U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One)
[ X ] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended September 30, 1998

[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from _______ to _______

Commission File Number 1-14556

POORE BROTHERS, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)

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

3500 S. LA COMETA DRIVE, GOODYEAR, ARIZONA 85338
------------------------------------------------
(Address of principal executive offices)

(602) 932-6200
--------------
(Issuer's telephone number)

Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

As of September 30, 1998, the number of issued and outstanding shares of common
stock of the Registrant was 7,126,657.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997.............................................. 3

Consolidated Statements of Operations for the three
and nine months ended September 30,1998 and 1997.................. 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1998 and 1997..................... 5
Notes to Financial Statements....................................... 6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.................................. 8

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS................................................... 12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................... 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................... 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 13
ITEM 5. OTHER INFORMATION................................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................... 14

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, DECEMBER 31,
1998 1997
---- ----
ASSETS (unaudited)
Current assets:
Cash and cash equivalents .................. $655,944 $1,622,751
Accounts receivable, net of allowance
of $177,000 in 1998 and $174,000 in 1997 . 1,236,659 1,528,318
Note receivable ............................ -- 78,414
Inventories ................................ 440,790 473,025
Other current assets ....................... 259,907 175,274
------------ ------------
Total current assets ..................... 2,593,300 3,877,782

Property and equipment, net ................. 6,262,939 6,602,435
Intangible assets, net ...................... 2,162,483 2,294,324
Other assets ................................ 107,399 100,673
------------ ------------

Total assets ............................. $11,126,121 $12,875,214
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................... $507,621 $824,129
Accrued liabilities ........................ 499,573 502,793
Current portion of long-term debt .......... 535,894 1,127,217
------------ ------------
Total current liabilities ................ 1,543,088 2,454,139

Long-term debt, less current portion ........ 4,826,291 5,017,724
------------ ------------
Total liabilities ........................ 6,369,379 7,471,863
------------ ------------
Shareholders' equity:
Preferred stock, $100 par value; 50,000
shares authorized; None issued and
outstanding in 1998 and 1997 ............. -- --
Common stock, $.01 par value; 15,000,000
shares authorized; 7,126,657 and 7,051,657
shares issued and outstanding in 1998
and 1997, respectively ................... 71,267 70,516
Additional paid-in capital ................. 10,875,134 10,794,768
Accumulated deficit ........................ (6,189,659) (5,461,933)
------------ ------------
Total shareholders' equity ............... 4,756,742 5,403,351
------------ ------------
Total liabilities and
shareholders' equity ................... $11,126,121 $12,875,214
============ ============

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

POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)

Net sales ......................... $3,014,738 $3,334,303 $9,475,956 $12,658,902

Cost of sales ..................... 2,295,323 3,011,936 7,108,610 11,139,582
----------- ----------- ----------- ------------

Gross profit ................... 719,415 322,367 2,367,347 1,519,320

Selling, general and administrative
expenses .......................... 941,036 1,009,093 2,724,126 3,020,292

Closing of Tennessee manufacturing
operation ......................... -- 470,021 -- 470,021

Sale of Texas distribution business -- -- -- 150,000
----------- ----------- ----------- ------------

Operating loss ................. (221,621) (1,156,747) (356,779) (2,120,993)
----------- ----------- ----------- ------------

Interest income ................... 12,602 29,266 37,724 109,725

Interest expense .................. (134,340) (141,660) (408,669) (307,053)
----------- ----------- ----------- ------------

Net interest expense .......... (121,738) (112,394) (370,945) (197,328)
----------- ----------- ----------- ------------

Net loss ...................... $(343,359) $(1,269,141) $(727,724) $(2,318,321)
=========== =========== =========== ============

Net loss per common share:
Basic ........................... $(0.05) $(0.18) $(0.10) $(0.33)
=========== =========== =========== ============
Diluted ......................... $(0.05) $(0.18) $(0.10) $(0.33)
=========== =========== =========== ============
Weighted average number of
common shares:
Basic ........................... 7,126,657 7,051,657 7,104,335 7,007,091
=========== =========== =========== ============
Diluted ......................... 7,126,657 7,051,657 7,104,335 7,007,091
=========== =========== =========== ============

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

POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
1998 1997
---- ----
(unaudited) (unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................. $(727,724) $(2,318,321)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation ........................................... 434,244 249,707
Amortization ........................................... 150,115 131,841
Bad debt expense ....................................... 68,000 61,000
Loss on disposition of business ....................... -- 428,000
Change in operating assets and liabilities:
Accounts receivable .................................... 223,659 (31,572)
Inventories ............................................ 32,235 187,761
Other assets and liabilities ........................... (109,634) (88,873)
Accounts payable and accrued liabilities ............... (319,728) (748,655)
----------- -----------
Net cash provided by (used in) operating
activities ......................................... (170,418) (2,065,968)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on disposal of property ........................ 27,268 770,559
Sale of Texas distribution business ..................... -- 78,414
Purchase of short term investments ...................... -- (1,022,439)
Purchase of property and equipment ...................... (122,016) (2,789,287)
----------- -----------
Net cash (used in) investing activities ............. (94,748) (2,962,753)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock .................. 81,116 1,253,431
Net decrease in restricted certificate
of deposit ............................................. -- 1,250,000
Stock issuance costs .................................... -- (157,575)
Proceeds from issuance of long-term debt ................ -- 1,734,627
Payments made on long-term debt ......................... (436,925) (2,069,812)
Net increase (decrease) in working
capital line of credit ................................. (345,832) 351,607
----------- -----------
Net cash (used in) provided by
financing activities ............................... (701,640) 2,362,278
----------- -----------
Net (decrease) in cash and cash equivalents ............... (966,806) (2,666,443)
Cash and cash equivalents at beginning of period .......... 1,622,751 3,603,850
----------- -----------
Cash and cash equivalents at end of period ................ $655,944 $937,407
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Summary of non cash investing and financing activities:
Construction loan for new facility ...................... $ -- $998,746
Capital lease obligation incurred - equipment acquisition -- 70,859
Mortgage impounds for interest, taxes and insurance ..... -- 35,990
Note received for sale of Texas distribution business ... -- 78,414
Cash paid during the nine months for interest,
net of amounts capitalized ............................. 397,370 330,223

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

POORE BROTHERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

GENERAL

Poore Brothers, Inc. (the "Company"), a Delaware corporation, was organized
in February 1995 as a holding company and on May 31, 1995 acquired substantially
all of the equity of Poore Brothers Southeast, Inc. ("PB Southeast") in an
exchange transaction pursuant to which 1,560,000 previously unissued shares of
the Company's common stock, par value $.01 per share (the "Common Stock"), were
exchanged for 150,366 issued and outstanding shares of PB Southeast's common
stock. The exchange transaction with PB Southeast has been accounted for similar
to a pooling-of interests since both entities had common ownership and control
immediately prior to the transaction. In December 1996, the Company completed an
initial public offering of its common stock. During 1997, the Company sold its
Houston, Texas distribution business and closed its Tennessee manufacturing
operation.

The Company manufactures and distributes potato chips under the Poore
Brothers(TM) brand name, as well as private label potato chips, and also
distributes a variety of other independently manufactured snack food items.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Poore
Brothers, Inc. and all of its controlled subsidiaries. In all situations, the
Company owns from 99% to 100% of the voting interests of the controlled
subsidiaries. All significant intercompany amounts and transactions have been
eliminated. The financial statements have been prepared in accordance with the
instructions for Form 10-QSB and, therefore, do not include all the information
and footnotes required by generally accepted accounting principles. In the
opinion of management, the consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary in order
to make the consolidated financial statements not misleading. A description of
the Company's accounting policies and other financial information is included in
the audited financial statements filed with the Form 10-KSB for the fiscal year
ended December 31, 1997. The results of operations for the nine months ended
September 30, 1998 are not necessarily indicative of the results expected for
the full year.

LOSS PER SHARE

During 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") 128, "Earnings Per Share". Pursuant to SFAS 128, basic
earnings per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the period.
Exercises of outstanding stock options and conversion of convertible debentures
were not assumed to be exercised for purposes of calculating diluted earnings
per share for the three and nine months ended September 30, 1998 and 1997, as
their effect was anti-dilutive.

Three months ended Nine months ended
September 30, September 30,
--------------------------------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------

Basic loss per share:
Loss available to common shareholders $ (343,359) $(1,269,141) $ (727,724) $(2,318,321)
Weighted average common shares 7,126,657 7,051,657 7,104,335 7,007,791
----------- ----------- ----------- -----------
Loss per share-basic $ (0.05) $ (0.18) $ (0.10) $ (0.33)
=========== =========== =========== ===========
Diluted loss per share:
Loss available to common shareholders $ (343,359) $(1,269,141) $ (727,724) $(2,318,321)
Weighted average common shares 7,126,657 7,051,657 7,104,335 7,007,791
Common stock equivalents -- -- -- --
----------- ----------- ----------- -----------
Loss per share-diluted $ (0.05) $ (0.18) $ (0.10) $ (0.33)
=========== =========== =========== ===========

2. DEBT

The Company's $1.0 million working capital line of credit from First
Community Financial Corporation (the "First Community Line of Credit") was
renewed as of May 31, 1998 for a six-month period. At September 30, 1998, the
Company had over $1.0 million of eligible receivables. The balance outstanding
was $240,265 and $586,097 at September 30, 1998 and December 31, 1997,
respectively.

On November 4, 1998, the Company signed a new $2.5 million Credit Agreement
with Norwest Business Credit, Inc. ("Norwest") which includes a $2.0 million
working capital line of credit (the "Norwest Line of Credit") and a $0.5 million
term loan (the "Norwest Term Loan"). Borrowings under the Norwest Credit
Agreement were used to pay off the First Community Line of Credit and to finance
a portion of the consideration paid by the Company in connection with the Tejas
Snacks acquisition (see Note 4), and will also be used for general working
capital needs. The Norwest Line of Credit bears interest at an annual rate of
prime plus 1.5% and matures in November 2001 while the Norwest Term Loan bears
interest at an annual rate of prime plus 3% and requires monthly principal
payments of approximately $28,000, plus interest, until maturity on May 1, 2000.
The Norwest Credit Agreement is secured by receivables, inventories, equipment
and general intangibles. Borrowings under the line of credit are based on 85% of
eligible receivables and 60% of eligible inventories. As of November 4, 1998,
the Company was eligible to borrow approximately $1,000,000 under the Norwest
Line of Credit and $0.5 million under the Norwest Term Loan. The Norwest Credit
Agreement requires the Company to be in compliance with certain financial
performance criteria, including minimum debt service coverage ratio, minimum
quarterly net income/maximum net loss, minimum annual net income/maximum net
loss, minimum quarterly increase in book net worth, and minimum annual
increase/maximum decrease in book net worth. Management believes that the
fulfillment of the Company's plans and objectives will enable the Company to
attain a sufficient level of profitability to be in compliance with these
financial performance criteria; however, there can be no assurance that the
Company will attain any such profitability or be in compliance. Any acceleration
under the Norwest Credit Agreement prior to the scheduled maturity of the
Norwest Line of Credit or the Norwest Term Loan could have a material adverse
effect upon the Company.

At September 30, 1998, the Company had outstanding 9% Convertible
Debentures due July 1, 2002 (the "9% Convertible Debentures") in the principal
amount of $2,219,000. The Company was not in compliance with a required interest
coverage ratio of 2:1 (actual of -1.2:1). Such non-compliance has not, to date,
resulted in an event of default because the holders of the 9% Convertible
Debentures have granted the Company a waiver effective through June 30, 1999.
After that time, the Company will be required to be in compliance with the
following financial ratios, so long as the 9% Convertible Debentures remain
outstanding: working capital of at least $500,000; minimum shareholders' equity
(net worth) of $4.5 million; an interest coverage ratio of at least 1:1; and a
current ratio at the end of any fiscal quarter of at least 1.1:1. Interest on
the 9% Convertible Debentures is paid by the Company on a monthly basis. Monthly
principal payments of approximately $20,000 are required to be made by the
Company through July 2002. For the period November 1, 1998 through October 31,
1999, Renaissance Capital (the holder of $1,718,000 of 9% Convertible
Debentures) has agreed to waive all mandatory principal redemption payments and
to accept stock in lieu of cash interest payments. Management believes that the
fulfillment of the Company's plans and objectives will enable the Company to
attain a sufficient level of profitability to be in compliance with the
financial ratios; however, there can be no assurance that the Company will
attain any such profitability or be in compliance with the financial ratios upon
the expiration of the waivers. Any acceleration under the 9% Convertible
Debentures prior to their maturity on July 1, 2002 could have a material adverse
effect upon the Company.

3. LITIGATION

On October 22, 1998, a jury rendered a verdict, but no judgement has been
entered by the Court, against the defendants, Mark S. Howells and Jeffrey J.
Puglisi (directors of the Company and PB Southeast), and awarded the plantiff
Gossett $90,000. The jury also rendered a verdict, but no judgement has been
entered by the Court, against Gossett and awarded Poore Brothers Southeast
$2,000. As of this date, the defendants have requested the Court to award them
attorneys' fees arising from additional plantiff's claims that were dismissed
earlier in the litigation. The parties have agreed to suspend all further action
and litigation until November 30, 1998 so that the parties may attempt to settle
the case.

In July 1998, the Company settled the litigation with Chris Ivey and his
company, Shelby and Associates. The settlement included the release of all
claims and the dismissal of his lawsuit.

4. ACQUISITION OF ASSETS OF TEJAS SNACKS

On November 4, 1998, the Company signed a definitive purchase agreement to
acquire the business and certain assets of Tejas Snacks, L.P., 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 StyleTM Potato Chips brand, inventories and certain capital
equipment. In exchange for these assets, the Company issued 523,077 unregistered
shares of Common Stock and paid approximately $1.2 million in cash. The Company
utilized available cash as well as funds available pursuant to the Norwest Line
of Credit and the Norwest Term Loan to satisfy the cash portion of the
consideration. Tejas Snacks had sales of approximately $2.8 million for the nine
months ended September 30, 1998. The Company has transferred production of the
Bob's brand to its Goodyear, Arizona facility. The acquisition will be accounted
for using the purchase method of accounting.

5. NEW ACCOUNTING PRONOUNCEMENTS

In July 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and for Hedging Activities",
which is effective for years beginning after June 15, 1999. The SFAS requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. Upon adoption in the first quarter
of 2000, the Company expects there will be no impact on its financial condition
or results of operations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

RESULTS OF OPERATIONS

QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO THE QUARTER ENDED SEPTEMBER
30, 1997

Net sales for the three months ended September 30, 1998 were $3,015,000
down $319,000 or 10%, from $3,334,000 for the three months ended September 30,
1997. Poore Brothers manufactured potato chip sales for the third quarter of
1998 were $2,309,000, down $365,000, or 14%, from $2,674,000. This decrease was
primarily the result of the third quarter 1997 discontinuance of low-fat potato
chips ($110,000) and the elimination of deep discount pricing and promotion
programs.

Gross profit for the three months ended September 30, 1998, was $719,000,
or 24% of net sales, as compared to $322,000, or 10% of net sales, for the three
months ended September 30, 1997. The $397,000 increase in gross profit, or 123%,
occurred despite 10% lower sales. This improvement resulted from the Company's
1997 manufacturing consolidation, benefits from negotiated raw material cost
savings and a continued improvement in manufacturing and operating efficiencies
at the Goodyear, Arizona facility.

Operating expenses decreased to $941,000 for the three months ended
September 30, 1998 from $1,479,000 for the same period in 1997. The decrease of
$538,000, or 36%, compared to the third quarter of 1997 was attributable
primarily to a $470,000 charge recorded by the Company in September 1997 related
to severance, equipment write-downs and lease termination costs in connection

with the closing of the Tennessee manufacturing facility. Selling, general and
administrative expenses for the three months ended September 30, 1998 decreased
$68,000 to $941,000, from $1,009,000 during the same period in 1997. Decreases
in administrative payroll costs, advertising and promotional spending, travel
and entertainment and bad debt expense were offset by increases in professional
services related to litigation and organizational changes.

Net interest expense increased to $122,000 for the quarter ended September
30, 1998 from $112,000 for the quarter ended September 30, 1997. This was due
primarily to a decrease in interest income generated from investment of the
remaining proceeds of the initial public offering.

The Company's net losses for the quarters ended September 30, 1998 and
September 30, 1997 were $343,000 and $1,269,000, respectively. The reduction in
net loss was attributable primarily to the increased gross profit and to the
absence of any charges for closing the Tennessee manufacturing facility in 1997.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997

Net sales for the nine months ended September 30, 1998 were $9,476,000,
down $3,183,000, or 25%, from $12,659,000 for the nine months ended September
30, 1997. The sale of the Texas distribution business in June 1997 contributed
approximately $1,452,000 to the sales decline, consisting of $1,213,000 in sales
of products manufactured by others and $239,000 in sales of Poore Brothers
manufactured potato chips. An additional $697,000 decrease occurred in sales of
products manufactured by others due to the elimination of several unprofitable
product lines during the second quarter of 1997. Poore Brothers manufactured
potato chip sales for the nine months of 1998 were $7,543,000, down $1,035,000,
or 12%, from $8,578,000 (excluding Texas) for the nine months of 1997. This
decrease was driven principally by lower volume as a result of the Company's
discontinuance of unprofitable promotion programs with certain customers and the
shutdown of the Tennessee manufacturing facility in the third quarter of 1997.

Gross profit for the nine months ended September 30, 1998, was $2,367,000,
or 25% of net sales, as compared to $1,519,000, or 12% of net sales, for the
nine months ended September 30, 1997. The $848,000 increase in gross profit, or
56%, occurred despite 25% lower sales. This increase is a result of the
restructuring actions implemented in 1997, benefits from negotiated raw material
cost savings and a continued improvement in manufacturing and operating
efficiencies at the Company's Goodyear, Arizona facility.

Operating expenses decreased to $2,724,000 for the nine months ended
September 30, 1998 from $3,640,000 for the same period in 1997. This represented
a $916,000 decrease, or 25%, compared to the same period in 1997. The decrease
was primarily attributable: to a $150,000 charge recorded by the Company in June
1997 related to severance, equipment write-downs and lease termination costs in
connection with the sale of the Company's Texas distribution business; a
$470,000 charge recorded by the Company in September 1997 in connection with the
closure of the Tennessee manufacturing facility; and a decrease in selling,
general and administrative expenses. Selling, general and administrative
expenses decreased $296,000, or 10%, to $2,724,000 for the nine month period
ended September 30, 1998 from $3,020,292 for the same period in 1997. A 25%
increase in advertising and promotional spending offset a 25% decrease in
payroll costs. In addition, higher professional service costs in 1998 were
offset by lower sales-related expenses, office expenses and occupancy costs.

Net interest expense increased to $371,000 for the nine months ended
September 30, 1998 from $197,000 for the same period in 1997. This increase was
due primarily to interest expense related to the permanent financing on the
Company's Arizona manufacturing facility and production equipment, and a
decrease in interest income generated from investment of the remaining proceeds
of the initial public offering.

The Company's net losses for the nine months ended September 30, 1998 and
September 30, 1997 were $728,000 and $2,318,000, respectively. The reduction in
net loss was attributable primarily to the increased gross profit and lower
operating expenses, offset by higher net interest expense.

LIQUIDITY AND CAPITAL RESOURCES

Net working capital was $1,050,000 at September 30, 1998, with a current
ratio of 1.7:1. At December 31, 1997, net working capital was $1,424,000 with a
current ratio of 1.6:1. The $374,000 decrease in working capital was primarily
attributable to the Company's use of cash for operating activities and payments
on long term debt.

On November 4, 1998, the Company signed a new $2.5 million Credit Agreement
with Norwest Business Credit, Inc. ("Norwest") which includes a $2.0 million
working capital line of credit (the "Norwest Line of Credit") and a $0.5 million
term loan (the "Norwest Term Loan"). Borrowings under the Norwest Credit
Agreement were used to pay off the First Community Line of Credit and to finance
a portion of the consideration paid by the Company in connection with the Tejas
Snacks acquisition (see Part II, Item 5), and will also be used for general
working capital needs. The Norwest Line of Credit bears interest at an annual
rate of prime plus 1.5% and matures in November 2001 while the Norwest Term Loan
bears interest at an annual rate of prime plus 3% and requires monthly principal
payments of approximately $28,000, plus interest, until maturity on May 1, 2000.
The Norwest Credit Agreement is secured by receivables, inventories, equipment
and general intangibles. Borrowings under the line of credit are based on 85% of
eligible receivables and 60% of eligible inventories. As of November 4, 1998,
the Company was eligible to borrow approximately $1,000,000 of the working
capital line of credit and $0.5 million under the Norwest Term Loan. The Norwest
Credit Agreement requires the Company to be in compliance with certain financial
performance criteria, including: minimum debt service coverage ratio; minimum
quarterly net income/maximum net loss; minimum annual net income/maximum net
loss; minimum quarterly increase in book net worth; and minimum annual
increase/decrease in book net worth. Management believes that the fulfillment of
the Company's plans and objectives will enable the Company to attain a
sufficient level of profitability to be in compliance with these financial
performance criteria; however, there can be no assurance that the Company will
attain any such profitability or be in compliance. Any acceleration under the
Norwest Credit Agreement prior to the scheduled maturity of the Norwest Line of
Credit or the Norwest Term Loan could have a material adverse effect upon the
Company. As of November 12, 1998, there was an outstanding balance of $709,000
on the Norwest Line of Credit and $500,000 on the Norwest Term Loan.

At September 30, 1998, the Company had outstanding 9% Convertible
Debentures due July 1, 2002 (the "9% Convertible Debentures") in the principal
amount of $2,219,000. The Company was not in compliance with a required interest
coverage ratio of 2:1 (actual of -1.2:1). Such non-compliance has not, to date,
resulted in an event of default because the holders of the Debentures have
granted the Company a waiver effective through June 30, 1999. After that time,
the Company will be required to be in compliance with the following financial
ratios, so long as the 9% Convertible Debentures remain outstanding: working
capital of at least $500,000; minimum shareholders' equity (net worth) of $4.5
million; an interest coverage ratio of at least 1:1; and a current ratio at the
end of any fiscal quarter of at least 1.1:1. Interest on the 9% Convertible
Debentures is paid by the Company on a monthly basis. Monthly principal payments
of approximately $20,000 are required to be made by the Company through July
2002. For the period November 1, 1998 through October 31, 1999, Renaissance
Capital (the holder of $1,718,000 of 9% Convertible Debentures) has agreed to
waive all mandatory principal redemption payments and to accept stock in lieu of
cash interest payments. Management believes that the fulfillment of the
Company's plans and objectives will enable the Company to attain a sufficient

level of profitability to be in compliance with the financial ratios; however,
there can be no assurance that the Company will attain any such profitability or
be in compliance with the financial ratios upon the expiration of the waivers.
Any acceleration under the 9% Convertible Debentures prior to their maturity on
July 1, 2002 could have a material adverse effect upon the Company.

As a result of the Company's strategy to expand the Company's operations
through acquisitions and otherwise, as well as general competitive conditions in
the snack food industry, the Company may incur additional operating losses in
the future. Expenditures relating to marketing, territory expansion and new
product development may adversely affect selling, general and administrative
expenses in the future and, consequently, may adversely affect operating and net
income. These types of expenditures are expensed for accounting purposes as
incurred, while sales generated from the result of such expansion may benefit
future periods.

Management believes that current working capital, together with available
line of credit borrowings, and anticipated cash flows from operations, will be
sufficient to finance the operations of the Company for at least the next twelve
months. This belief is based on current operating plans and certain assumptions,
including those relating to the Company's future sales levels and expenditures,
industry and general economic conditions and other conditions. If any of these
plans, assumptions or factors change, or if the Company pursues additional
strategic acquisitions, the Company may require future debt or equity financing
to meet its capital requirements. There can be no assurance that such financing
will be available or, if available, on terms attractive to the Company.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to identify the applicable year. For example,
computer programs that utilize date-sensitive information may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations.

The Company processes much of its data using licensed computer programs
from third parties, including its accounting software. Such third parties have
advised the Company that they have made all necessary programming changes to
such computer programs to address the Year 2000 issue. The Company tested its
systems for Year 2000 compliance during the first half of 1998 and discovered
that certain database information utilized by the Company for purposes of order
entry, billing and accounts receivables is not Year 2000 compliant, although the
underlying database software is Year 2000 compliant. The Company intends to
implement corrective measures with respect to such database information on or
prior to the first quarter of 1999. The Company does not expect to incur
significant expenses in connection with such corrective measures. In addition,
the Company believes that, notwithstanding the foregoing, it has no material
internal risk in connection with the potential impact of the Year 2000 issue on
the processing of date sensitive information by the Company's computerized
information systems.

The Company is in the process of determining the effect of the Year 2000
issue on its vendors' and customers' systems. There can be no assurance that the
systems of such third parties will be Year 2000 compliant on a timely basis, or
that the Company's results of operations will not be adversely affected by the
failure of systems operated by third parties to properly operate in the Year
2000.

FORWARD LOOKING STATEMENTS

WHEN USED IN THIS FORM 10-QSB AND IN FUTURE FILINGS BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), THE WORDS OR PHRASES
"WILL LIKELY RESULT," "THE COMPANY EXPECTS," "WILL CONTINUE," "IS ANTICIPATED,"
"ESTIMATED," "PROJECT," OR "OUTLOOK," OR SIMILAR WORDS OR EXPRESSIONS, ARE
INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION

27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY WISHES TO CAUTION READERS NOT TO
PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, EACH OF WHICH SPEAK
ONLY AS OF THE DATE MADE. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
HISTORICAL EARNINGS AND THOSE PRESENTLY ANTICIPATED OR PROJECTED. IN LIGHT OF
SUCH RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT FORWARD-LOOKING
INFORMATION CONTAINED IN THIS FORM 10-QSB WILL, IN FACT, TRANSPIRE OR PROVE TO
BE ACCURATE. THE COMPANY HAS NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY
REVISIONS THAT MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT
ANTICIPATED OR UNANTICIPATED EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE OF
SUCH STATEMENTS.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In July 1998, the Company settled the litigation with Chris Ivey and his
company, Shelby and Associates. The settlement included the release of all
claims and the dismissal of his lawsuit

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On November 4, 1998, pursuant to the terms of the Norwest Credit Agreement,
the Company issued to Norwest a Warrant (the "Norwest Warrant") to purchase
50,000 shares of Common Stock for an exercise price of $0.93375 per share. The
Norwest Warrant is exercisable until November 3, 2003, the date of termination
of the Norwest Warrant, and provides the holder thereof certain demand and
piggyback registration rights. The issuance of the Warrant was made in reliance
upon the exemption from registration under the Securities Act of 1933, as
amended (the "Securities Act"), set forth in Section 4(2) as it did not involve
a public offering.

On November 12, 1998, the Company issued 523,077 unregistered shares of
Common Stock in connection with the acquisition by the Company of the business
and certain assets of Tejas Snacks, L.P. The shares were issued in lieu of cash
in satisfaction of $450,000 of the total $1.6 million purchase price. These
issuances were made in reliance upon the exemption from registration under the
Securities Act set forth in Section 4(2) as they did not involve a public
offering.

The Company has agreed to issue 183,263 unregistered shares of Common Stock
to Renaissance Capital in consideration for its waiver of all mandatory
principal redemption payments due under the 9% Convertible Debentures held by
Renaissance Capital for the period from November 1, 1998 through October 31,
1999. The issuance will be made in reliance upon the exemption from registration
under the Securities Act set forth in Section 4(2) as it will not involve a
public offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

At September 30, 1998, the Company had outstanding 9% Convertible
Debenturesdue July 1, 2002 (the "9% Convertible Debentures") in the principal
amount of $2,219,000. The Company was not in compliance with a required interest
coverage ratio of 2:1 (actual of -1.2:1). Such non-compliance has not, to date,
resulted in an event of default because the holders of the 9% Convertible
Debentures have granted the Company a waiver effective through June 30, 1999.
After that time, the Company will be required to be in compliance with the
following financial ratios, so long as the 9% Convertible Debentures remain
outstanding: working capital of at least $500,000; minimum shareholders' equity
(net worth) of $4.5 million; an interest coverage ratio of at least 1:1; and a
current ratio at the end of any fiscal quarter of at least 1.1:1. Interest on
the 9% Convertible Debentures is paid by the Company on a monthly basis. Monthly
principal payments of approximately $20,000 are required to be made by the
Company through July 2002. For the period November 1, 1998 through October 31,
1999, however, Renaissance (the holder of $1,718,000 of 9% Convertible
Debentures) has agreed to waive all mandatory principal redemption payments and
to accept stock in lieu of cash interest payments. Management believes that the
fulfillment of the Company's plans and objectives will enable the Company to
attain a sufficient level of profitability to be in compliance with the
financial ratios; however, there can be no assurance that the Company will
attain any such profitability or be in compliance with the financial ratios upon
the expiration of the waivers. Any acceleration under the 9% Convertible
Debentures prior to their maturity on July 1, 2002 could have a material adverse
effect upon the Company.

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

None

ITEM 5. OTHER INFORMATION

On July 9, 1998, the Company filed a Registration Statement of Form S-3,
Amendment No. 1, with the Commission in connection with the registration of
2,604,717 shares of Common Stock, including 300,000 shares issuable upon the
exercise of the Warrant issued by the Company to Westminster Capital, Inc. in
September 1996 and 2,109,717 shares issuable upon conversion of the 9%
Convertible Debentures. The Registration Statement has not to date been declared
effective by the Commission.

On August 14, 1998, Scott D. Fullmer resigned as Vice President - Sales and
Marketing of the Company. In connection with the acquisition of Tejas Snacks,
Kevin M. Kohl and Thomas G. Bigham were made Vice Presidents of Tejas PB
Distributing, Inc.

On August 18, 1998, the Company entered into an agreement with Everen
Securities, Inc. ("Everen") pursuant to which the Company retained Everen as
financial advisor to assist the Company in its pursuit of strategic
acquisitions. Everen is entitled to fees in connection with the Tejas Snacks
acquisition and the Norwest financing pursuant to the agreement.

On November 4, 1998, the Company signed a definitive purchase agreement to
acquire the business and certain assets of Tejas Snacks, L.P., 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 StyleTM Potato Chips brand, inventories and certain capital
equipment. In exchange for these assets, the Company issued 523,077 unregistered
shares of Common Stock and paid approximately $1.2 million in cash. The Company
utilized available cash as well as funds available pursuant to the Norwest Line
of Credit and the Norwest Term Loan to satisfy the cash portion of the
consideration. Tejas Snacks had sales of approximately $2.8 million for the nine
months ended September 30, 1998. The Company has transferred production of the
Bob's brand to its Goodyear, Arizona facility. In connection with the
acquisition, the Company entered into employment agreements with certain key
personnel of Tejas.

On November 4, 1998, the Company entered into the Norwest Credit
Agreement with Norwest which provides the Company with a $2.0 million working
capital line of credit and a $0.5 million term loan. See "PART I, ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - LIQUIDITY AND CAPITAL RESOURCES."

As of November 9, 1998, the closing bid price of the Company's Common
Stock had remained below $1.00 per share for thirty consecutive trading days. As
a result, the Company has received a notice from the NASDAQ Stock Market, Inc.
("NASDAQ") that the Company was not in compliance with the closing bid price
requirements for the continued listing of the Common Stock on the NASDAQ
SmallCap Market and that such Common Stock would be delisted after February 15,
1999 if the closing bid price is not equal to or greater than $1.00 per share
for a period of at least ten consecutive trading days during the ninety-day
period ending February 15, 1999. As of November 13, 1998, the Company has not
satisfied this closing bid price requirement. In the event that the Company is
unable to achieve compliance, it will consider seeking further procedural
remedies to delay or avoid the delisting of the Common Stock or consider listing
in the over-the-counter market of the National Association of Securities
Dealers, Inc.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

EXHIBIT
NUMBER DESCRIPTION

10.1 Separation Agreement and Release of All Claims dated August 14, 1998,
by and between the Company and Scott D. Fullmer. *
10.2 Letter Agreement dated August 18, 1998, by and between the Company and
Everen.*
10.3 Credit and Security Agreement dated October 23, 1998, by and between
the Company (and certain of its subsidiaries) and Norwest. *
10.4 Patent and Trademark Security Agreement dated October 23, 1998, by and
between the Company (and certain of its subsidiaries) and Norwest. *
10.5 Warrant dated November 4, 1998, issued by the Company to Norwest. *
10.6 Agreement for Purchase and Sale of Assets dated October 29, 1998, by
and among the Company, Tejas, Kevin Kohl and Tom Bigham. *
10.7 Employment Agreement dated November 12, 1998, by and between Tejas PB
Distributing, Inc. and Thomas G. Bigham. *
10.8 Employment Agreement dated November 12, 1998, by and between Tejas PB
Distributing, Inc. and Kevin M. Kohl. *
27.1 Financial Data Schedule. *

* Filed herewith.

(b) Current Reports on Form 8-K:

Current Report on Form 8-K, reporting the signing of a letter of intent
by and between the Company and Tejas to acquire the business of Tejas
(filed with the Commission on September 29, 1998).

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

POORE BROTHERS, INC.

By: /s/ Eric J. Kufel
------------------------------------------
Dated: November 16, 1998 Eric J. Kufel
President and Chief Executive Officer
(principal executive officer)

By: /s/ Thomas W. Freeze
------------------------------------------
Dated: November 16, 1998 Thomas W. Freeze
Vice President, Chief Financial Officer,
Treasurer and Secretary
(principal financial and accounting officer)

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION

10.1 Separation Agreement and Release of All Claims dated August 14, 1998,
by and between the Company and Scott D. Fullmer.
10.2 Letter Agreement dated August 18, 1998, by and between the Company and
Everen.
10.3 Credit and Security Agreement dated October 23, 1998, by and between
the Company (and certain of its subsidiaries) and Norwest.
10.4 Patent and Trademark Security Agreement dated October 23, 1998, by and
between the Company (and certain of its subsidiaries) and Norwest.
10.5 Warrant dated November 4, 1998, issued by the Company to Norwest.
10.6 Agreement for Purchase and Sale of Assets dated October 29, 1998, by
and among the Company, Tejas, Kevin Kohl and Tom Bigham.
10.7 Employment Agreement dated November 12, 1998, by and between Tejas PB
Distributing, Inc. and Thomas G. Bigham.
10.8 Employment Agreement dated November 12, 1998, by and between Tejas PB
Distributing, Inc. and Kevin M. Kohl.
27.1 Financial Data Schedule.