, Inc. (4)

                                       24
<PAGE>
4.7 --    Warrant to  purchase  400,000  shares of Common  Stock,  issued by the
          Company to Wabash Foods on October 7, 1999. (Incorporated by reference
          to the Company's definitive Proxy Statement on Schedule 14A filed with
          the Securities and Exchange Commission on September 15, 1999.)
4.8 --    Form of  Revolving  Note,  Term  Note A and Term  Note B issued by the
          Company to U.S. Bancorp Republic Commercial  Finance,  Inc. on October
          7, 1999. (5)
4.9 --    Warrant  to  purchase  50,000  shares of Common  Stock,  issued by the
          Company to U.S. Bancorp Republic Commercial  Finance,  Inc. on October
          7, 1999. (5)
4.10 --   Form of Term  Note C and Term  Note D issued  by the  Company  to U.S.
          Bancorp as of June 30, 2000. (6)
10.1 --   Non-Qualified Stock Option Agreements dated August 1, 1995, August 31,
          1995 and  February  29,  1996,  by and between the Company and Mark S.
          Howells. (1)
10.2 --   Non-Qualified Stock Option Agreements dated August 1, 1995, August 31,
          1995 and February 29, 1996,  by and between the Company and Jeffrey J.
          Puglisi. (1)
10.3 --   Agreement  dated  August 29,  1996,  by and  between  the  Company and
          Westminster Capital, Inc. ("Westminster"), as amended. (1)
10.4 --   Amendment No. 1 dated October 14, 1996, to Warrant dated September 11,
          1996, issued by the Company to Westminster. (1)
10.5 --   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. (1)
10.6 --   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. (1)
10.7 --   Non-Qualified  Stock Option Agreement dated as of October 22, 1996, by
          and between the Company and Mark S. Howells. (1)
10.8 --   Letter  Agreement  dated as of  November  5, 1996,  by and between the
          Company and Jeffrey J. Puglisi. (1)
10.9 --   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. (1)
10.10 --  Letter  Agreement  dated  December 4, 1996, by and between the Company
          and Jeffrey J. Puglisi, relating to stock options. (1)
10.11 --  Letter  Agreement  dated  December 4, 1996, by and between the Company
          and Mark S. Howells, relating to stock options. (1)
10.12 --  Employment  Agreement  dated  January  24,  1997,  by and  between the
          Company and Eric J. Kufel. (2)
10.13 --  Employment  Agreement  dated  February  14,  1997,  by and between the
          Company and Glen E. Flook. (2)
10.14 --  Employment  Agreement dated April 10, 1997, by and between the Company
          and Thomas W. Freeze.  (Incorporated  by  reference  to the  Company's
          Quarterly Report on Form 10-QSB for the three-month period ended March
          31, 1997.)
10.15 --  Fixed  Rate  Note  dated  June  4,  1997,  by and  between  La  Cometa
          Properties, Inc. and Morgan Guaranty Trust Company of New York. (3)
10.16 --  Deed of Trust  and  Security  Agreement  dated  June 4,  1997,  by and
          between La Cometa  Properties,  Inc. and Morgan Guaranty Trust Company
          of New York. (3)
10.17 --  Guaranty  Agreement dated June 4, 1997, by and between the Company and
          Morgan Guaranty Trust Company of New York. (3)
10.18 --  Agreement  for  Purchase  and  Sale  of  Limited   Liability   Company
          Membership  Interests dated as of August 16, 1999, by and between Pate
          Foods  Corporation,  Wabash  Foods and the Company.  (Incorporated  by
          reference to the Company's  definitive Proxy Statement on Schedule 14A
          filed with the  Securities  and Exchange  Commission  on September 15,
          1999.)
10.19 --  Letter  Agreement  dated July 30,  1999 by and between the Company and
          Stifel, Nicolaus & Company,  Incorporated.  (Incorporated by reference
          to the Company's  Quarterly  Report on Form 10-QSB for the three-month
          period ended September 30, 1999.)
10.20 --  Poore Brothers, Inc. 1995 Stock Option Plan, as amended. (5)
10.21 --  Credit  Agreement,  dated as of October 3, 1999,  by and  between  the
          Company and U.S. Bancorp Republic Commercial Finance, Inc. (5)
10.22 --  Security  Agreement,  dated as of October 3, 1999,  by and between the
          Company and U.S. Bancorp Republic Commercial Finance, Inc. (5)
10.23 --  Commercial Lease,  dated May 1, 1998, by and between Wabash Foods, LLC
          and American Pacific Financial Corporation. (5)
10.24 --  Agreement  for the  Purchase  and Sale of  Assets  of  Boulder  Potato
          Company  dated as of June 8,  2000,  by and  among  the  Company,  the
          shareholders  of Boulder Potato  Company,  and Boulder Potato Company.
          (6)
10.25 --  Registration Rights Agreement dated as of June 8, 2000, by and between
          Boulder Potato Company and the Company. (6)

                                       25
<PAGE>
10.26 --  First Amendment, dated as of June 30, 2000, to Credit Agreement, dated
          as of October 3, 1999,  by and between  the Company and U.S.  Bancorp.
          (6)
10.27 --  Second  Amendment to Credit  Agreement  (dated March 2, 2001),  by and
          between the Company and U.S. Bank National Association. (7)
10.28 --  License Agreement, dated April 3, 2000, by and between the Company and
          TGI Friday's Inc.  (Certain portions of this exhibit have been omitted
          pursuant to a confidential treatment request filed with the Securities
          and Exchange Commission.) (7)
10.29 --  Third  Amendment to Credit  Agreement  (dated March 30, 2001),  by and
          between the Company and U.S. Bank National Association. (8)
10.30 --  First  Amendment to License  Agreement,  dated as of July 11, 2001, by
          and between the Company and TGI  Friday's  Inc.  (certain  portions of
          this exhibit have been omitted pursuant to a confidentiality treatment
          request filed with the Securities and Exchange Commission). (9)
10.31 --  Share Purchase Agreement,  dated December 27, 2001, by and between the
          Company and BFS US Special  Opportunities Trust PLC.  (Incorporated by
          reference to the Company's  Current  Report on Form 8-K filed with the
          Securities and Exchange Commission on January 10, 2002.)
10.32 --  Fourth  Amendment to Credit  Agreement (dated as of June 29, 2002), by
          and between the Company and U.S. Bank National Association. (10)
10.33 --  License Agreement, dated November 20, 2002, by and between the Company
          and Warner  Bros.,  a division of Time Warner  Entertainment  Company,
          L.P. (Certain portions of this exhibit have been omitted pursuant to a
          confidential  treatment request filed with the Securities and Exchange
          Commission.) (11)
10.34 --  License Agreement, dated November 20, 2002, by and between the Company
          and Warner  Bros.,  a division of Time Warner  Entertainment  Company,
          L.P. (Certain portions of this exhibit have been omitted pursuant to a
          confidential  treatment request filed with the Securities and Exchange
          Commission.) (11)
10.35 --  License Agreement, dated July 19, 2000, by and between the Company and
          M.J.  Quinlan &  Associates  Pty.  Limited  (Certain  portions of this
          exhibit have been omitted pursuant to a confidential treatment request
          filed with the Securities and Exchange Commission.) (11)
21.1 --   List of Subsidiaries of the Company. (11)
23.1 --   Consent of Deloitte & Touche, LLP. (11)
23.2 --   Notice Regarding Consent of Arthur Andersen LLP (11)
99.1 --   Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002. (11)

----------
(1)  Incorporated by reference to the Company's  Registration  Statement on Form
     SB-2, Registration No. 333-5594-LA.
(2)  Incorporated by reference to the Company's Annual Report on Form 10-KSB for
     the fiscal year ended December 31, 1996.
(3)  Incorporated by reference to the Company's  Quarterly Report on Form 10-QSB
     for the three-month period ended June 30, 1997.
(4)  Incorporated by reference to the Company's  Quarterly Report on Form 10-QSB
     for the three-month period ended September 30, 1998.
(5)  Incorporated by reference to the Company's Annual Report on Form 10-KSB for
     the fiscal year ended December 31, 1999.
(6)  Incorporated by reference to the Company's  Quarterly Report on Form 10-QSB
     for the three-month period ended June 30, 2000.
(7)  Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the three-month period ended March 31, 2001.
(8)  Incorporated by reference to the Company's  Quarterly Report on Form 10-QSB
     for the three-month period ended June 30, 2001.
(9)  Incorporated by reference to the Company's  Quarterly Report on Form 10-QSB
     for the three-month period ended September 30, 2001.
(10) Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the quarter ended September 28, 2002.
(11) Filed herewith.

     (b)  Reports on Form 8-K.

          None.

                                       26
<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 28, 2003                  POORE BROTHERS, INC.

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

     Pursuant to the  requirements of the Securities  Exchange 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 Officer,     March 28, 2003
-----------------------   and Director (Principal Executive
     Eric J. Kufel        Officer)


 /s/ Thomas W. Freeze     Senior Vice President, Chief Financial  March 28, 2003
-----------------------   Officer, Treasurer, Secretary, and
   Thomas W. Freeze       Director (Principal Financial Officer
                          and Principal Accounting Officer)

  /s/ Mark S. Howells     Chairman, Director                      March 28, 2003
-----------------------
    Mark S. Howells


  /s/ Thomas E. Cain      Director                                March 28, 2003
-----------------------
    Thomas E. Cain


  /s/ James W. Myers      Director                                March 28, 2003
-----------------------
    James W. Myers


 /s/ Robert C. Pearson    Director                                March 28, 2003
-----------------------
   Robert C. Pearson


 /s/ Aaron M. Shenkman    Director                                March 28, 2003
-----------------------
   Aaron M. Shenkman

                                       27
<PAGE>
                                 CERTIFICATIONS

     I, Eric J. Kufel, certify that:

     1. I have reviewed this Annual Report on Form 10-K of Poore Brothers, Inc.;

     2. Based on my  knowledge,  this  Annual on Form 10-K does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this Annual Report on Form 10-K,  fairly present in all
material respects the financial condition,  results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Securities and Exchange Commission Rules 13a-14 and 15d-14 promulgated under the
Securities and Exchange Act of 1934, as amended) for the registrant and we have:

     a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

     b) Evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this Annual
Report on Form 10-K (the "Evaluation Date"); and

     c) Presented in this Annual Report on Form 10-K our  conclusions  about the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     a) All  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) Any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
Annual  Report on Form 10-K whether there were  significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003

/s/ Eric J. Kufel
-------------------------------------
Eric J. Kufel
President and Chief Executive Officer
(principal executive officer)

                                       28
<PAGE>
                                 CERTIFICATIONS

     I, Thomas W. Freeze, certify that:

     1. I have reviewed this Annual Report on Form 10-K of Poore Brothers, Inc.;

     2. Based on my  knowledge,  this  Annual on Form 10-K does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this Annual Report on Form 10-K,  fairly present in all
material respects the financial condition,  results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Securities and Exchange Commission Rules 13a-14 and 15d-14 promulgated under the
Securities and Exchange Act of 1934, as amended) for the registrant and we have:

     a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

     b) Evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this Annual
Report on Form 10-K (the "Evaluation Date"); and

     c) Presented in this Annual Report on Form 10-K our  conclusions  about the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     a) All  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) Any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
Annual  Report on Form 10-K whether there were  significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003

/s/ Thomas W. Freeze
--------------------------------------------
Thomas W. Freeze
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
(principal financial and accounting officer)

                                       29
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

Shareholders and Board of Directors of Poore Brothers, Inc. and Subsidiaries
Goodyear, Arizona

We have audited the accompanying  consolidated  balance sheet of Poore Brothers,
Inc. and  subsidiaries  (the "Company") as of December 28, 2002, and the related
consolidated statements of income,  shareholders' equity, and cash flows for the
year 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 audit. The Company's  consolidated  financial
statements as of December 31, 2001 and for the years ended December 31, 2001 and
2000, before the reclassifications  described in Note 1 and before the inclusion
of the disclosures discussed in Note 2 to the consolidated financial statements,
were  audited by other  auditors  who have  ceased  operations.  Those  auditors
expressed an unqualified  opinion on those financial  statements in their report
dated February 11, 2002.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  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  audit  provides  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial  position  of  Poore  Brothers,   Inc.  and
subsidiaries  as of December 28, 2002,  and the results of their  operations and
their  cash  flows  for the  year  then  ended  in  conformity  with  accounting
principles generally accepted in the United States of America.

As discussed above, the financial  statements of the Company for the years ended
December  31,  2001 and 2000 were  audited  by other  auditors  who have  ceased
operations.  As  described  in Note 1,  those  financial  statements  have  been
reclassified to give effect to Emerging Issues Task Force (EITF) Issue No. 01-9,
Accounting for Consideration  Given by a Vendor to a Customer or Reseller of the
Vendor's  Products,  which was  adopted by the  Company  on January 1, 2002.  We
audited the  reclassifications  described in Note 1 that were applied to conform
the 2001 and 2000 financial statements to the comparative  presentation required
by EITF  Issue  01-9.  Our audit  procedures  with  respect to the 2001 and 2000
disclosures  in Note 1 included  (i)  comparing  the  amounts  shown as customer
incentive  costs  in Note 1 to  underlying  accounting  analysis  obtained  from
management,  and (2) on a test  basis,  comparing  the  amounts  comprising  the
customer  incentive  costs obtained from  management to  independent  supporting
documentation,  and (3) testing  the  mathematical  accuracy  of the  underlying
analysis.  In our opinion,  such  reclassifications  have been properly applied.
However,  we were not engaged to audit,  review,  or apply any procedures to the
2001 and 2000  financial  statements  of the Company  other than with respect to
such  reclassifications  and,  accordingly,  we do not express an opinion or any
form of assurance on the 2001 and 2000 financial statements taken as a whole.

As described in Note 2, these financial  statements have been revised to include
the  transitional  disclosures  required by Statement  of  Financial  Accounting
Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"),  which was
adopted by the Company as of January 1, 2002. Our audit  procedures with respect
to the  disclosures  in  Note 2 with  respect  to 2001  and  2000  included  (1)
comparing the previously  reported net income to the previously issued financial
statements and the adjustments to reported net income representing  amortization
expense (including any related tax effects)  recognized in those periods related
to goodwill  and  intangible  assets that are no longer  being  amortized,  as a
result of initially applying SFAS 142 (including any related tax effects) to the
Company's  underlying  analysis  obtained from  management,  and (2) testing the
mathematical  accuracy of the  reconciliation of adjusted net income to reported
net income and the  related  earnings-per-share  amounts.  In our  opinion,  the
disclosures for 2001 and 2000 in Note 2 are  appropriate.  However,  we were not
engaged to audit, review, or apply any procedures to the 2001 and 2000 financial
statements  of the  Company  other than with  respect to such  disclosures  and,
accordingly,  we do not express an opinion or any other form of assurance on the
2001 and 2000 financial statements taken as a whole.

DELOITTE & TOUCHE LLP

February 12, 2003
Phoenix, Arizona

                                       30
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


          NOTE: The report of Arthur Andersen LLP presented below is a copy of a
          previously issued Arthur Andersen LLP report. This report has not been
          reissued by Arthur Andersen LLP nor has Arthur Andersen LLP provided a
          consent to the inclusion of its report in this Form 10-K.

To Poore Brothers, Inc.

We have audited the accompanying  consolidated balance sheets of POORE BROTHERS,
INC. (a Delaware corporation) and SUBSIDIARIES as of December 31, 2001 and 2000,
and the related consolidated statements of operations, shareholders' equity, 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 auditing standards generally accepted
in the United States. 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 financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of Poore  Brothers,  Inc. and
subsidiaries  as of  December  31,  2001  and  2000,  and the  results  of their
operations  and their cash flows for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Phoenix, Arizona,
February 11, 2002

                                       31
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                           DECEMBER 28,    DECEMBER 31,
                                                                               2002            2001
                                                                           ------------    ------------
<S>                                                                        <C>             <C>
                                     ASSETS
Current assets:
  Cash .................................................................   $  1,395,187    $    894,198
  Accounts receivable, net of allowance of $409,000 in 2002
    and $219,000 in 2001 ...............................................      4,427,531       4,982,793
  Inventories ..........................................................      1,760,401       1,887,872
  Deferred income tax asset ............................................        421,942              --
  Other current assets .................................................        803,665         430,914
                                                                           ------------    ------------
     Total current assets ..............................................      8,808,726       8,195,777

Property and equipment, net ............................................     13,009,948      13,730,273
Goodwill ...............................................................      5,565,687       5,354,901
Intangible assets, net .................................................      4,207,032       4,207,032
Other assets, net ......................................................        165,233         200,077
                                                                           ------------    ------------
     Total assets ......................................................   $ 31,756,626    $ 31,688,060
                                                                           ============    ============
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

  Accounts payable .....................................................   $  2,937,602    $  2,430,857
  Accrued liabilities ..................................................      2,806,149       1,406,845
  Current portion of long-term debt ....................................      1,105,004       2,343,472
                                                                           ------------    ------------
     Total current liabilities .........................................      6,848,755       6,181,174

Long-term debt, less current portion ...................................      4,105,118       8,661,255
Deferred income tax liability ..........................................         80,512              --
                                                                           ------------    ------------
     Total liabilities .................................................     11,034,385      14,842,429
                                                                           ------------    ------------
Commitments and contingencies

Shareholders' equity:
  Preferred stock, $100 par value; 50,000 shares authorized;
    no shares issued or outstanding at December 28, 2002 and
    2001, respectively .................................................             --              --
  Common stock, $.01 par value; 50,000,000 shares authorized;
    16,729,911 and 15,687,518 shares issued and outstanding at
    December 28, 2002 and December 31, 2001, respectively ..............        167,299         156,875
  Additional paid-in capital ...........................................     22,404,835      21,175,485
  Accumulated deficit ..................................................     (1,849,893)     (4,486,729)
                                                                           ------------    ------------
     Total shareholders' equity ........................................     20,722,241      16,845,631
                                                                           ------------    ------------
     Total liabilities and shareholders' equity ........................   $ 31,756,626    $ 31,688,060
                                                                           ============    ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       32
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                    DECEMBER 28,            DECEMBER 31,
                                                        2002            2001            2000
                                                    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>
Net revenues ....................................   $ 59,348,471    $ 53,904,816    $ 39,055,082

Cost of revenues ................................     48,036,462      42,958,822      31,350,941
                                                    ------------    ------------    ------------

     Gross profit ...............................     11,312,009      10,945,994       7,704,141

Selling, general and administrative expenses ....      8,637,652       8,816,627       5,758,883
                                                    ------------    ------------    ------------

     Operating income ...........................      2,674,357       2,129,367       1,945,258
                                                    ------------    ------------    ------------

Fire related income, net ........................        259,376           4,014              --

Interest expense, net ...........................       (539,733)     (1,045,117)     (1,177,467)
                                                    ------------    ------------    ------------

       Total interest expense and other .........       (280,357)     (1,041,103)     (1,177,467)
                                                    ------------    ------------    ------------

     Income before income tax provision .........      2,394,000       1,088,264         767,791

Income tax benefit (provision) ..................        242,837         (43,000)        (38,000)
                                                    ------------    ------------    ------------

   Net income ...................................   $  2,636,837    $  1,045,264    $    729,791
                                                    ============    ============    ============
Earnings per common share:
    Basic .......................................   $       0.16    $       0.07    $       0.05
                                                    ============    ============    ============
    Diluted .....................................   $       0.15    $       0.06    $       0.05
                                                    ============    ============    ============
Weighted average number of common shares:
    Basic .......................................     16,146,081      15,050,509      13,769,614
                                                    ============    ============    ============
    Diluted .....................................     17,826,953      17,198,648      15,129,593
                                                    ============    ============    ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       33
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                COMMON STOCK          ADDITIONAL
                                          -------------------------     PAID-IN     ACCUMULATED
                                             SHARES        AMOUNT       CAPITAL       DEFICIT         TOTAL
                                          -----------   -----------   -----------   -----------    -----------
<S>                                       <C>          <C>           <C>           <C>            <C>
Balance, December 31, 1999 ............    13,222,044   $   132,220   $17,386,827   $(6,261,784)   $11,257,263
  Exercise of common stock options ....       153,334         1,533       173,705            --        175,238
  Issuance of common stock ............     1,619,387        16,194     2,117,010            --      2,133,204
  Net income ..........................            --            --            --       729,791        729,791
                                          -----------   -----------   -----------   -----------    -----------
Balance, December 31, 2000 ............    14,994,765       149,947    19,677,542    (5,531,993)    14,295,496
  Exercise of common stock options ....        76,000           760        97,810            --         98,570
  Issuance of warrants ................            --            --        16,800            --         16,800
  Issuance of common stock ............       616,753         6,168     1,383,333            --      1,389,501
  Net income ..........................            --            --            --     1,045,264      1,045,264
                                          -----------   -----------   -----------   -----------    -----------
Balance, December 31, 2001 ............    15,687,518       156,875    21,175,485    (4,486,729)    16,845,631
  Exercise of common stock options ....       349,016         3,490       508,304            --        511,794
  Issuance of common stock ............       693,377         6,934       721,044            --        727,978
  Net income ..........................            --            --            --     2,636,837      2,636,837
                                          -----------   -----------   -----------   -----------    -----------
Balance, December 28, 2002 ............    16,729,911   $   167,299   $22,404,835   $(1,849,893)   $20,722,241
                                          ===========   ===========   ===========   ===========    ===========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       34
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   2002           2001           2000
                                                                               -----------    -----------    -----------
<S>                                                                            <C>            <C>            <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
  Net income ...............................................................   $ 2,636,837    $ 1,045,264    $   729,791
  Adjustments to reconcile net income to net cash provided by (used in)
    operating activities:
      Depreciation .........................................................     1,288,333      1,237,260      1,089,004
      Amortization .........................................................        33,939        694,067        648,938
      Accounts receivable and inventory provisions .........................       329,996         53,558        102,325
      Other asset amortization .............................................       423,088        349,723        252,148
      Deferred income taxes ................................................      (341,430)            --             --
      (Gain) loss on disposition of fixed assets ...........................         7,073       (167,450)            --
  Change in operating assets and liabilities, net of effect of business
    acquired:
      Accounts receivable ..................................................       365,782        240,981     (1,974,013)
      Inventories ..........................................................       (13,045)      (186,238)      (481,401)
      Other assets and liabilities .........................................      (794,934)      (396,916)      (252,812)
      Accounts payable and accrued liabilities .............................     1,906,049       (776,807)     2,503,632
                                                                               -----------    -----------    -----------
              Net cash provided by operating activities ....................     5,841,688      2,093,442      2,617,612
                                                                               -----------    -----------    -----------
CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES:
  Purchase of equipment ....................................................      (581,087)    (2,655,535)      (635,415)
  Proceeds from disposition of fixed assets ................................         6,006        700,000             --
  Acquisition related expenses .............................................            --             --       (365,542)
                                                                               -----------    -----------    -----------
               Net cash used in investing activities .......................      (575,081)    (1,955,535)    (1,000,957)
                                                                               -----------    -----------    -----------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
  Proceeds from issuance of common stock ...................................       627,494      1,313,571        175,238
  Stock and debt issuance costs ............................................            --        (10,774)       (11,164)
  Proceeds from issuance of debt ...........................................            --             --        610,329
  Payments made on long-term debt ..........................................    (1,954,844)    (2,404,470)    (2,053,149)
  Net increase (decrease) in working capital line of credit ................    (3,438,268)     1,530,410       (114,720)
                                                                               -----------    -----------    -----------
               Net cash provided by (used in) financing activities .........    (4,765,618)       428,738     (1,393,466)
                                                                               -----------    -----------    -----------
Net increase in cash .......................................................       500,989        566,645        223,189
Cash and cash equivalents at beginning of year .............................       894,198        327,553        104,364
                                                                               -----------    -----------    -----------
Cash and cash equivalents at end of year ...................................   $ 1,395,187    $   894,198    $   327,553
                                                                               ===========    ===========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for interest ...................................   $   521,420    $ 1,055,248    $ 1,047,380
  Summary of noncash investing and financing activities:
    Common Stock issued for acquisitions and related earnouts ..............       210,786        185,274      1,235,321
    Common Stock or warrant issued for sales commissions ...................            --         16,800         50,000
    Conversion of Convertible Debenture into Common Stock ..................       401,497             --        859,047
    Note payable issued for purchase of equipment ..........................            --        538,308             --
    Note payable issued for acquisition ....................................            --             --        830,000
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       35
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     The  Company,  a  Delaware  corporation,  was  formed  in 1995 as a holding
company to acquire a potato chip  manufacturing and distribution  business which
had been founded by Donald and James Poore in 1986.

     In December 1996, the Company  completed an initial public  offering of its
Common Stock,  pursuant to which  2,250,000  shares of Common Stock were offered
and sold to the public at an offering price of $3.50 per share.  Of such shares,
1,882,652  shares were sold by the  Company.  The initial  public  offering  was
underwritten by Paradise Valley Securities,  Inc. (the  "Underwriter").  The net
proceeds to the Company from the sale of the  1,882,652  shares of Common Stock,
after deducting  underwriting  discounts and commissions and the expenses of the
offering payable by the Company,  were approximately  $5,300,000.  On January 6,
1997,  337,500  additional  shares of Common Stock were sold by the Company upon
the exercise by the  Underwriter  of an  over-allotment  option granted to it in
connection  with  the  initial  public  offering.   After  deducting  applicable
underwriting  discounts  and  expenses,  the Company  received  net  proceeds of
approximately $1,000,000 from the sale of such additional shares.

     On November 4, 1998,  the Company  acquired the business and certain assets
of Tejas Snacks,  L.P., a Texas-based potato chip manufacturer,  including Bob's
Texas Style(R) potato chips brand, inventories and certain capital equipment. In
consideration for these assets, the Company issued 523,077  unregistered  shares
of Common Stock with a fair value at the time of $450,000 and paid approximately
$1,250,000 in cash.

     On October 7, 1999, the Company  acquired Wabash Foods,  including the Tato
Skins(R),  O'Boisies(R),  and Pizzarias(R) trademarks for a total purchase price
of $12,763,000.  The Company acquired all of the membership  interests of Wabash
Foods from Pate Foods  Corporation in exchange for (i) the issuance of 4,400,000
unregistered shares of Common Stock, (ii) the issuance of a five-year warrant to
purchase  400,000  unregistered  shares of Common Stock at an exercise  price of
$1.00  per  share,   and  (iii)  the  effective   assumption  of  $8,073,000  in
liabilities.

     On June 8, 2000, the Company acquired  Boulder Natural Foods,  Inc. and the
business and certain related assets and liabilities of Boulder Potato Company, a
Colorado-based  potato chip marketer and  distributor.  The assets  included the
Boulder Potato  Company(R) and Boulder  Chips(TM)  brand,  accounts  receivable,
inventories,  certain  other  intangible  assets and specified  liabilities.  In
consideration  for  these  assets  and  liabilities,  the  Company  paid a total
purchase  price of  $2,637,000,  consisting  of:  (i) the  issuance  of  725,252
unregistered shares of Common Stock with a fair value at the time of $1,235,000,
(ii) a cash payment of $301,000,  (iii) the issuance of a promissory note to the
seller  in the  amount of  $830,000,  and (iv) the  assumption  of  $271,000  in
liabilities.   In  addition,  the  Company  was  required  to  issue  additional
unregistered  shares of Common Stock to the seller on each of the first two (and
may be required on the third)  anniversaries  of the closing of the acquisition.
Any such  issuances will be dependent  upon, and will be calculated  based upon,
increases in sales of Boulder Potato Company(R) products as compared to previous
periods.

     In October 2000, the Company launched its T.G.I.  Friday's(R)  brand salted
snacks pursuant to a license  agreement with TGI Friday's Inc., which expires in
2014.

     On December 27, 2001,  the Company  completed the sale of 586,855 shares of
Common  Stock  at an  offering  price  of  $2.13  per  share  to BFS US  Special
Opportunities  Trust PLC, a fund managed by  Renaissance  Capital,  in a private
placement transaction.

     In December 2002, Warner Bros. Consumer Products granted the Company rights
to introduce a new brand of salted snacks featuring Looney Tunes(TM) characters.
The Company plans to launch the new brand nationwide in the summer of 2003 under
a multi-year  agreement that grants the Company  exclusive salted snack category
brand licensing and promotional rights for Looney Tunes(TM) characters.

     Effective  January 1, 2002,  the  Company  changed its fiscal year from the
twelve  calendar  months  ending on December 31 each year to the 52-week  period
ending on the last Saturday  occurring in the month of December of each calendar
year. Accordingly,  fiscal 2002 commenced January 1, 2002 and ended December 28,
2002.

                                       36
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
   (CONTINUED)

     Certain amounts in the prior year  consolidated  financial  statements have
been reclassified to conform to the current year presentation.

BUSINESS

     The  Company is  engaged  in the  development,  production,  marketing  and
distribution  of  innovative  salted snack food  products  that are sold through
grocery  retail  chains,  mass  merchandisers,  club  stores  and  through  vend
distributors  across  the  United  States.  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 had significant operating losses
prior to fiscal 1999. Successful future operations are subject to certain risks,
uncertainties,   expenses  and  difficulties   frequently   encountered  in  the
establishment  and  growth of a new  business  in the snack food  industry.  The
market for salted snack foods, such as potato chips, tortilla chips, popcorn and
pretzels, is large and intensely  competitive.  The industry is dominated by one
significant   competitor  and  includes  many  other  competitors  with  greater
financial and other resources than the Company.

PRINCIPLES OF CONSOLIDATION

     The  consolidated  financial  statements  include  the  accounts  of  Poore
Brothers,  Inc.  and  all of its  wholly  owned  subsidiaries.  All  significant
intercompany amounts and transactions have been eliminated.

USE OF ESTIMATES

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally accepted in the United States requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities,  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.  We routinely  evaluate our  estimates,  including  those
related to customer programs and incentives,  product returns, bad debts, income
taxes, long-lived assets,  inventories and contingencies.  We base our estimates
on historical  experience and on various other  assumptions that are believed to
be reasonable  under the  circumstances.  Actual results could differ from those
estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     At December 28, 2002,  December  31, 2001 and 2000,  the carrying  value of
cash, accounts receivable, accounts payable, and accrued liabilities approximate
fair values  since they are  short-term  in nature.  The  carrying  value of the
long-term debt  approximates  fair-value  based on the borrowing rates currently
available to the Company for long-term borrowings with similar terms, except for
the  mortgage  loan  with  interest  at  9.03%,   which  has  a  fair  value  of
approximately  $1.4  million at December 28, 2002.  The Company  estimates  fair
values  of  financial   instruments  by  using  available  market   information.
Considerable  judgment is required  in  interpreting  market data to develop the
estimates of fair value. Accordingly, the estimates may not be indicative of the
amounts that the Company could realize in a current market exchange.  The use of
different market  assumptions or valuation  methodologies  could have a material
effect on the estimated fair value amounts.

INVENTORIES

     Inventories  are  stated  at the  lower of cost  (first-in,  first-out)  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 otherwise disposed of, the
related  costs and  accumulated  depreciation  are removed from the  appropriate
accounts, and the resulting gain or loss is recognized.  Depreciation expense is
computed using the  straight-line  method over the estimated useful lives of the
assets, ranging from 2 to 30 years.

                                       37
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
   (CONTINUED)

     In accordance with Financial  Accounting Standards Board ("FASB") Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  144,  "Accounting  for  the
Impairment or Disposal of Long-Lived  Assets", we evaluate the recoverability of
property and equipment not held for sale by comparing the carrying amount of the
asset or group of assets  against the estimated  undiscounted  future cash flows
expected  to  result  from the use of the  asset or group of  assets  and  their
eventual  disposition.  If the undiscounted  future cash flows are less than the
carrying  value of the asset or group of assets being  evaluated,  an impairment
loss is recorded.  The loss is measured as the difference between the fair value
and carrying value of the asset or group of assets being evaluated. Assets to be
disposed of are reported at the lower of the  carrying  amount or the fair value
less  cost to  sell.  The  estimated  fair  value  would  be  based  on the best
information  available  under the  circumstances,  including  prices for similar
assets or the results of valuation  techniques,  including  the present value of
expected  future cash flows using a discount  rate  commensurate  with the risks
involved.

INTANGIBLE ASSETS

     In June 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 142,  "Goodwill  and
Other  Intangible  Assets".  SFAS No. 142 changes the method by which  companies
recognize  intangible  assets in purchase  business  combinations  and generally
requires  identifiable  intangible  assets  to  be  recognized  separately  from
goodwill.  In addition, it eliminates the amortization of all existing and newly
acquired  goodwill  on a  prospective  basis and  requires  companies  to assess
goodwill  for  impairment,  at least  annually,  based on the fair  value of the
reporting  unit.  Upon  adoption  on  January 1, 2002,  the  Company  ceased the
amortization of goodwill and other  intangible  assets with indefinite  lives in
accordance with SFAS No. 142.

     Goodwill is recorded at cost and reviewed for impairment annually,  or more
frequently if impairment  indicators arise.  Goodwill  amortization  expense was
approximately $321,000 and $299,000 for 2001 and 2000, respectively. See Note 2.

     Trademarks are recorded at cost and are reviewed for  impairment  annually,
or more frequently if impairment indicators arise. Amortization expense on these
trademarks  was   approximately   $331,000  and  $304,000  for  2001  and  2000,
respectively. See Note 2.

REVENUE RECOGNITION

     Net revenues  are  recorded  when the risk of loss and title to the product
transfers to the  purchaser.  Revenues are recorded net of  allowances  for cash
discounts, estimated sales returns, trade promotions and other sales incentives.

ADVERTISING AND PROMOTION

     The Company  expenses  production  costs of advertising  the first time the
advertising  takes place,  except for  cooperative  advertising  costs which are
expensed when the related sales are recognized.  Costs associated with obtaining
shelf space  (i.e.,  "slotting  fees") are  expensed in the period in which such
costs are incurred by the Company.  Accrued advertising and promotion,  which is
included in the current  liabilities  section of the  accompanying  consolidated
balance sheet, was $946,000 and $388,000 in 2002 and 2001, respectively.

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 bases of assets and
liabilities using enacted rates expected to apply to

                                       38
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
   (CONTINUED)

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 the period that  includes  the  enactment
date.

STOCK OPTIONS

     The  Company's  stock-based  compensation  plan,  described  in  Note 8, is
accounted for under the recognition  and  measurement  provisions of APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
The  Company  has  adopted  the  disclosure-only  provisions  of SFAS  No.  123,
"Accounting  for  Stock-Based   Compensation,"  as  amended  by  SFAS  No.  148,
"Accounting   for  Stock-Based   Compensation  -  Transition  and   Disclosure".
Accordingly, no compensation cost has been recognized for the stock option plan.
Awards  under  the plan  vest  over  periods  ranging  from one to three  years,
depending on the type of award.  The following  table  illustrates the effect on
net  income  and  earnings  per share if the fair  value  based  method had been
applied to all outstanding and unvested awards in each period  presented,  using
the Black-Scholes valuation model.

<TABLE>
<CAPTION>
(in thousands)                                                              2002            2001            2000
                                                                       -------------   -------------   -------------
<S>                                                                    <C>             <C>             <C>
Net income as reported                                                 $   2,636,837   $   1,045,264   $     729,791
Deduct: Total stock-based employee compensation expense determined
  under fair value method for all awards, net of related tax effects      (1,010,139)       (850,301)       (701,300)
                                                                       -------------   -------------   -------------
Pro forma net income                                                   $   1,626,698   $     194,963   $      28,491
                                                                       =============   =============   =============
Net income per share - basic - as reported                             $        0.16   $        0.07   $        0.05
Pro forma net income per share - basic                                          0.10            0.01            0.00
Net income per share - diluted - as reported                                    0.15            0.06            0.05
Pro forma net income per share - diluted                                        0.09            0.01            0.00
</TABLE>

     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 44%, 58% and 110%;
risk-free  interest rate of 3.8%,  3.4% and 6.1%;  and expected lives of 3 years
for 2002, 2001 and 2000,  respectively.  Under this method, the weighted average
fair value of the options granted was $1.27,  $1.59 and $1.23 per share in 2002,
2001 and 2000, respectively.

EARNINGS PER COMMON SHARE

     Basic  earnings  per common share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
Exercises of outstanding stock options or warrants and conversion of convertible
debentures are assumed to occur for purposes of calculating diluted earnings per
share for periods in which their effect would not be anti-dilutive.

                                           DECEMBER 28,       DECEMBER 31,
                                              2002         2001          2000
                                           -----------  -----------  -----------
BASIC EARNINGS PER COMMON SHARE:
Net income                                 $ 2,636,837  $ 1,045,264  $   729,791
                                           ===========  ===========  ===========
Weighted average number of common shares    16,146,081   15,050,509   13,769,614
                                           ===========  ===========  ===========
Earnings per common share                  $      0.16  $      0.07  $      0.05
                                           ===========  ===========  ===========

                                       39
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
   (CONTINUED)

DILUTED EARNINGS PER COMMON SHARE:

<TABLE>
<S>                                                 <C>           <C>           <C>
Net income                                          $ 2,636,837   $ 1,045,264   $   729,791
                                                    ===========   ===========   ===========
Weighted average number of common shares             16,146,081    15,050,509    13,769,614
Incremental shares from assumed conversions -
  Debentures                                            120,279            --            --
  Warrants                                              476,019       690,428       475,943
  Stock options                                       1,084,574     1,457,711       884,036
                                                    -----------   -----------   -----------
Adjusted weighted average number of common shares    17,826,953    17,198,648    15,129,593
                                                    ===========   ===========   ===========
Earnings per common share                           $      0.15   $      0.06   $      0.05
                                                    ===========   ===========   ===========
</TABLE>

     Options and  warrants to purchase  950,577,  653,077 and 985,527  shares of
Common  Stock were  outstanding  at December  28,  2002,  December  31, 2001 and
December 31, 2000,  respectively,  but were not included in the  computation  of
diluted  earnings per share because the option and warrant  exercise prices were
greater  than the average  market price per share of the Common  Stock.  For the
years ended December 31, 2001 and 2000 conversion of the convertible  debentures
was not assumed, as the effect of the conversion would be anti-dilutive.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statements  of  Financial  Accounting  Standards  ("SFAS")  No.  141,  "BUSINESS
COMBINATIONS" and SFAS No. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS". SFAS No.
141  requires  companies  to apply the  purchase  method of  accounting  for all
business combinations initiated after June 30, 2001 and prohibits the use of the
pooling-of-interests  method. SFAS No. 142 changes the method by which companies
recognize  intangible  assets in purchase  business  combinations  and generally
requires  identifiable  intangible  assets  to  be  recognized  separately  from
goodwill.  In addition, it eliminates the amortization of all existing and newly
acquired  goodwill  on a  prospective  basis and  requires  companies  to assess
goodwill  for  impairment,  at least  annually,  based on the fair  value of the
reporting  unit.  Upon  adoption  on  January 1, 2002,  the  Company  ceased the
amortization  of  goodwill  and  trademarks  in  accordance  with SFAS No.  142.
Goodwill  and  trademark  amortization  expense was  approximately  $652,000 and
$603,000 for 2001 and 2000 respectively.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "ACCOUNTING  FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED  ASSETS".  SFAS No. 144 supersedes SFAS No.
121,  "ACCOUNTING  FOR THE  IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR  LONG-LIVED
ASSETS TO BE DISPOSED OF" and the  accounting  and  reporting  provisions of APB
Opinion No. 30,  "REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF
DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY
OCCURRING  EVENTS AND  TRANSACTIONS".  SFAS No. 144 modifies the method by which
companies account for certain asset impairment losses.  There was no effect from
adopting SFAS No. 144 on January 1, 2002.

     In 2001, the Emerging  Issues Task Force (EITF) issued EITF Issue No. 01-9,
"Accounting for  Consideration  Given by a Vendor to a Customer or a Reseller of
the Vendor's Products," (EITF Issue No. 01-9). EITF Issue No. 01-9 addresses the
accounting  for  certain  consideration  given by a  vendor  to a  customer  and
provides   guidance  on  the  recognition,   measurement  and  income  statement
classification  for sales  incentives.  In general,  the guidance  requires that
consideration  from a vendor to a retailer be recorded as a reduction in revenue
unless certain  criteria are met. The Company adopted the provisions of the EITF
Issue No. 01-9  effective  in the first  quarter of 2002 and as a result,  costs
previously   recorded  as  expense  have  been  reclassified  and  reflected  as
reductions in revenue.  The Company was also  required to reclassify  amounts in
prior periods in order to conform to the revised  presentation of these costs if
practicable.  As a result of adopting EITF Issue No. 01-9,  the Company  reduced
both net revenues and selling,  general and administrative  expenses in 2001 and
2000 by $3,761,072 and $2,687,925 respectively.  There was no change to the 2001
and 2000 previously reported net income as a result of this change.

                                       40
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
   (CONTINUED)

     In  November  2002,  the FASB issued  FASB  Interpretation  ("FIN") No. 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees of Indebtedness  of Others".  FIN 45 expands the disclosure
requirements  to be made by a  guarantor  in its  interim  and annual  financial
statements  about its obligations  under certain  guarantees that it has issued.
The Interpretation also clarifies that a guarantor is required to recognize,  at
the inception of a guarantee,  a liability for the fair value of the  obligation
undertaken  in issuing the  guarantee.  The  Company  does not have and does not
anticipate  issuing any guarantees which would be required to be recognized as a
liability  under the  provisions of FIN 45 and thus does not expect the adoption
of this Interpretation to have a material impact on its results of operations or
financial position.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure".  This Statement amends SFAS No. 123 to
provide  alternative  methods of transition  for a voluntary  change to the fair
value method of accounting for stock-based employee compensation.  Specifically,
SFAS No. 148  prohibits  companies  from  utilizing  the  prospective  method of
transition,  the only method  offered under the original SFAS No. 123, in fiscal
years  beginning  after December 15, 2003.  However,  the statement  permits two
additional  transition methods for companies that adopt the fair value method of
accounting for stock-based compensation,  which include the modified prospective
and retroactive  restatement methods.  Under the prospective method,  expense is
recognized  for all employee  awards  granted,  modified,  or settled  after the
beginning  of the  fiscal  year in which the  recognition  provisions  are first
applied.  The  modified  prospective  method  recognizes   stock-based  employee
compensation  cost from the beginning of the fiscal year in which the provisions
are first applied,  as if the fair value method had been used to account for all
employee  awards granted,  modified,  or settled in fiscal years beginning after
December  15,  1994.  Under the  retroactive  restatement  method,  all  periods
presented are restated to reflect stock-based  employee  compensation cost under
the fair value method for all employee awards granted,  modified,  or settled in
fiscal years  beginning  after  December 15, 1994. In addition,  this  Statement
amends  the  disclosure  requirements  of  SFAS  No.  123 to  require  prominent
disclosures in both annual and interim financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on reported results with a prescribed specific tabular format and requiring
disclosure  in  the  "Summary  of  Significant   Accounting   Policies"  or  its
equivalent.  The Company has adopted the new disclosure  requirements  for 2002,
and is  evaluating  the  impact  if it were to adopt  the fair  value  method of
accounting for stock-based employee compensation under all three methods.

2. ACQUISITIONS:

     On June 8, 2000,  the  Company  acquired  Boulder  Natural  Foods,  Inc. (a
Colorado   corporation)   and  the  business  and  certain  related  assets  and
liabilities of Boulder Potato  Company,  a totally  natural potato chip marketer
based in Boulder  Colorado.  The  assets,  which were  acquired  through a newly
formed wholly owned subsidiary of the Company,  Boulder Natural Foods,  Inc., an
Arizona  corporation,   included  the  Boulder  Potato  Company(R)  and  Boulder
Chips(TM)  brands,  other  intangible  assets,   receivables,   inventories  and
specified  liabilities.  In consideration for these assets and liabilities,  the
Company  paid a total  purchase  price of  $2,637,000,  consisting  of:  (i) the
issuance of 725,252 unregistered shares of Common Stock with a fair value at the
time of  $1,235,000,  (ii) a cash payment of  $301,000,  (iii) the issuance of a
note to the seller in the amount of $830,000 with interest at 6.4%,  was secured
by the Boulder  assets  acquired,  and required  monthly  principal and interest
payments of approximately  $37,000 until maturity on June 15, 2002, and (iv) the
assumption  by the Company of $271,000 in  liabilities,  including a note to the
seller in the amount of  $130,000  with  interest at 6.0% and  requires  monthly
principal and interest  payments of approximately  $6,000 until maturity on June
15, 2002. The initial $301,000 cash payment was  subsequently  financed with the
U.S.  Bank  Term Loan D. In  addition,  the  Company  may be  required  to issue
additional  unregistered  shares  of Common  Stock to the  seller on each of the
first,  second and third  anniversaries of the closing of the  acquisition.  Any
such  issuances  will be  dependent  upon,  and will be  calculated  based upon,
increases in sales of Boulder Potato Company(R) products as compared to previous
periods.  In 2002,  the Company was required to issue 88,864 shares  pursuant to
this  provision,  which were  valued at  $210,786  and  increased  the  goodwill
recorded  from this  acquisition.  In 2001,  the Company  was  required to issue
57,898  shares  pursuant to this  provision,  which were valued at $185,274  and
increased  the goodwill  recorded from this  acquisition.  The  acquisition  was
accounted for using the purchase  method of  accounting  in accordance  with APB
Opinion No. 16.  Accordingly,  only the results of operations  subsequent to the
acquisition date have been included in the Company's results. In connection with
the acquisition,  the Company has recorded trademarks of $1,000,000 and goodwill
of $1,690,539,  which were previously amortized on a straight-line basis over 15
and 20-year

                                       41
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


2. ACQUISITIONS: (CONTINUED)

periods, respectively. Amortization of these intangible assets ceased on January
1, 2002 in  accordance  with the adoption of SFAS No. 142.  Boulder had sales of
approximately $0.9 million for the five months ended May 31, 2000.

     On October 7, 1999, the Company acquired all of the membership interests of
Wabash from Pate Foods  Corporation  in exchange for (i) 4,400,000  unregistered
shares of  Common  Stock  with a fair  value at the time of  $4,400,000,  (ii) a
warrant to purchase 400,000  unregistered  shares of Common Stock at an exercise
price of $1.00 per share  with a fair value at the time of  $290,000,  and (iii)
the  assumption of  $8,073,000  in  liabilities,  or a total  purchase  price of
$12,763,000.  The  warrant  has a  five-year  term and became  exercisable  upon
issuance. As a result, the Company acquired all the assets of Wabash,  including
the Tato Skins(R),  O'Boisies(R),  and Pizzarias(R) trademarks.  The acquisition
was accounted for using the purchase method of accounting in accordance with APB
Opinion No. 16.  Accordingly,  only the results of operations  subsequent to the
acquisition date have been included in the Company's results. In connection with
the  acquisition,  the  Company  recorded  goodwill  of  $1,327,227,  which  was
previously   amortized  on  a   straight-line   basis  over  a  20-year  period.
Amortization  of this goodwill  ceased on January 1, 2002 in accordance with the
adoption of SFAS No. 142.

     On November 4, 1998,  the Company  acquired the business and certain assets
of Tejas,  a  Texas-based  potato  chip  manufacturer.  The  assets,  which were
acquired through a newly formed wholly owned subsidiary of the Company, Tejas PB
Distributing,  Inc.,  included the Bob's Texas Style(R) potato chips  trademark,
inventories and certain  capital  equipment.  In exchange for these assets,  the
Company issued 523,077  unregistered shares of Common Stock with a fair value of
$450,000  and paid $1.25  million  in cash,  or a total  purchase  price of $1.7
million. The Company utilized available cash as well as funds available pursuant
to the Wells Fargo Line of Credit  Agreement  to satisfy the cash portion of the
consideration. Tejas had sales of approximately $2.8 million for the nine months
ended  September  30, 1998.  In  connection  with the  acquisition,  the Company
transferred  production  of the Bob's Texas  Style(R)  brand potato chips to its
Arizona facility. The acquisition was accounted for using the purchase method of
accounting in accordance with APB Opinion No. 16. Accordingly,  only the results
of  operations  subsequent  to the  acquisition  date have been  included in the
Company's  results.  In connection with the  acquisition,  the Company  recorded
goodwill of $126,702,  which was previously  amortized on a straight-line  basis
over a 20-year period.  Amortization of this intangible  asset ceased on January
1, 2002 in  accordance  with the adoption of SFAS No. 142. In 2001,  the Company
cancelled and retired  28,000  shares of Common Stock issued in connection  with
the Tejas  acquisition.  The  cancellation was made pursuant to the terms of the
escrow agreement in settlement of post acquisition liabilities.

     Intangibles not subject to amortization consisted of the following:

                                               2002           2001
                                            ----------     ----------
          Goodwill (1)                      $5,565,687     $5,354,901
          Trademarks                         4,207,032      4,207,032
                                            ----------     ----------
                                            $9,772,719     $9,561,933
                                            ==========     ==========

     (1)  Additions  to  goodwill  are  related  to the  earnout  payment to the
previous owners of Boulder Natural Foods, Inc.

     In connection with the implementation of SFAS No. 142, effective January 1,
2002, the Company ceased  amortizing  goodwill and other intangible  assets with
indefinite lives. The following table shows the pro forma impact of the adoption
of SFAS No. 142 for the years ended December 31, 2001 and December 31, 2000.

                                          DECEMBER 31, 2001    DECEMBER 31, 2000
                                          -----------------    -----------------
     NET INCOME
     As reported                             $1,045,264            $  729,791
     Add back: Goodwill and trademark
                 amortization                   652,104               603,017
                                             ----------            ----------
     Adjusted                                $1,697,368            $1,332,808
                                             ==========            ==========

                                       42
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


2. ACQUISITIONS: (CONTINUED)

     BASIC EARNINGS PER COMMON SHARE:
     As reported                                            $0.07     $0.05
     Add back: Goodwill and trademark amortization           0.04      0.04
                                                            -----     -----
     Adjusted                                               $0.11     $0.09
                                                            =====     =====

     DILUTED EARNINGS PER COMMON SHARE:
     As reported                                            $0.06     $0.05
     Add back: Goodwill and trademark amortization           0.04      0.04
                                                            -----     -----
     Adjusted                                               $0.10     $0.09
                                                            =====     =====

3. CONCENTRATIONS OF CREDIT RISK:

     The Company's cash is placed with major banks.  The Company,  in the normal
course of business, maintains balances in excess of Federal insurance limits.

     The Company's  primary  concentration  of credit risk is related to certain
trade accounts receivable. In the normal course of business, the Company extends
unsecured credit to its customers.  In 2002 and 2001,  substantially  all of the
Company's customers were distributors or retailers whose sales were concentrated
in the grocery industry,  throughout the United States. The Company investigates
a customer's  credit  worthiness  before extending credit. At December 28, 2002,
two customers  accounted  for  approximately  27% of accounts  receivable in the
accompanying Consolidated Balance Sheets.

4. INVENTORIES:

    Inventories consisted of the following:

                                               DECEMBER 28,    DECEMBER 31,
                                                   2002            2001
                                               ------------    ------------
     Finished goods .......................    $    713,616    $    588,376

     Raw materials ........................       1,046,785       1,299,496
                                               ------------    ------------
                                               $  1,760,401    $  1,887,872
                                               ============    ============

5. PROPERTY AND EQUIPMENT:

     Property and equipment consisted of the following:

                                          USEFUL      DECEMBER 28,  DECEMBER 31,
                                          LIVES          2002          2001
                                          ------      -----------   -----------
     Buildings and improvements ......  20-30 years   $ 5,226,016   $ 5,137,005
     Equipment .......................   7-15 years    11,464,258    11,085,794
     Land ............................       --           272,006       272,006
     Vehicles ........................      5 years        11,393        40,178
     Furniture and office equipment ..      5 years     1,207,291     1,109,325
                                                      -----------   -----------
                                                       18,180,964    17,644,308
     Less accumulated depreciation
       and amortization ..............                 (5,171,016)   (3,914,035)
                                                      -----------   -----------
                                                      $13,009,948   $13,730,273
                                                      ===========   ===========

     Depreciation  expense was  $1,288,333,  $1,237,260  and $1,089,004 in 2002,
2001 and 2000, respectively.

     Included in equipment are assets held under capital leases with an original
cost of $330,149 at December 28, 2002 and  $1,193,110 at December 31, 2001,  and
accumulated amortization of $106,694 and $993,106 at December 28, 2002, December
31, 2001, respectively.

                                       43
<PAGE>
                     POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


5. PROPERTY AND EQUIPMENT: (CONTINUED)

     On October  28,  2000,  the  Company  experienced  a fire at the  Goodyear,
Arizona  manufacturing  plant,  causing a temporary  shutdown  of  manufacturing
operations at the facility. There was extensive damage to the roof and equipment
utilities in the potato chip processing area. Third party  manufacturers  agreed
to provide the Company with  production  volume to assist the Company in meeting
anticipated  customers'  needs  during the  shutdown.  The Company  continued to
season and package the bulk product received from third party manufacturers.  In
fiscal 2000, the Company  identified and recorded  approximately $1.4 million of
incremental expenses incurred as a result of the fire, primarily associated with
outsourcing production.  These extra expenses were charged to "cost of revenues"
and offset by a $1.4 million  credit  representing  estimated  future  insurance
proceeds. As of December 31, 2000, the Company had been advanced $0.5 million of
the $1.4 million by its insurance company as partial reimbursement.

     The Company  resumed full production of private label potato chips in early
January of 2001 and resumed full production of batch-fried  potato chips in late
March of 2001.  During  fiscal 2001,  the Company  recorded  approximately  $1.4
million of  incremental  expenses  incurred  as a result of the fire,  primarily
associated  with  outsourcing  production.  These extra expenses were charged to
"cost of revenues" and offset by a $1.4 million  credit  representing  insurance
proceeds.  The Company also incurred  approximately $2.3 million in building and
equipment  reconstruction costs in connection with the fire. During fiscal 2001,
the Company was advanced a total of $3.2 million by the insurance company. "Fire
related income,  net" on the accompanying  Consolidated  Statement of Operations
for fiscal 2001  includes  (i) a gain of  $167,000,  representing  the excess of
insurance  proceeds  over the book  value  for the  building  and  equipment  of
$533,000  damaged by the fire, and (ii) expenses not reimbursed by the insurance
company of approximately $163,000.

     In December 2002, the Company received  $261,000 from its insurance company
in partial  settlement of  outstanding  claims,  which is shown in "Fire related
income, net" on the accompanying Consolidated Statement of Operations for fiscal
2002. This includes (i) a gain of $121,000,  representing  additional  insurance
proceeds  over the book value of  equipment  previously  written  off,  and (ii)
reimbursement  of  $140,000  for  expenses  previously  denied by the  insurance
company.  The Company does not have any receivables  from the insurance  company
reflected in the  accompanying  Consolidated  Balance  Sheets as of December 28,
2002.

6. LONG-TERM DEBT:

     Long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                                                            DECEMBER 28,    DECEMBER 31,
                                                                                                2002            2001
                                                                                            ------------    ------------
<S>                                                                                         <C>             <C>
     Convertible Debentures due in monthly installments through July 1, 2002; ...........   $         --    $    427,656
       interest at 9%; collateralized by land, buildings, equipment and intangibles
     Working capital line of credit expiring October 31, 2005; interest at prime
       rate plus 1% (5.75% at December 31, 2001); collateralized by accounts
       receivable, inventories, equipment and general intangibles .......................             --       3,438,269
     Term loan due in monthly installments through July 1, 2006; interest at prime
       rate (4.25% at December 28, 2002); collateralized by accounts receivable,
       inventories, equipment and general intangibles ...................................      3,181,685       4,089,743
     Mortgage loan due in monthly installments through July 2012; interest at
       9.03%; collateralized by land and building .......................................      1,851,888       1,882,282
     Term loan due in monthly installments through June 30, 2002; interest at
       prime plus 2% (6.75% at December 31, 2001); collateralized by accounts
       receivable, inventories, equipment and general intangibles .......................             --         128,751
     Term loan due in monthly installments through June 15, 2002; interest at
       6.4%; collateralized by certain assets of Boulder ................................             --         217,499
     Term loan due in monthly installments through June 15, 2002; interest
       at 6% ............................................................................             --          33,968
     Term loan due in monthly installments through August 31, 2002; interest at
       prime plus 2% (6.75% at December 31, 2001); collateralized by accounts
       receivable, inventory, equipment and intangibles .................................             --          87,500
</TABLE>

                                       44
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


6. LONG-TERM DEBT: (CONTINUED)

<TABLE>
<S>                                                                                         <C>             <C>
     Capital lease obligations due in monthly installments through 2003; interest
       rates ranging from 8.2% to 11.3%; collateralized by equipment ....................         45,779         457,629
     Capital Expenditures Term loan due in monthly installments through October 31,
       2003; interest at prime plus 1% (5.25% at December 28, 2002); collateralized
       by equipment .....................................................................        130,770         241,430
                                                                                            ------------    ------------
                                                                                               5,210,122      11,004,727
     Less current portion ...............................................................     (1,105,004)     (2,343,472)
                                                                                            ------------    ------------
                                                                                            $  4,105,118    $  8,661,255
                                                                                            ============    ============
</TABLE>

Annual maturities of long-term debt at December 28, 2002 are as follows:

     YEAR
     ----
     2003.....................................................   $ 1,105,004
     2004.....................................................       931,857
     2005.....................................................       935,580
     2006.....................................................       552,106
     2007.....................................................        51,802
     Thereafter...............................................     1,633,773
                                                                 -----------
                                                                 $ 5,210,122
                                                                 ===========

     The   Company's   Goodyear,   Arizona   manufacturing,   distribution   and
headquarters  facility is subject to a $1.9  million  mortgage  loan from Morgan
Guaranty  Trust  Company of New York,  bears  interest at 9.03% per annum and is
secured by the building and the land on which it is located. The loan matures on
July 1, 2012; however monthly principal and interest installments of $18,425 are
determined based on a twenty-year amortization period.

     The Company has entered into a variety of capital and operating  leases for
the  acquisition of equipment and vehicles.  The leases  generally have three to
seven year terms,  bear  interest at rates from 8.2% to 11.3%,  require  monthly
payments and expire at various times through 2008 and are  collateralized by the
related equipment.

     During 2002, the Company's remaining  outstanding 9% Convertible  Debenture
due July 1, 2002 in the  principal  amount of $427,656 held by Wells Fargo Small
Business  Investment  Company,  Inc.  ("Wells  Fargo SBIC") was  converted  into
401,497  shares of the Company's  common stock.  In November  1999,  Renaissance
Capital converted 50% ($859,047) of its 9% Convertible  Debenture  holdings into
859,047 shares of Common Stock and agreed unconditionally to convert into Common
Stock the remaining $859,047 not later than December 31, 2000. In December 2000,
Renaissance Capital converted the remaining 859,047 shares of its 9% Convertible
Debentures into Common Stock.  For the period November 1, 1999 through  December
31, 2000, Renaissance Capital agreed to waive all mandatory principal redemption
payments and to accept 30,000  unregistered shares of the Company's Common Stock
and a warrant to purchase  60,000  shares of common  stock at $1.50 per share in
lieu of cash interest payments.

     On October 7, 1999, the Company signed a new $9.15 million Credit Agreement
with U.S. Bancorp (the "U.S. Bancorp Credit Agreement"). In April 2001, the U.S.
Bancorp Credit Agreement was amended to increase the U.S. Bancorp Line of Credit
from $3.0 million to $5.0 million,  establish a $0.5 million capital expenditure
line of credit (the "CapEx Term Loan"),  extend the U.S.  Bancorp Line of Credit
maturity  date from  October  2002 to  October  31,  2003,  and  modify  certain
financial covenants. In June 2002, the U.S. Bancorp Credit Agreement was amended
to extend the U.S. Bancorp Line of Credit maturity date from October 31, 2003 to
October 31, 2005, and modify certain financial covenants.

     The U.S.  Bancorp  Credit  Agreement  is  secured by  accounts  receivable,
inventories,  equipment and general  intangibles.  Borrowings  under the line of
credit are  limited to 80% of  eligible  receivables  and up to 60% of  eligible
inventories.  At  December  28,  2002,  the  Company  had a  borrowing  base  of
$3,174,000  under  the  U.S.  Bancorp  Line of  Credit.  There  were no  amounts
outstanding  on the U.S.  Bancorp line of credit at December 28, 2002.  The U.S.
Bancorp Credit  Agreement  requires the Company to be in compliance with certain

                                       45
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


6. LONG-TERM DEBT: (CONTINUED)

financial performance criteria,  including a minimum cash flow coverage ratio, a
minimum debt service coverage ratio, minimum annual operating results, a minimum
tangible capital base and a minimum fixed charge coverage ratio. At December 28,
2002,  the  Company  was in  compliance  with  all of the  financial  covenants.
Management  believes that the  fulfillment of the Company's plans and objectives
will enable the Company to attain a sufficient  level of profitability to remain
in  compliance  with  these  financial  covenants.  There  can be no  assurance,
however,  that the  Company  will  attain any such  profitability  and remain in
compliance.  Any  acceleration  under the U.S. Bancorp Credit Agreement prior to
the scheduled  maturity of the U.S.  Bancorp Line of Credit or the U.S.  Bancorp
Term Loans could have a material adverse effect upon the Company.

7. COMMITMENTS AND CONTINGENCIES:

     Rental expense under operating  leases was $956,000,  $506,900 and $309,000
for each of fiscal 2002,  2001 and 2000,  respectively.  Minimum  future  rental
commitments under non-cancelable leases as of December 28, 2002 are as follows:

<TABLE>
<CAPTION>
                                                         CAPITAL        OPERATING
     YEAR                                                LEASES          LEASES           TOTAL
     ----                                              -----------     -----------     -----------
<S>                                                    <C>             <C>             <C>
     2003..........................................    $    46,484     $   980,270     $ 1,026,754
     2004..........................................             --         952,300         952,300
     2005..........................................             --         916,036         916,036
     2006..........................................             --         888,325         888,325
     2007..........................................             --         706,823         706,823
     Thereafter....................................             --       2,670,891       2,670,891
                                                       -----------     -----------     -----------
     Total.........................................         46,484     $ 7,114,645     $ 7,161,129
     Less amount representing interest.............           (705)    ===========     ===========
                                                       -----------
     Present value.................................    $    45,779
                                                       ===========
</TABLE>

     The  Company  produces  T.G.I.  Friday's(R)  brand  salted  snacks and Tato
Skins(R)  brand  potato  crisps  utilizing a sheeting  and frying  process  that
includes  patented  technology  that the  Company  licenses  from Miles  Willard
Technologies,  LLC,  an  Idaho  limited  liability  company  ("Miles  Willard").
Pursuant to the license  agreement  between the Company and Miles  Willard,  the
Company has an  exclusive  right to use the  patented  technology  within  North
America until the patents expire between 2004 and 2006. In consideration for the
use of these patents,  the Company is required to make royalty payments to Miles
Willard on sales of products manufactured utilizing the patented technology.

     The Company licenses the T.G.I.  Friday's(R)  brand salted snacks trademark
from TGI Friday's Inc.  under a license  agreement with a term expiring in 2014.
Pursuant to the  license  agreement,  the  Company is  required to make  royalty
payments on sales of T.G.I.  Friday's(R)  brand  salted  snack  products  and is
required to achieve  certain  minimum  sales levels by certain  dates during the
contract term.

     In December 2002, Warner Bros. Consumer Products granted the Company rights
to introduce an innovative new brand of salted snacks featuring Looney Tunes(TM)
characters.  The Company plans to launch the new brand  nationwide in the summer
of 2003 under a multi-year  agreement that grants the Company  exclusive  salted
snack  category  brand  licensing and  promotional  rights for Looney  Tunes(TM)
characters. A prepaid royalty of $500,000 is included in other current assets as
a result of this agreement.

8. SHAREHOLDERS' EQUITY:

COMMON STOCK

     On December 27, 2001,  the Company  completed the sale of 586,855 shares of
Common  Stock  at an  offering  price  of  $2.13  per  share  to BFS US  Special
Opportunities Trust PLC, a fund managed by Renaissance Capital Group, Inc., in a
private placement transaction. The net proceeds of the transaction were utilized
by the Company to reduce the Company's

                                       47
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


8. SHAREHOLDERS' EQUITY: (CONTINUED)

outstanding  indebtedness.  The Company has granted BFS US Special Opportunities
Trust PLC both demand and  piggyback  registration  rights  with  respect to the
shares of Common Stock purchased in the offering.

PREFERRED STOCK

     The Company has authorized 50,000 shares of $100 par value Preferred Stock,
none of which was  outstanding  at December 28, 2002 or December  31, 2001.  The
Company  may  issue  such  shares  of  Preferred  Stock  in the  future  without
shareholder approval.

WARRANTS

     During 2000, 2001 and 2002 warrant activity was as follows:

                                               WARRANTS     WEIGHTED AVERAGE
                                             OUTSTANDING     EXERCISE PRICE
                                             -----------     --------------
     Balance, December 31, 1999..........      1,413,298         $ 1.62
       Issued............................         85,000           1.09
                                              ----------
     Balance, December 31, 2000..........      1,498,298           1.59
       Issued............................         10,000           3.62
       Cancelled.........................       (225,000)          4.38
                                              ----------
     Balance, December 31, 2001..........      1,283,298           1.11
       Exercised.........................       (269,505)          1.00
                                              ----------
     Balance, December 28, 2002..........      1,013,793           1.11
                                              ==========

     Warrants  have been  issued in  connection  with prior  financings  and the
acquisition of Wabash. At December 28, 2002,  outstanding  warrants had exercise
prices ranging from $0.88 to $3.62 and a weighted average  remaining term of 2.9
years.  Warrants that were exercisable at December 28, 2002 totaled 865,716 with
a weighted average exercise price per share of $1.15.

     As of July 30, 1999, the Company agreed to the assignment of a warrant from
Everen  Securities,  Inc.  to  Stifel,  Nicolaus  &  Company  Incorporated  (the
Company's acquisitions and financial advisor) representing the right to purchase
296,155  unregistered  shares of Common Stock at an exercise  price of $.875 per
share and  expiring in August  2003.  The warrant  provides  the holder  thereof
certain  anti-dilution  and  piggyback  registration  rights.  The  warrant  was
exercisable  as to 50% of the shares when the  Company's  pro forma annual sales
reached  $30  million,  which it did  when  the  Company  completed  the  Wabash
acquisition  in October 1999.  The  remaining 50% of the warrant is  exercisable
when the Company's pro forma annual sales reach $100 million.

STOCK OPTIONS

     The Company's 1995 Stock Option Plan (the "Plan"),  as amended in May 2001,
provides  for the  issuance  of options to purchase  2,500,000  shares of Common
Stock.  The options granted  pursuant to the Plan expire over a five-year period
and generally  vest over three years.  In addition to options  granted under the
Plan, the Company also issued non-qualified  options to purchase Common Stock to
certain  Directors and officers which are  exercisable and expire either five or
ten years from date of grant.  All options  are issued at an  exercise  price of
fair market value and are noncompensatory. Fair market value is determined based
on the price of sales of Common Stock  occurring at time of the option award. At
December 28, 2002,  outstanding options had exercise prices ranging from $.59 to
$3.50 per share.

                                       48
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


8. SHAREHOLDERS' EQUITY: (CONTINUED)

     During 2001 and 2002, stock option activity was as follows:

<TABLE>
<CAPTION>
                                              PLAN OPTIONS                 NON-PLAN OPTIONS
                                     ------------------------------  -----------------------------
                                        OPTIONS    WEIGHTED AVERAGE    OPTIONS    WEIGHTED AVERAGE
                                      OUTSTANDING   EXERCISE PRICE   OUTSTANDING   EXERCISE PRICE
                                     ------------   --------------   ----------    --------------
<S>                                  <C>            <C>              <C>          <C>
Balance, December 31, 1999 ......      1,483,650      $     1.54        720,000      $     1.17
  Granted .......................        336,000            2.13      1,050,000            1.64
  Canceled ......................        (91,666)           1.84             --              --
  Exercised .....................        (28,334)           1.41       (125,000)           1.08
                                      ----------                     ----------
Balance, December 31, 2000 ......      1,699,650            1.64      1,645,000            1.48
  Granted .......................        480,000            3.03         50,000            3.02
  Canceled ......................       (143,333)           1.63             --              --
  Exercised .....................        (26,000)           1.71        (50,000)           1.08
                                      ----------                     ----------
Balance, December 31, 2001 ......      2,010,317            1.97      1,645,000            1.54
  Granted .......................        367,500            2.86             --              --
  Canceled ......................       (324,334)           2.78        (66,667)           2.61
  Exercised .....................       (315,683)           1.19        (33,333)           2.61
                                      ----------                     ----------
Balance, December 28, 2002 ......      1,737,800            2.15      1,545,000            1.47
                                      ==========                     ==========
</TABLE>

     At December 28, 2002,  outstanding Plan options had exercise prices ranging
from $0.59 to $3.10 and a weighted  average  remaining  term of 2.4 years.  Plan
options  that were  exercisable  at December  28,  2002,  December  31, 2001 and
December 31, 2000 totaled 1,034,793, 1,299,982 and 975,415 with weighted average
exercise prices per share of $1.60,  $1.56 and $1.60  respectively.  Outstanding
Non-Plan  options had exercise prices ranging from $1.18 to $3.50 and a weighted
average  remaining term of 2.4 years.  Non-Plan options that were exercisable at
December 28, 2002 totaled  1,019,999 with a weighted  average exercise price per
share of $1.37.

9. INCOME TAXES:

     The  Company  accounts  for income  taxes  using a balance  sheet  approach
whereby  deferred  tax  assets  and  liabilities  are  determined  based  on the
differences  in  financial   reporting  and  income  tax  basis  of  assets  and
liabilities.  The  differences  are measured using the income tax rate in effect
during the year of measurement.

     The provision for income taxes consisted of the following:

                                                2002         2001         2000
                                             ---------    ---------    ---------
Current:
  Federal                                    $      --    $      --    $      --
  State                                         98,593       43,000       38,000
                                             ---------    ---------    ---------
                                             $  98,593    $  43,000    $  38,000
                                             ---------    ---------    ---------
Deferred:
  Federal                                    $(413,430)   $      --    $      --
  State                                         72,000           --           --
                                             ---------    ---------    ---------
                                             $(341,430)   $      --    $      --
                                             ---------    ---------    ---------

                                             ---------    ---------    ---------
Total (benefit) provision for income taxes   $(242,837)   $  43,000    $  38,000
                                             =========    =========    =========

                                       49
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


9. INCOME TAXES: (CONTINUED)

     The following table provides a reconciliation between the amount determined
by applying the  statutory  federal  income tax rate to the pretax income amount
for the years ended December 28, 2002, December 31, 2001 and December 31, 2000:

                                            2002          2001          2000
                                        -----------   -----------   -----------
Provision at statutory rate ..........  $   813,960   $   370,010   $   261,049
State income tax, net ................      170,593        56,742        38,390
Nondeductible expenses ...............       11,983        18,722        15,600
Net operating loss utilized and
  reversal of valuation allowance ....   (1,239,373)     (402,474)     (277,039)
                                        -----------   -----------   -----------
Income tax (benefit) provision .......  $  (242,837)  $    43,000   $    38,000
                                        ===========   ===========   ===========

    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 28,   DECEMBER 31,
                                                       2002           2001
                                                   -----------    -----------
     Net operating loss carryforward.............  $ 1,022,000    $ 1,855,000
     Bad debt expense............................      160,000         86,000
     Accrued liabilities.........................      121,000         73,000
     Other.......................................      141,000        254,000
                                                   -----------    -----------
                                                     1,444,000      2,268,000
     Depreciation and amortization...............     (966,570)      (865,000)
     Deferred tax asset valuation allowance......     (136,000)    (1,403,000)
                                                   -----------    -----------
          Net deferred tax assets................  $   341,430    $       --
                                                   ===========    ===========

     The  Company  experienced  significant  net  losses in prior  fiscal  years
resulting in a net operating loss  carryforward  ("NOLC") for federal income tax
purposes of approximately  $2.6 million at December 28, 2002. The Company's NOLC
will begin to expire in varying amounts between 2010 and 2018.

     Generally accepted accounting principles require that a valuation allowance
be  established  when it is more  likely  than not that  all or a  portion  of a
deferred tax asset will not be realized.  Changes in valuation  allowances  from
period to period are included in the tax  provision in the period of change.  In
determining whether a valuation allowance is required,  we take into account all
positive and negative  evidence with regard to the utilization of a deferred tax
asset  including  our past  earnings  history,  expected  future  earnings,  the
character and jurisdiction of such earnings,  unsettled  circumstances  that, if
unfavorably  resolved,  would  adversely  affect  utilization  of a deferred tax
asset,  carryback  and  carryforward  periods,  and tax  strategies  that  could
potentially  enhance the  likelihood  of  realization  of a deferred  tax asset.
During the third quarter of 2002, the Company  concluded that it was more likely
than not that its  deferred  tax asset at the time would be  realized,  and also
began  providing  for income taxes at a rate equal to the  combined  federal and
state effective rates, which approximates 39.2% under current tax rates,  rather
than the 7.5% rate  previously  being  used to record a tax  provision  for only
certain state income  taxes.  The $136,000  deferred tax valuation  allowance at
December 28, 2002 relates to certain state NOL carryforwards.

10. BUSINESS SEGMENTS AND SIGNIFICANT CUSTOMERS:

     For the year ended  December 28, 2002, one national mass and warehouse club
customer and one national vending  distributor  accounted for $12,414,000 or 21%
and $7,784,000 or 13%, respectively, of the Company's consolidated net revenues.
For the year ended December 31, 2001,  one national  warehouse club customer and
one national vending distributor  accounted for $9,353,000 or 16% and $6,886,000
or 12%, respectively, of the Company's  consolidated net revenues.  For the year
ended  December 31, 2000,  one Arizona  grocery  chain  customer  accounted  for
$4,673,000,   or  11%,  and  one  national  vending  distributor  accounted  for
$6,376,000, or 15%, respectively, of consolidated net revenues.

                                       50
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


10. BUSINESS SEGMENTS AND SIGNIFICANT CUSTOMERS: (CONTINUED)

     The Company's operations consist of two segments: manufactured products and
distributed  products.  The manufactured products segment produces potato chips,
potato crisps,  and tortilla chips for sale primarily to snack food distributors
and  retailers.  The  distributed  products  segment  sells snack food  products
manufactured   by  other   companies  to  the   Company's   Arizona  snack  food
distributors.  The Company's  reportable  segments offer different  products and
services.  All of the Company's  revenues are attributable to external customers
in the United States and all of its assets are located in the United States. The
Company does not allocate assets based on its reportable segments.

     The accounting  policies of the segments are the same as those described in
the Summary of  Significant  Accounting  Policies (Note 1). The Company does not
allocate selling, general and administrative  expenses,  income taxes or unusual
items to segments and has no significant  non-cash items other than depreciation
and amortization.


                                        MANUFACTURED   DISTRIBUTED
                                          PRODUCTS       PRODUCTS   CONSOLIDATED
                                          --------       --------   ------------
2002
----
Revenues from external customers         $55,321,985   $ 4,026,486   $59,348,471
Depreciation and amortization included
  in segment gross profit                    936,499            --       936,499
Segment gross profit                      10,797,357       514,652    11,312,009

2001
----
Revenues from external customers         $49,116,667   $ 4,788,149   $53,904,816
Depreciation and amortization included
  in segment gross profit                    859,776            --       859,776
Segment gross profit                      10,711,869       234,125    10,945,994

2000
----
Revenues from external customers         $33,855,177   $ 5,199,905   $39,055,082
Depreciation and amortization included
  in segment gross profit                    953,010            --       953,010
Segment gross profit                       7,395,832       308,309     7,704,141


The following table reconciles  reportable segment gross profit to the Company's
consolidated income before income tax provision:

<TABLE>
<CAPTION>
                                                         2002          2001          2000
                                                      -----------   -----------   -----------
<S>                                                   <C>           <C>           <C>
Segment gross profit                                  $11,312,009   $10,945,994   $ 7,704,141
Unallocated amounts:
  Selling, general and administrative expenses          8,637,652     8,816,627     5,758,883
  Fire related income, net                                259,376         4,014            --
  Interest expense, net                                   539,733     1,045,117     1,177,467
                                                      -----------   -----------   -----------
Income before income taxes                            $ 2,394,000   $ 1,088,264   $   767,791
                                                      ===========   ===========   ===========
</TABLE>

11. LITIGATION:

     The  Company is  periodically  a party to various  lawsuits  arising in the
ordinary  course of business.  Management  believes,  based on discussions  with
legal counsel, that the resolution of any such lawsuits will not have a material
effect on the financial statements taken as a whole.

                                       51
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


12. RELATED PARTY TRANSACTIONS:

     The land and  building  (140,000  square  feet)  occupied by the Company in
Bluffton,  Indiana is leased  pursuant  to a twenty year lease dated May 1, 1998
with  American  Pacific  Financial  Corporation,  an  affiliate  of  Pate  Foods
Corporation  from whom the Company  purchased  Wabash in October 1999. The lease
extends  through April 2018 and contains two additional  five-year lease renewal
periods at the option of the Company.  Lease payments are approximately  $20,000
per month,  plus CPI  adjustments,  and the Company is responsible  for all real
estate taxes, utilities and insurance.

13. QUARTERLY FINANCIAL DATA (UNAUDITED)

     The results for any single  quarter are not  necessarily  indicative of the
Company's  results for any other  quarter or the full year.  The  quarterly  net
sales and gross profit  amounts  presented  below reflect the  reclassifications
required by EITF 01-9 discussed in Note 1.

<TABLE>
<CAPTION>
  (in 000's except for share data)                  FIRST        SECOND         THIRD        FOURTH
                                                   QUARTER       QUARTER       QUARTER       QUARTER      FULL YEAR
                                                 -----------   -----------   -----------   -----------   -----------
<S>                                              <C>           <C>           <C>           <C>           <C>
FISCAL 2002
Net revenues                                     $    14,278   $    15,358   $    15,209   $    14,503   $    59,348
Gross profit                                           2,517         3,188         2,564         3,043        11,312
Operating income                                         552           819           550           753         2,674
Net income                                       $       380   $       640   $     1,051   $       565   $     2,637

Earnings per common share:
  Basic                                          $      0.02   $      0.04   $      0.06   $      0.03   $      0.16
  Diluted                                        $      0.02   $      0.04   $      0.06   $      0.03   $      0.15

Weighted average number of common shares:
  Basic                                           15,692,387    15,833,473    16,362,344    16,686,148    16,146,081
  Diluted                                         17,439,210    18,079,446    17,961,882    18,049,958    17,826,953

FISCAL 2001
Net revenues                                     $    13,267   $    14,482   $    13,871   $    12,285   $    53,905
Gross profit                                           2,872         3,121         2,778         2,175        10,946
Operating income                                         668           703           422           336         2,129
Net income                                       $       369   $       404   $       161   $       111   $     1,045

Earnings per common share:
  Basic                                          $      0.02   $      0.03   $      0.01   $      0.01   $      0.07
  Diluted                                        $      0.02   $      0.02   $      0.01   $      0.01   $      0.06

Weighted average number of common shares:
  Basic                                           14,999,765    15,046,655    15,042,765    15,111,704    15,050,509
  Diluted                                         16,965,390    17,708,387    17,920,140    17,107,814    17,198,648
</TABLE>

The sum of quarterly  earnings per share information may not agree to the annual
amount due to the use of the treasury stock method of  calculating  earnings per
share.

                                       52
<PAGE>
                      POORE BROTHERS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


14. ACCOUNTS RECEIVABLE ALLOWANCE

Changes to the  allowance  for  doubtful  accounts  during the three years ended
December 28, 2002 are summarized below:

                                  Balance at                            Balance
                                  beginning   Charges to               at end of
                                  of period     Expense    Deductions    period
                                  ---------    ---------   ----------    ------
Allowance for Doubtful Accounts
          Fiscal 2000              $206,000     124,000      84,000     $246,000
          Fiscal 2001              $246,000     332,000     359,000     $219,000
          Fiscal 2002              $219,000     379,000     189,000     $409,000

                                       53
<PAGE>
EXHIBIT INDEX

10.33 --  License Agreement, dated November 20, 2002, by and between the Company
          and Warner  Bros.,  a division of Time Warner  Entertainment  Company,
          L.P.

10.34 --  License Agreement, dated November 20, 2002, by and between the Company
          and Warner  Bros.,  a division of Time Warner  Entertainment  Company,
          L.P.

10.35 --  License Agreement, dated July 19, 2000, by and between the Company and
          M.J. Quinlan & Associates Pty. Limited

21.1 --   List of subsidiaries of Poore Brothers, Inc.

23.1 --   Consent of Deloitte & Touche LLP.

23.2 --   Notice Regarding Consent of Arthur Andersen LLP

99.1 --   Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002

                                       54