Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 27, 2008

For the transition period from                  to                

Commission File Number: 1-14556

THE INVENTURE GROUP, INC.

(Exact name of registrant as specified in its charter)

5050 N. 40 th  Street, Suite 300

Phoenix, Arizona 85018

(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:

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

The aggregate market value of the voting stock (Common Stock, $.01 par value) held by non-affiliates of the Registrant was approximately $29.2 million based upon the closing market price on June 28, 2008, the last business day of the Registrant’s most recently completed second fiscal quarter.

The number of issued and outstanding shares of Common Stock, $.01 par value, as of March 26, 2009 was 17,884,456.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant’s Annual Meeting of Shareholders to be held on May 19, 2009 are incorporated by reference into Part III of this Form 10-K.

EXCHANGE ACT REPORTS AVAILABLE ON COMPANY WEBSITE

Under “SEC Filings” on the “Investors” page of the Company’s website located at www.inventuregroup.net, the following filings are made available as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”): the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A related to the Company’s Annual Shareholders Meeting, and any amendments to those reports or statements filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.  You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an Internet website located at http://www.sec.gov that contains the information we file of furnish electronically with the SEC.

Table of Contents

TABLE OF CONTENTS

2

Table of Contents

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”), Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and The Inventure Group, 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 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, lack of consumer acceptance of existing and future products, dependence upon key license agreements, dependence upon major customers, 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.

Item 1.  Business

Description of Business

The Inventure Group, Inc. (the “Company”) is a $100+ million marketer and manufacturer of healthy/all natural and indulgent specialty food brands. The Company is headquartered in Phoenix, Arizona with plants in Arizona, Indiana and Washington.  The goal is to build a rapidly growing specialty brand company that specializes on evolving consumer eating habits in two primary product segments: 1) Healthy/Natural Food Products 2) Indulgent Specialty Snack Food Brands.  The company sells its products nationally through a number of channels including: Grocery, Natural, Mass, Drug, Club, Vending, Food Service, Convenience Stores and International.

In the Healthy/Natural portfolio, products include Rader Farms frozen berries and Boulder Canyon Natural Foods TM  brand kettle cooked potato chips. In the Indulgent Specialty category, products include TGI Friday’s® brand snacks under license from TGI Friday’s Inc., BURGER KING TM  brand snack products under license from Burger King Corporation, Poore Brothers® kettle cooked potato chips, Bob’s Texas Style® kettle cooked chips, Tato Skins® brand potato snacks and O’Boises® potato snacks. The Company also manufactures private label snacks for certain grocery retail chains and distributes in Arizona snack food products that are manufactured by others.

The Inventure Group, Inc.’s frozen berry products are manufactured by Rader Farms, Inc. (“Rader Farms”) a Washington corporation located in Whatcom County, and acquired by the Company in May of 2007.   Rader Farms grows processes and markets premium berry blends, raspberries, blueberries, and rhubarb and purchases marionberries, cherries, cranberries, strawberries and other fruits from a select network of fruit growers for resale. The fruit is processed, frozen and packaged for sale and distribution to wholesale customers. The company also uses third party processors for certain products.

The Company’s snack products are manufactured at the Arizona and Indiana plants as well as some third party plants for certain products.

For the fiscal years 2008 and 2007, net revenues totaled $113,058,715 and $90,910,580, respectively, and T.G.I. Friday’s® brand salted snacks represented 33% and 47%, respectively, of the Company’s total net revenues.

3

Table of Contents

The Company produces T.G.I. Friday’s® brand snacks, BURGER KING TM  snack products, Tato Skins® brand potato snacks, O’Boises® brand potato snacks and Boulder Canyon Natural Foods TM  Rice and Bean Snacks, utilizing a sheeting and frying process that includes licensed technology. Each snack product is offered in several different flavors and formulations.  All of these products are manufactured at the Company-owned facility in Bluffton, Indiana, except for Mozzarella Snack Sticks,  Hot Pepper Jack Cheese Fries, Onion Rings and French Toast products which are produced by contract manufacturers on behalf of the Company and sold under the T.G.I. Friday’s® and BURGER KING TM  brand name.

Poore Brothers®, Bob’s Texas Style® and Boulder Canyon Natural Foods TM  brand potato chips are manufactured with a batch-frying process that the Company believes produces potato chips with enhanced crispness and flavor. Poore Brothers®, Bob’s Texas Style® and Boulder Canyon Natural Foods TM  potato chips are each offered in a variety of flavors.  The Company also manufactures potato chips for sale on contract manufacturing 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. ”

At the Company-owned farming operations in Lynden, Washington, the Company grows raspberries, blueberries and rhubarb which are individually quick frozen on site to enhance shelf life.  The Company also purchases marionberries, cherries, cranberries, strawberries and other fruit from a select network of fruit growers for resale.  The fruit is processed, frozen and packaged for sale and distribution nationally to wholesale customers under the Rader Farms® brand, as well as co-branded with store brands.

The Company’s business objective is to build a diverse portfolio of Healthy/Natural and Indulgent Specialty food brands that provide 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 Healthy and or Natural food brands.   The Company also plans to increase sales of its existing brands and continue to improve profit margins through increased operating efficiencies and manufacturing capacity utilization.  See “ Business Strategy .”

The Company’s executive offices are located at 5050 N. 40 th  Street, Suite 300 Phoenix, Arizona 85018, and its telephone number is (623) 932-6200.

Company History

The Inventure Group, Inc., (“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.  The Company changed its name from Poore Brothers, Inc. to The Inventure Group, Inc. on May 23, 2006.

In December 1996, the Company completed an initial public offering of its Common Stock.  In November 1998, the Company acquired the business and certain assets (including the Bob’s Texas Style® potato chip brand) of Tejas Snacks, L.P. (“Tejas”), a Texas-based potato chip manufacturer.  In October 1999, the Company acquired Wabash Foods, LLC (“Wabash”) including the Tato Skins®, O’Boisies®, and Pizzarias® trademarks and the Bluffton, Indiana manufacturing operation and assumed all of Wabash Foods’ liabilities.  In June 2000, the Company acquired Boulder Natural Foods, Inc. (“Boulder”) and the Boulder Canyon Natural Foods TM  brand of totally natural potato chips.  In May 2007, the Company acquired Rader Farms, Inc., including a farming operation and a berry processing facility in Lynden, Washington.

In 2000, the Company launched its T.G.I. Friday’s® brand salted snacks pursuant to a license agreement with TGI Friday’s Inc., which expires in 2014.  In 2007, the Company launched its BURGER KING TM  snack products pursuant to a license agreement with Burger King Corporation , which expires in 2012.

4

Table of Contents

The Company continues to introduce line extensions and test market new and innovative snack food products.

Business Strategy

The Company’s business strategy is to continue building a diverse portfolio of Healthy/Natural (Rader Farms® and Boulder Canyon Natural Foods TM ) and Indulgent Specialty (T.G.I. Friday’s®, BURGER KING TM , Poore Brothers®) food brands with annualized revenues of $5 million to $50 million each through building existing brands, licensing, acquisition or development.  The goals of our strategy are to (i) capitalize on Healthy/Natural and Indulgent Specialty food brand opportunities, (ii) deliver incremental category growth for retailers, (iii) provide product innovation targeted to a defined consumer segment, (iv) complement, rather than compete directly against, large national competitors with leading national brands, and (v) build relationships with major retailers in all channels of distribution by providing them higher margins, excellent customer service and constant innovation.  The primary elements of the Company’s long-term business strategy are as follows:

Develop, Acquire or License Innovative Healthy/Natural and Indulgent Specialty Food Brands.   A significant element of the Company’s business strategy is to develop, acquire or license new innovative Healthy/Natural and Indulgent Specialty food brands that provide strategic fit with our existing business and possess strong national brand equity in order to expand, complement or diversify the Company’s existing business. The Company initiated this element of its strategy in 2000 by launching its first national niche brand, T.G.I. Friday’s® brand salted snacks, under an exclusive license from TGI Friday’s Inc. and in 2007 launched its second national niche brand, BURGER KING TM  snack products pursuant to a license agreement with Burger King Corporation.  The Company plans to continue developing, acquiring or licensing additional specialty food brands, though it intends to mitigate the financial impact of launching new brands by introducing new licensed products in small-scale test markets rather than large scale regional or national introductions.

Broaden Distribution of Existing Brands.   The Company plans to increase distribution and build the market share of its existing branded products through selected trade activity in various existing or new markets and channels.  For example, the Company has recently extended the shelf life of our Poore Brothers® brands in order for us to expand beyond Arizona.  We are expanding the distribution of our Boulder Canyon Natural Foods TM  brand nationally through the natural channel as well as through the natural segment in the grocery channel.  The Company is looking at expanding overseas with the T.G.I. Friday’s® brand as well as BURGER KING TM  and Boulder Canyon Natural Foods TM  brands. Marketing efforts may include, among other things, trade advertising and promotional programs with distributors and retailers, in-store advertisements, in-store displays and limited consumer advertising, public relations and coupon programs.

Pursue Acquisitions.   In 2007, the Company acquired Rader Farms, Inc. (“Rader Farms”) for an estimated total cost of approximately $20.9 million. The Company continues to evaluate acquisition opportunities in the specialty food area where we can use our competencies in Operations, Sales, Marketing and Distribution in order to drive revenue and profit growth.

Develop New Products for Existing Brands.   In addition, the Company plans to continue its innovation activities to identify and develop (i) new line extensions for its brands, such as new flavors or products, and (ii) new food segments in which to expand the brand’s presence.  We have launched a number of new items such as: T.G.I. Friday’s® Buffalo Sticks, T.G.I. Friday’s® Kettle Chips, BURGER KING TM  Onion Rings, Poore Brothers® Sweet Chili & Red Pepper, Poore Brothers® 50% Reduced Salt, Boulder Canyon Natural Foods TM  Balsamic Vinegar & Rosemary, and Boulder Canyon Natural Foods TM  Rice & Adzuki Bean snack chips.

Leverage Infrastructure and Capacity.   The Company’s Indiana, Arizona and Washington facilities are currently operating at approximately 40%, 80% and 50% of their respective manufacturing capacities.  The Company currently has arrangements with several grocery chains for the manufacture and distribution by the Company of their respective private label snacks and believes that additional contract manufacturing opportunities exist.  While such arrangements are extremely price competitive and can be short in duration, the Company believes that they may provide a profitable opportunity for the Company to improve the capacity utilization of its facilities.  The Company intends to seek additional private label and contract manufacturing customers located near its facilities who demand superior product quality at a reasonable price.  The Company also utilizes contract manufacturers’ excess capacity to produce items that the Company does not have the equipment or ability to manufacture.

5

Table of Contents

Improve Profit Margins.   The Company plans to increase gross profit margins through increased long-term revenue growth, improved operating efficiencies, and higher margin new products.  It believes that additional improvements to its manufactured products’ gross profit margins are possible with the achievement of the business strategies discussed above.

Products

Manufactured Snack Food Products .   The Company produces T.G.I. Friday’s® brand Potato Skins snacks, BURGER KING TM  brand potato snack products , Tato Skins® brand potato snacks and O’Boises brand snacks utilizing a sheeting and frying process.  All of these are offered in several different flavors and formulations and are manufactured at the Company-owned facility in Bluffton, Indiana, except for Mozzarella Snack Sticks,  Hot Pepper Jack Cheese Fries, Onion Rings and French Toast products which are produced by contract manufacturers on behalf of the Company and sold under the T.G.I. Friday’s® and BURGER KING TM  brand name.

Poore Brothers®, Bob’s Texas Style®, and Boulder Canyon Natural Foods TM  brand potato chips are produced utilizing a batch-frying process and are marketed by the Company as premium products based on their distinctive combination of cooking method and variety of distinctive flavors.  Poore Brothers®, Bob’s Texas Style® and Boulder Canyon Natural Foods TM  potato chips are each offered in a variety of flavors.  The Company currently has agreements with several grocery chains pursuant to which the Company produces their respective private label potato chips in the styles and flavors specified by each grocery chain.

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.

Berry Farming and Processing. The Company grows raspberries, blueberries and rhubarb at its Company-owned farming operations in Lynden, Washington, which are individually quick frozen on site to enhance shelf life.  The Company also purchases marionberries, cherries, cranberries and strawberries from a select network of fruit growers for resale.  The fruit is processed and packaged for sale and distribution nationally to wholesale customers under the Rader Farms® brand, as well as through store brands.

Manufacturing

The Company-owned 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®, BURGER KING TM ,  and Tato Skins® brand products.  The Indiana facility is currently operating at approximately 40% of capacity.  Certain T.G.I. Friday’s®, BURGER KING TM , Tato Skins® brand products and Boulder Canyon Natural Foods TM  Rice and Bean Snacks are produced utilizing a sheeting and frying process that includes some licensed technology.  Some T.G.I. Friday’s® brand salted snack products are produced by contract manufacturers on behalf of the Company.  See “ Patents, Trademarks and Licenses .” Recently developed technology at the Bluffton plant allows the Company to use existing equipment to make pellet snacks that are entirely different in appearance and taste from its other product lines.  The Company believes this technology will help expand the T.G.I. Friday’s® and BURGER KING™ product lines and facilitate the addition of new Indulgent Specialty food brands .

The Company believes that a key element of the success to date of the Poore Brothers®, Bob’s Texas Style® and Boulder Canyon Natural Foods TM  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.

The Company-owned manufacturing facility in Goodyear, Arizona has the capacity to produce up to approximately 2,500 pounds of potato chips per hour, including 1,300 pounds of batch-fried branded potato chips per hour and 1,200 pounds of continuous-fried private label potato chips per hour.  The Arizona facility is currently operating at approximately 80% of capacity.

The Company-owned farming and facility in Lynden, Washington has the capacity to produce up to eight million pounds of grown berries per year.  The individually quick frozen (“IQF”) processing facilities located at the same location

6

Table of Contents

have the capacity to apply the IQF process to forty million pounds of berries annually.  Overall, the farming and processing facilities are operating at 75% and 50% of capacity, respectively.

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. Properties .”

Marketing and Distribution

The Company’s T.G.I. Friday’s® brand snack food products have achieved significant market presence across a number of sales channels.  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 the Company’s manufacturing processes.  The Company has retained various sales and marketing agencies with employees and offices nationwide to represent T.G.I. Friday’s® brand snacks on behalf of the Company in the grocery and convenience store channels.  The Company’s own sales organization, as well as brokers, sells T.G.I. Friday’s® brand snacks in the mass, club and drug channels.  The Company also obtains significant sales on T.G.I. Friday’s® brand snacks in the vending channel nationwide through an independent network of brokers and distributors.

The Company’s potato chip brands are distributed to grocery and other retailers primarily by a select group of independent distributors.  The Company’s Boulder Canyon Natural Foods TM  brand potato chip products have achieved significant market presence in Colorado and in natural food stores nationwide as well as other leading grocery retailers.  Poore Brothers® brand potato chip products have achieved significant market presence in the southwest United States.  The Company’s Bob’s Texas Style® brand potato chip products have achieved significant market presence in south/central Texas.  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 all of the various channels in which we operate. The Company has also retained an International broker to expand sales internationally.

The Company’s distribution network throughout Arizona includes approximately 42 independently operated service routes.  Each route is operated by an independent distributor who merchandises to 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 independent distributors service many smaller independent grocery stores, club stores, and military facilities throughout Arizona.  In addition to Poore Brothers® 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.  The Company currently also retains a Canadian sales and marketing agency to sell to Canadian customers and is seeking opportunities to selectively expand its growth in other countries.

The Company’s marketing of its berry products is essentially performed through brokerage arrangements with whom the Company has relationships.   Similar to its snack business, the Company selects brokers primarily on the basis of quality of service, call frequency on customers, financial capability and relationships they have with supermarkets and club stores including access to freezer space for the berry products.

Successful marketing of the Company’s products depends, in part, upon obtaining adequate shelf or freezer space for such products, particularly in supermarkets, C-Stores, discount stores and the club channel for both snacks and berry products and vending machines for snacks.  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 has traditionally been 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.  The Company also invests marketing dollars in brand and category research.

7

Table of Contents

Suppliers

The principal raw materials used by the Company are potatoes, potato flakes, wheat flour, corn, oils and berries.  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 and corn are widely available year-round, although they are subject to seasonal price fluctuations.  The Company will lock in prices as appropriate.  The Company uses a variety of oils in the production of its snack 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 snack manufacturing process.  Although the Company produces many of its berry products in its own farms, it also augments that production by purchasing additional berries to meet customer demands.

The Company chooses its suppliers based primarily on price, availability, service and quality.  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

Costco accounted for 24% of the Company’s 2008 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 net revenues in 2008.  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.

The majority of the Company’s revenues are attributable to external customers in the United States.  The Company does sell to Canadian and international customers as well, however, the revenues attributable to Canadian and International customers is insignificant.  All of the Company’s assets are located in the United States.

Competition

The Company’s snack products generally compete against other snack foods, including potato chips and tortilla chips.  The snack food industry is large and highly competitive and is dominated by large food companies, including Frito-Lay, Inc., a subsidiary of PepsiCo, Inc., Procter and Gamble and General Mills.  These companies possess substantially greater financial, production, marketing, distribution and other resources than the Company, and their brands are more widely recognized than the Company’s products.  Numerous other companies that are actual or potential competitors of the Company offer products similar to the Company’s, and some of these have greater financial and other resources (including more employees and more extensive facilities) than the Company.  In addition, many 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 it has innovative products and methods of operation that will enable it to compete successfully, there can be no assurance of its ability to do so.

The Company’s berry products generally compete against other packaged berries on the basis of quality and price.  Obtaining freezer space at supermarkets and club stores is tantamount to successfully competing with other berry products, as supermarkets and club stores will frequently only carry one brand of frozen berry products, contrasted to snack products where multiple brands are carried.

The principal competitive factors affecting the markets of the Company’s products include product quality and taste, brand awareness among consumers, access to shelf or freezer space, price, advertising and promotion, varieties offered, nutritional content, product packaging and package design.  The Company competes in its markets principally on the basis of product quality and taste.  While products produced at the Company’s Bluffton, Indiana facility involve the use of certain licensed technology and unique manufacturing processes, the taste and quality of products produced at the Company’s Goodyear, Arizona facility are largely due to two elements of the Company’s manufacturing process: its use of batch-frying

8

Table of Contents

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.

Government Regulation

The manufacture, labeling and distribution of the Company’s products are subject to the rules and regulations of various federal, state and local health agencies, including the Food & Drug Administration (“FDA”).  In May 1994, regulations issued under the Nutrition Labeling and Education Act of 1990 (“NLEA”), which requires specified nutritional information to be disclosed on all packaged foods, 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 snack 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.

As a direct result of the September 11, 2001 terrorism attack, the FDA issued the Bioterrorism Act of 2002 (“the Act”) to protect the U.S. food supply.  While there are four parts to the Act, only two of the provisions impact the Company.  One requirement for the Company was registration with the FDA as a U.S. Food Manufacturing Company, which the Company completed prior to the required date of December 12, 2003.  The second of the Act’s provisions pertaining to the Company relates to record retention.  The Company is required to retain records pertaining to its raw materials’ immediate previous sources (“one back”) as well as its finished goods’ subsequent recipients (“one up”) for twelve months.  The Act was effective January 1, 2005, and the Company believes it is currently compliant with this provision.

On July 11, 2003, the FDA published its final rule on Trans Fat Labeling requiring that food labels declare trans fats on or before January 1, 2006.  This rule requires that trans fat be declared on a separate line in the standard Nutrition Facts below total fat and saturated fat and be calculated to the nearest 0.5 grams, unless it is less than 0.5 grams in which case it may be expressed as 0 grams.

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 27, 2008, the Company had 374 full-time employees, including 323 in manufacturing and distribution, 24 in sales and marketing and 27 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, Trademarks and Licenses

The Company produces T.G.I. Friday’s® brand snacks, BURGER KING TM  brand potato snack products, Tato Skins® brand potato crisps and Boulder Canyon Natural Foods TM  Rice and Beans Snacks utilizing a sheeting and frying process that includes technology that the Company licenses from a third party.  Pursuant to the license agreement between the Company and the third party, the Company has a royalty-bearing, exclusive right license to use the technology in the United States, Canada, and Mexico until such time the parties mutually agree to terminate the agreement and provide written sixty (60) days notice to each other.  In consideration for the use of this technology, the Company is required to make royalty payments on sales of products manufactured utilizing the technology until such termination date.  The patents for this technology expired December 26, 2006. However, should products substantially similar to Tato Skins®, O’Boisies® and Pizzarias® become available for any reason in the marketplace by any manufacturer other than the Company which results in a sales decline of 10% or more, any royalty obligation for the respective product(s) shall cease.

The Company licenses the T.G.I. Friday’s® brand snacks trademark from T.G.I. 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® brand snack products and is required to achieve certain minimum sales levels by certain dates during the contract term.

9

Table of Contents

The Company licenses the BURGER KING TM  brand snacks trademark from Burger King Corporation under a license agreement with a term expiring in 2012.  Pursuant to the license agreement, the Company is required to make royalty payments on sales of BURGER KING TM  brand snack products and is required to achieve certain minimum sales levels by certain dates during the contract term.

The Company continues to evaluate new licensing opportunities to broaden its product offering and to complement the growth of its existing T.G.I. Friday’s® and BURGER KING TM  product lines through the introduction of new products in snack foods as well as other consumer product categories.

The Company owns the following trademarks in the United States: Poore Brothers®, Rader Farms TM , An Intensely Different Taste®, Texas Style®, Boulder Canyon®, Tato Skins®, O’Boisies®, Pizzarias®, Braids® and Knots®.

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.   Any termination of any of the Company’s license agreements, 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.

Seasonality

The food products industry is seasonal.  Consumers tend to purchase our snack products at higher levels during the major summer holidays and also at times surrounding major sporting events throughout the year.  Additionally, we may face seasonal price increases for raw materials.

Item 1A.  Risk Factors

Any one of the following factors could affect operating results.  You should read and carefully consider these risk factors, and the entirety of this report, before you invest in our securities.

Risks Related to Our Business

We may incur significant future expenses due to the implementation of our business strategy.

The Company is striving to achieve its long-term vision of being a significant marketer of specialty food brands.  Such action is subject to the substantial risks, expenses and difficulties frequently encountered in the implementation of a business strategy.  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 require the Company to incur substantial additional expenses, including advertising and promotional costs, “slotting” expenses (i.e., the cost of obtaining shelf of freezer 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 will be able to implement its strategic plan, that its business strategy will prove successful or that it will be able to maintain profitability during such implementation.

We may not be able to obtain the additional financing we need to implement our business strategy.

A significant element of the Company’s business strategy is the development, acquisition and/or licensing of innovative specialty food brands, for the purpose of expanding, complementing and/or diversifying the Company’s business. In connection with each of the Company’s previous acquisitions, 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.  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, be 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.

10

Table of Contents

We expect some of our future growth to be derived in part, from acquisitions, but our acquisition strategy may not be successful, or we may not be successful integrating acquisitions.

An element of the Company’s business strategy is the pursuit of selected strategic acquisition opportunities for the purpose of expanding, complementing and/or diversifying the Company’s business.  However, no assurance can be given that the Company will be able 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.

We are subject to ongoing financial covenants under our main credit facility, and if we fail to meet those covenants or otherwise default on our credit facility, our lender may accelerate our borrowings.

At December 27, 2008, the Company had outstanding indebtedness in the aggregate principal amount of $20.7 million.

We borrowed the principal amount of $16 million of our indebtedness pursuant to a credit agreement with U.S. Bank National Association (“U.S. Bank”) which is secured by substantially all assets of the Company.  At December 27, 2008, our line of credit balance under the agreement was $8.2 million.  The Company’s obligations under the Credit Agreement are guaranteed by each of its subsidiaries.  The Company is required to comply with certain financial covenants pursuant to the U.S. Bank Credit Agreement so long as borrowings from U.S. Bank remain outstanding.  Should the Company be in default under any of such covenants, U.S. Bank 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 Credit Agreement.  At December 27, 2008, the Company was in compliance with all covenants of the Credit Agreement.

$12.5 million of the indebtedness is secured by the Company’s land and buildings at its Goodyear, AZ, Bluffton, IN, and Lynden, WA facilities.

As the Company implements its business strategy, there can be no assurance that the Company will remain in compliance with the financial covenants in the future. Any acceleration of the borrowings under the Credit Agreement prior to the applicable maturity dates could have a material adverse effect upon the Company. See “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources .”

We may not be able to successfully implement our strategy to expand our business internationally.

The Company plans to expand sales to Canadian customers and is exploring other international market opportunities for its brands.  Such expansion may require significant management attention and financial resources and may not produce desired levels of revenue.  International business is subject to inherent risks, including longer accounts receivable collection cycles, difficulties in managing operations across disparate geographical areas, difficulties enforcing agreements and intellectual property rights, fluctuations in local economic, market and political conditions, compliance requirements with U.S. and foreign export regulations, potential adverse tax consequences and currency exchange rate fluctuations.

We may incur material losses and costs as a result of product liability claims that may be brought against us or any product recalls we have to make .

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 or product recall, could have a material adverse effect on the financial condition or results of operations of the Company.

We are subject to numerous governmental regulations, and our failure to comply with those regulations could result in fines or penalties being imposed on us.

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.

Additionally, as a direct result of the September 11, 2001 terrorism attack, the FDA issued the Bioterrorism Act of 2002 (“the Act”) to protect the U.S. food supply.  While there are four parts to the Act, only two of the provisions impact the

11

Table of Contents

Company.  One requirement that applied to the Company was registration with the FDA as a U.S. Food Manufacturing Company, which the Company completed prior to the required date of December 12, 2003.  The second of the Act’s provisions pertaining to the Company relates to record retention.  The Company is required to retain records pertaining to its raw materials’ immediate previous sources (“one back”) as well as its finished goods’ subsequent recipients (“one up”) for twelve months. The Act was effective January 1, 2005.

On July 11, 2003, the FDA published its final rule on Trans Fat Labeling requiring that food labels declare trans fats on or before January 1, 2006.  This rule requires that trans fat be declared on a separate line in the standard Nutrition Facts below total fat and saturated fat and be calculated to the nearest 0.5 grams, unless it is less than 0.5 grams in which case it may be expressed as 0 grams.

We cannot assure you that we will not face fines or penalties if our efforts to comply with these regulations are determined to be inadequate.

Newly adopted governmental regulations could increase our costs or liabilities or impact the sale of our products.

The food industry is highly regulated.  We cannot assure you 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.

We do not own the patents for the technology we use to manufacture our T.G.I. Friday’s®, BURGER KING TM  and Tato Skins® brand products .

The Company licenses technology from a third party in connection with the manufacture of its T.G.I. Friday’s®, BURGER KING TM  and Tato Skins® brand products and has a royalty-bearing, exclusive right license to use the technology necessary to produce these products in the United States, Canada, and Mexico until such time the parties mutually agree to terminate the agreement and provide written sixty (60) days notice to each other.  In consideration for the use of this technology, the Company is required to make royalty payments to the third party on sales of products manufactured utilizing the technology until such termination date.  The patents for this technology expired December 26, 2006.  Since these patents expired, we no longer have exclusive rights to this technology and, as a result, may face additional competition that could adversely affect our revenues.  Moreover, competitors of the Company, certain of which may have significantly greater resources than the Company, may utilize different technology in the manufacture of products that are similar to those currently manufactured, or that may in the future be manufactured, by the Company.  The entry of any such products into the marketplace could have a material adverse effect on the Company’s sales of T.G.I. Friday’s®, BURGER KING TM  and Tato Skins® brand products, as well as any such future products.

The taste and quality of Poore Brothers®, Bob’s Texas Style® and Boulder Canyon Natural Foods TM  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.

The majority of our revenues are derived from a limited number of food brands.

The Company derives a substantial portion of its revenue from a limited number of snack food brands.  For the year ended December 27, 2008, 76% of the Company’s net revenues were attributable to the T.G.I. Friday’s® brand products, the Boulder Canyon Natural Foods TM  brand products and Rader Farms® brand products.  A decrease in the popularity of these brands 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 food brands will retain their historical levels of popularity or increase in popularity.  Any impact to a licensed brand’s reputation could also lead to an impact on the Company’s other snack food products associated with that brand.  Decreased sales from any one of our key 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

Table of Contents

We depend on a license agreement for the right to sell our T.G.I. Friday’s® brand and BURGER KING TM  brand products and we may rely on similar license agreements in the future.

The T.G.I. Friday’s® 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 BURGER KING TM  brand products are manufactured and sold by the Company pursuant to a license agreement by and between the Company and Burger King Corporation which expires in 2012.  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 Burger King Corporation.  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 or royalty payments).  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.

The loss of one of our major customers could have a material adverse effect on our business .

Costco accounted for 24% of the Company’s 2008 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 2008.  A decision by any major customer to cease or substantially reduce its purchases could have a material adverse effect on the Company’s business.

The loss of certain key employees could adversely affect our business .

The Company’s success is dependent in large part upon the abilities of its executive officers, including Terry McDaniel, Chief Executive Officer and Steve Weinberger, Chief Financial Officer.  The Company’s business strategy will challenge its executive officers, and the inability of such 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.

Risks Related to the Snack Business

We may not be able to compete successfully in our highly competitive industry.

The market for snack foods, such as those sold by us, including potato chips and meat snacks, is large and intensely competitive. Competitive factors in the 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 dominated by large food companies, including Frito-Lay, Inc., Procter and Gamble and others which have substantially greater financial and other resources than the Company and sell 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 products similar to those of the Company. With expansion of Company operations into new markets, the

13

Table of Contents

Company 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. There can be no assurance of the Company’s ability to compete successfully.

Unavailability of our necessary supplies, at reasonable prices, could materially adversely affect our operations.

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, and the Company uses a variety of oils in the production of its products.  Nonetheless, the Company is dependent on its suppliers to provide the Company with products and ingredients in adequate supply and on a timely basis.  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.

We may incur substantial costs in order to market our snacks.

Successful marketing of snack products generally depends upon obtaining adequate retail shelf space for product display, particularly in supermarkets. Frequently, food manufacturers and distributors, such as the Company, incur additional costs in order to obtain additional shelf space. Whether or not the Company incurs such costs in a particular market is dependent upon a number of factors, including 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.

Our business may be adversely affected by oversupply of snack products at the wholesale and retail levels and seasonal fluctuations.

Profitability in the food product industry is subject to oversupply of certain snack products at the wholesale and retail levels, which can result in our products going out of date before they are sold.  The snack products industry is also seasonal.  Consumers tend to purchase our products at higher levels during the major summer holidays and also at times surrounding the major sporting events throughout the year.

We may not be able to respond successfully to shifting consumer tastes.

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.  The success of new products will be key to the success of the Company’s business plan and 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.

Diet trends may adversely affect our revenues.

Increased consumer concerns about nutrition and healthy diets and the risk that sales of our food product may decline due to perceived health concerns, changes in consumer tastes or other reasons beyond the control of the Company may adversely affect our revenues.

Risks Related to the Rader Farms Business

Farming is subject to numerous inherent risks including changes in weather conditions or natural disasters that can have an adverse impact on crop production and materially affect our results of operations.

The Company, through its subsidiary Rader Farms, Inc. is subject to the risks that generally relate to the agricultural industry. Change in weather conditions and natural disasters, such as earthquakes, droughts, extreme cold or pestilence, may affect the planting, growing and delivery of crops, reduce sales stock, interrupt distribution, and have a material adverse impact on our business, financial condition and results of operations. Our competitors may be affected differently by such weather conditions and natural disasters depending on the location of their supplies or operations.

14

Table of Contents

Revenues are derived from one brand; the loss or impairment of this brand may have a material adverse effect on operating results .

Rader Farms derives the majority of its revenue from the sales of one brand. The Company’s net revenues are predominantly attributable to the Rader Farms® brand of frozen berries. A decrease in the popularity of frozen berries 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 the Rader Farms® brand will retain its historical level of popularity or increase in popularity. Decreased sales from the Rader Farms® brand of frozen berries would have a material adverse effect on the Company’s financial condition and results of operations.

Unavailability of purchased berries, at reasonable prices, could materially adversely affect our operations.

The Company’s manufacturing costs are subject to fluctuations in the prices of certain commodity prices. Berries are not readily available year-round, therefore, the Company uses an individual quick frozen (IQF) technique to freeze the berries harvested for use during the year to meet processing demands. In addition to freezing our own home-grown berries, we also purchase a significant amount of berries from outside suppliers to meet customer demands. The Company is dependent on its suppliers to provide the Company with adequate supply and on a timely basis. 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 certain types of berries could materially adversely affect the Company’s operations. There can be no assurance that alternative products would be available when needed and on commercially attractive terms, if at all.

We may incur material losses and costs as a result of product liability claims that may be brought against us or any product recalls we have to make .

The sale of food products for human consumption involves the risk of injury to consumers. Such hazards could result from: tampering by unauthorized third parties; product contamination (such as listeria, e-coli, and salmonella) or spoilage; the presence of foreign objects, substances, chemicals, and other agents; residues introduced during the growing, storage, handling or transportation phases; or improperly formulated products. 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 or product recall, could have a material adverse effect on the financial condition or results of operations of the Company.

Risks Related to Our Securities

The market price of our Common Stock is volatile.

The market price of our 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 Capital Market) on December 22, 1998.  During fiscal 2008, the market price of the Common Stock (based on last reported sale price of the Common Stock on the Nasdaq Capital Market) ranged from a high of $2.23 per share to a low of $1.21 per share.  The last reported sales price of the Common Stock on the Nasdaq Capital Market on December 27, 2008 was $1.60 per share. There can be no assurance as to the future market price of the Common Stock.  See “ Our Common Stock may not continue to trade at a market price sufficient to prevent our de-listing from the NASDAQ Capital Market. ”

15

Table of Contents

Our Common Stock may not continue to trade at a market price sufficient to prevent our de-listing from the NASDAQ Capital Market.

In order for the Company’s Common Stock to continue to be listed on the Nasdaq Capital 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 Capital 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 “ The market price of our Common Stock is volatile. ”

A significant amount of our Common Stock is controlled by individuals, and the interests of such individuals may conflict with those of other shareholders.

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, holding approximately 23% of the outstanding shares of Common Stock based on Capital Foods’ Schedule 13G filing.  Accordingly, Capital Foods is in a position to exercise substantial influence on the business and affairs of the Company.  In addition, Heartland Advisors, Inc. (“Heartland”) and SRB Management, L.P. (“SRB”) are the beneficial owners of approximately 18% and 11%, respectively, of the outstanding shares of Common Stock at December 27, 2008 based on their Schedule 13G filings.  Capital Foods, Heartland and SRB are hereinafter referred to collectively as the “Significant Shareholders.”  There can be no assurance that one or more of the Significant Shareholder will not adopt or support a plan to undertake a material change in the management or business of the Company.

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.

A significant amount of our Common Stock is subject to registration rights, and the registration and sale of such shares could negatively affect the market price of our Common Stock and impair our ability to obtain financing.

Approximately 4.3 million shares of outstanding Common Stock 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.  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.  All or a portion of such shares may, at the election of the holders thereof, be included in a future registration statement of the Company and, upon the effectiveness 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.

Our Certificate of Incorporation authorizes us to issue preferred stock, and the rights of holders of Common Stock may be adversely affected by the rights of holders of any such preferred stock .

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

16

Table of Contents

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.  Properties

The Company owns a 140,000 square foot manufacturing facility located on 15 acres of land in Bluffton, Indiana, approximately 20 miles south of Ft. Wayne, Indiana.  The facility is financed by a mortgage with U.S. Bank National Association that matures in December, 2016.  The Company produces its T.G.I. Friday’s® brand snacks, BURGER KING TM  brand snacks and Tato Skins® brand potato snacks at the Bluffton, Indiana facility.

The Company owns a 60,000 square foot manufacturing facility located on 7.7 acres of land in Goodyear, Arizona, approximately 15 miles west of Phoenix, Arizona.  The facility is financed by a mortgage with Morgan Guaranty Trust Company of New York that matures in June 2012.  The Company produces its Poore Brothers®, Bob’s Texas Style® and Boulder Canyon Natural Foods TM  brand potato chips, as well as its private label potato chips, at the Goodyear, Arizona facility.

The Company owns a farming, processing and storage facility located on 696 acres of land in Lynden, Washington, which is leased from the Uptrails Group LLC, owned by four members of the Rader family.  One of the four, Brad Rader, is a current employee of the Company and two of the others, Lyle and Sue Rader, were the former owners of Rader Farms.  This lease commenced on the acquisition date and is effect until May 17, 2017.  Lease payments are $43,500 per month throughout the term of the lease.

The Company also leases one-half of a 200,000 square foot facility in Bluffton, Indiana which is used as a distribution center.  The Company has entered into a lease, the initial term expiring in November 2006, with respect to the facility and has entered into the first of two three-year renewal options.  Current lease payments are approximately $32,500 per month.

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, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or results of operations.

The Inventure Group, Inc. is one of eight companies sued by the Environmental Law Foundation in August, 2006 in the Superior Court for the State of California for the County of Los Angeles by the Attorney General of the State of California for alleged violations of California Proposition 65. California Proposition 65 is a state law that, in part, requires companies to warn California residents if a product contains chemicals listed within the statute. The plaintiff seeks injunctive relief and penalties but has made no specific demands.  Settlement discussions are ongoing.

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

None.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s Common Stock is traded on the Nasdaq Capital Market tier of the Nasdaq Stock Market under the symbol “SNAK.”  There were approximately 206 shareholders of record on March 26, 2009.  The Company believes the number of beneficial owners is substantially greater than the number of record holders because a large portion of the Common Stock is held of record in broker “street names.”

17

Table of Contents

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 Capital Market for each quarter of the fiscal years ended December 27, 2008 and December 29, 2007.

The information appearing under the heading “Securities Authorized for Issuance under Equity Compensation Plans” in the Company’s 2009 Proxy Statement is incorporated by reference in this section.

On December 27, 2008 the Company’s Board of Directors approved the retirement of all treasury stock shares purchased under its various programs.   A total of 1,933,827 shares were retired at cost.  The Company’s treasury stock balance as of December 27, 2008 was zero.  See Note 9 to our Financial Statements in this Annual Report for a summary of stock repurchases made during 2008, 2007 and 2006.

Item 7.            Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the other sections of this Annual Report on Form 10-K, including “Item 1.:  Business” and “Item 8.:  Financial Statements and Supplementary Data.”  The various sections of this MD&A contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly in “Item 1A.: Risk Factors.”  Accordingly, the Company’s actual future results may differ materially from historical results or those currently anticipated.

Overview

The Company’s net revenue increased 24.4% in fiscal 2008. Net revenues from sales of T.G.I. Friday’s® snack products, which comprised 33% of total net revenues, decreased 12.5%.  During our second quarterly review, the Company identified the 20% volume decline in T.G.I. Friday’s® as a concern in the warehouse snack segment.  The Company made progress in the third quarter, as net revenues from this brand declined by only 6%, and total Bluffton, Indiana produced products were up 9% for the quarter.  The Company continues to work with the T.G.I Friday’s® group to extend its’ product offerings into new categories and channels of distribution.  Additionally, the Company believes that the new T.G.I. Friday’s® branded products currently scheduled for roll out in first quarter 2009 will strengthen this category.  Net revenues from potato chips and other snacks increased 36.2% in 2008.  The table below highlights the changes between years:

Net Revenues Comparison

($ in millions)

18

Table of Contents

In connection with the implementation of the Company’s business strategy, the Company is likely to require future debt or equity financings (particularly in connection with future strategic acquisitions).  Expenditures stemming from 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.

Key Trends

Retailer Consolidation

The retail food environment continues to be influenced by consolidation as fewer large retailers, including Kroger, Safeway and Wal*Mart, are gaining a larger share of the grocery retail environment.  These retailers are also consolidating their regional buying operations into singular national operations to improve efficiency.  This action creates opportunities for the Company because brands like T.G.I. Friday’s® and BURGER KING TM  brand snack products are niche brands that can be sold effectively on a national basis.

Consumer Trends

The snack industry has been heavily influenced in the past five years by a proliferation of new flavors and health focused snacks, with a rapid increase in the number of low-fat, low-carb and all-natural and organic products.  Mainstream retailers such as Safeway have now created standalone natural and organic sections in their stores.  The Company believes this trend for healthier snacks will continue and will provide opportunities for its Rader Farms berry products to experience revenue growth.

Raw Material and Freight Price Increases and Subsequent Retail Price Increases

The snack foods industry has experienced higher costs as a result of the increase in the price of potatoes and oil.  Additionally, both inbound transportation of raw materials and outbound transportation of finished goods have experienced higher costs as a result of freight surcharges.  Nearly all raw materials have experienced higher pricing both as a result of higher freight costs and certain products require oil based raw materials.  As a result of these raw material price increases, many companies, including us, have implemented price increases in 2007 and 2008.

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 “Item 8.: Financial Statements and Supplementary Data” and the “Cautionary Statement Regarding Forward-Looking Statements” on page 3.

Year ended December 27, 2008 compared to the year ended December 29, 2007

19

Table of Contents

For the fiscal year ended December 27, 2008, net revenues increased 24.4%, or $22.2 million, to $113.1 million compared with net revenues of $90.9 million for the previous fiscal year.

The increase in Net Revenues were attributable to a number of factors; a full year of Rader Farms which was acquired in May 2007, a 29% increase in Boulder Canyon Natural Foods TM  brand kettle cooked chips, an increase of 18% in Poore Brothers® kettle cooked chips, an increase in Private Label snacks of 82% which reflects the company’s strategy of moving into Premium Private Label products to fill up the Indiana plant and BURGER KING TM  branded snacks sales of $5.5 million for the year. These increase were partially offset by a 12.5% reduction in the TGI Friday’s® brand of snacks.

Gross profit for 2008 increased $6.6 million to $22.2 million, and increased as a percentage of net revenues to 19.6% as compared to 17.2% in 2007.  The primary cause of this increase was the improvement in gross margin realized from our snack products, increasing to 19.8% as compared to 16.6% in the prior year, attributable to product price increases and cost reduction activities at our plants.  Rader Farms gross margin was 19.4%, compared to 18.9% in the prior year.

Selling, general and administrative expenses were $16.8 million or 14.9% of net revenues for the year versus $16.8 million or 18.5% of Net Revenue last year. Last year’s expenses included a $2.7 million impairment charge realized on the Bob’s Texas Style® and Tato Skins® trademarks. Excluding these write downs, last year’s expenses would have been 15.5% of net revenues.

The Company’s effective income tax expense rate was 42.1% in 2008 while its effective tax benefit rate was 32.1% in 2007.  The change in the effective rate is due to differences in non-deductible expenses, primarily stock based compensation related to individual stock option grants.

Net income for 2008 was $2.4 million, representing a $3.9 million increase when compared to net loss of $1.5 million for 2007.   The net income for 2008 equated to $0.13 per basic and diluted share, compared with $(0.08) per basic and diluted share, in 2007.

Liquidity and Capital Resources

Net working capital was $4.5 million (a current ratio of 1.2:1) and $3.6 million (a current ratio of 1.2:1) at December 27, 2008 and December 29, 2007, respectively.  For the fiscal year ended December 27, 2008, operating activities provided $5.4 million, primarily as a result of our generation of net income in fiscal year 2008, compared to a net loss in 2007, and an increase in accounts payable and accrued liabilities of $1.9 million.  Investing activities utilized $3.9 million, primarily due to the purchase of fixed assets.  Financing activities utilized $1.3 million, largely due to the Company’s payments towards debt borrowings and purchases of treasury stock.

For the fiscal year ended December 29, 2007, the Company utilized $0.7 million in operating activities primarily as a result of increased inventories.  Investing activities utilized $23.4 million, primarily due to the acquisition of Rader Farms and the purchase of fixed assets.  Financing activities provided $15.9 million, largely due to debt borrowings and draw downs on the Company’s line of credit.

The Company’s Goodyear, Arizona manufacturing and distribution facility is subject to a $1.6 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 $16,825 are determined based on a twenty-year amortization period.

The Company’s Bluffton, Indiana manufacturing and distribution facility was purchased for $3.0 million in December, 2006. The facility is subject to a $2.3 million mortgage loan from U.S. Bank National Association, (“U.S. Bank”) bears interest at the 30 day LIBOR plus 165 basis points and is secured by the building and the land on which it is located. The interest rate associated with this debt instrument was fixed to 6.85% via an interest rate swap agreement with U.S. Bank in December 2006.  The loan matures in December, 2016; however monthly principal and interest installments of $18,392 are determined based on a twenty-year amortization period.

To fund the acquisition of Rader Farms the Company entered into a Loan Agreement (the “Loan Agreement”) with U.S. Bank. Each of our subsidiaries is a guarantor of the Loan Agreement, which is secured by a pledge of all of the assets of our consolidated group. The borrowing capacity available to us under the Loan Agreement consists of notes representing:

·                   a $15,000,000 revolving line of credit maturing on June 30, 2011; based on asset eligibility, there was $3.0

20

Table of Contents

million of borrowing availability under the line of credit at December 27, 2008.

·                   an equipment term loan, secured by the equipment acquired, subject to a $5.8 million mortgage loan from U.S. Bank, bears interest at the 30 day LIBOR plus 165 basis points. The loan matures in May, 2014 and monthly principal installments are $71,429 plus interest and

·                   a real estate term loan, secured by a leasehold interest in the real property we are leasing from the former owners of Rader Farms in connection with the Acquisition, subject to a $4.0 million real estate term loan from U.S. Bank, bears interest at the 30 day LIBOR plus 165 basis points. The interest rate associated with this debt instrument was fixed to 4.28% via an interest rate swap agreement with U.S. Bank in January 2008. The loan matures in July, 2017; however monthly principal and interest installments of $36,357 are determined based on a fifteen-year amortization period.

The Company believes that its current financing arrangement with U.S. Bank will provide adequate ability to finance future capital expenditures, including planned improvements to our Goodyear, AZ facility in 2009.

All borrowings under the revolving line of credit will bear interest at either (i) the prime rate of interest announced by U.S. Bank from time to time or (ii) LIBOR, plus the LIBOR Rate Margin (as defined in the revolving credit facility note). The term loan will bear interest at LIBOR, plus the LIBOR Rate Margin (as defined in the term loan note).

As is customary in such financings, U.S. Bank may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Loan Agreement), subject, in certain instances, to the expiration of an applicable cure period. The agreement requires the Company to maintain compliance with certain financial covenants, including a minimum tangible net worth, a minimum fixed charge coverage ratio and a debt to equity ratio. At December 27, 2008, the Company was in compliance with all of the financial covenants.

At December 27, 2008, the Company had a net operating loss carryforward available for federal income taxes of approximately $0.6 million.  The Company’s accumulated net operating loss carryforward will begin to expire in 2023.

Off-Balance Sheet Arrangements

Under SEC regulations, in certain circumstances, the Company is required to make certain disclosures regarding the following off-balance sheet arrangements, if material:

·                   Any obligation under certain guarantee contracts;

·                   Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

·                   Any obligation under certain derivative instruments; and

·                   Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

The Company does not have any off-balance sheet arrangements that are required to be disclosed pursuant to these regulations, other than those described in the Notes to Consolidated Financial Statements.  The Company does not have, nor does it engage in, transactions with any special purpose entities.  Other than an interest rate swap, the Company is not engaged in any derivative activities and had no forward exchange contracts outstanding at December 27, 2008.  In the ordinary course of business, the Company enters into operating lease commitments, purchase commitments and other contractual obligations.  These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States, and are more fully discussed below.

Management’s Plans

In connection with the implementation of the Company’s business strategy, the Company may incur operating losses in the future and may require future debt or equity financings (particularly in connection with future strategic acquisitions, new brand introductions or capital expenditures).  Expenditures relating to acquisition-related integration costs, market and territory expansion and new product development and introduction may adversely affect promotional and 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 expansion or new products may benefit future periods.  Management believes that the Company will generate positive cash flow from operations during the next twelve months, which, along with its existing working capital and borrowing facilities, will enable the Company to meet its operating cash requirements for the next twelve months.  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. For instance, if current general economic conditions continue or worsen, we believe that our sales forecasts may prove to be less reliable than they have in the past as consumers may change their buying habits with respect to snack food

21

Table of Contents

products. Unexpected price increases for commodities used in our snack products, or adverse weather conditions affecting our Rader Farms crop yield could also impact our financial condition.  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, will be on terms attractive to the Company.

Critical Accounting Policies and Estimates

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.

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.  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.  During 2007, the Company determined the carrying values of two trademarks were impaired following the completion of a discounted cash flow analysis and recorded a $2.7 million charge as a result.  In 2008, the Company conducted a similar analysis, and believes the carrying values of its trademarks are appropriate.

In determining that each of our trademarks has an indefinite life, management considered the factors found in paragraph 11 of SFAS No. 142. Management believes that each of these trademarks has the continued ability to generate cash flows indefinitely. Management’s determination that these trademarks have indefinite lives includes an evaluation of historical cash flows and projected cash flows for each of these trademarks. The Company continues making investments to market and promote each of these brands, and management continues to believe that the market opportunities and brand extension opportunities will generate cash flows for an indefinite period of time. In addition, there are no legal, regulatory, contractual, economic or other factors to limit the useful life of these trademarks, and management intends to renew each of these trademarks, which can be accomplished at little cost.

Advertising and Promotional Expenses and Trade Spending.  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 accounted for as a reduction of revenue 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 promotional allowance to a purchaser of products at any point along the distribution chain, the amount is accrued and recorded as a reduction in revenue.  Marketing programs that deal directly with the consumer, primarily consisting of in-store demonstrations/samples and a sponsorship with a professional baseball team, are recorded as a marketing expense in selling, general and administrative expenses.  Further discussion of these marketing programs is expanded upon below:

·                   Demonstrations/Samples :   The Company periodically arranges in-store product demonstrations with club stores (i.e. Sam’s, Costco or BJ’s) or grocery retailers.  Product demonstrations are conducted by independent third party providers designated by the various retailer or club chains.  During the in-store demonstrations the consumers in the stores receive small samples of our products, and consumers are not required to purchase our product in order to receive the sample. The cost of product used in the demonstrations, which is insignificant, and the fee we pay to the independent third party providers who conduct the in-store demonstrations are recorded as a sales and marketing expense in selling, general and

22

Table of Contents

administrative expenses.

·                   Sponsorship :   The Company has a sponsorship with the Arizona Diamondbacks Major League Baseball team.  The sponsorship involves using the Arizona Diamondbacks team and Company marks inside and outside of the stadium to build awareness for the Company brands.

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 $0.6 million at December 27, 2008.  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.  The Company expects to utilize its NOL in future periods, and no valuation allowance is considered necessary.

Revenue Recognition.   In accordance with accounting principles generally accepted in the United States, the Company recognizes operating revenues upon shipment of products to customers provided title and risk of loss pass to its customers. In those instances where title and risk of loss does not pass until delivery, revenue recognition is deferred until delivery has occurred.  Revenue for products sold through our direct store delivery distributed product segment is recognized when the product is received by the retailer.  Provisions and allowances for sales returns, promotional allowances and discounts are also recorded as a reduction of revenues in the Company’s consolidated financial statements

Stock-Based Compensation .  On January 1, 2006, we adopted Statement of Financial Accounting Standards (SFAS) 123R, “Share-Based Payment” , under the modified prospective method.  SFAS 123R requires us to measure the cost of employee services received in exchange for stock options granted using the fair value method as of the beginning of 2006.   We account for our stock options under the fair value method of accounting using a Black-Scholes valuation model to measure stock option fair values at the date of grant. Prior to May 2008, all stock option grants had a 5-year term. The fair value of these stock option grants is amortized to expense over the vesting period, generally three years for employees and one year for the Board of Directors.  In May 2008, the Company’s Board of Directors approved a 10 year term for all future stock option grants, with vesting periods of five years and one year for employees and Board of Director members, respectively.

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 included in this Annual Report on Form 10-K which contain accounting policies and other disclosures required by accounting principles generally accepted in the United States.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109   (“FIN 48”) , which clarifies the accounting for uncertainty in tax positions.  FIN 48 requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective as of the beginning of the 2007 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company’s adoption of FIN 48 did not affect the financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”).  SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  While SFAS No. 157 will not impact our valuation methods, it will expand our disclosures of assets and liabilities which are recorded at fair value.  SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.  The Company adopted SFAS No. 157 effective January 1, 2008 and its adoption did not have a material impact on our financial position, results of operations, or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”).  SFAS No. 159 allows entities to choose to measure eligible financial instruments at fair value

23

Table of Contents

with changes in fair value recognized in earnings of each subsequent reporting date.  The fair value election is available for most financial assets and liabilities on an instrument-by-instrument basis and is to be elected on the date the financial instrument is initially recognized.  SFAS 159 is effective for all entities as of the beginning of a reporting entity’s first fiscal year that begins after November 15, 2007 (with earlier application permitted under certain circumstances).  The adoption of SFAS No. 159 had no impact on the Company’s financial position or statement of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “ Business Combinations ” (“SFAS No. 141(R)”), which replaces SFAS No. 141, “ Business Combinations .” SFAS No. 141(R) retains the underlying concepts of SFAS No. 141 that require all business combinations to be accounted for at fair value under the acquisition method of accounting, however, SFAS No. 141(R) significantly changes certain aspects of the prior guidance including: (i) acquisition-related costs, except for those costs incurred to issue debt or equity securities, will no longer be capitalized and must be expensed in the period incurred; (ii) non-controlling interests will be valued at fair value at the acquisition date; (iii) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; (iv) restructuring costs associated with a business combination will no longer be capitalized and must be expensed subsequent to the acquisition date; and (v) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will no longer be recorded as an adjustment of goodwill, rather such changes will be recognized through income tax expense or directly in contributed capital. SFAS 141(R) is effective for all business combinations having an acquisition date on or after the beginning of the first annual period subsequent to December 15, 2008, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the controlling and noncontrolling interests and requires the separate disclosure of income attributable to controlling and noncontrolling interests. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact that the adoption of SFAS 160 will have on its consolidated financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 applies to all entities and requires specified disclosures for derivative instruments and related hedge items accounted for under SFAS 133, Accounting for Derivative Instruments and Hedging Activities .   SFAS 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and their effect on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008.  The adoption of SFAS 161 is not expected to have a material impact on the Company’s financial position, results of operations or liquidity.

24

Table of Contents

Item 8.    Financial Statements and Supplementary Data

Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A(T).           Controls and Procedures.

(a)                Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms.

The Company’s Chief Executive Officer and Chief Financial Officer do not expect that the Company’s internal controls will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

No change occurred in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended December 27, 2008 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements or instances of fraud. As such, a control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Also, projections of any evaluation of effectiveness to

25

Table of Contents

future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of internal control over financial reporting as of December 27, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, management believes that we maintained effective internal control over financial reporting as of December 27, 2008.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

Item 9B.     Other Information.

None.

PART III

Item 10.     Directors, Executive Officers and Corporate Governance

Code of Ethics

Each of the Company’s directors, officers and employees are required to comply with The Inventure Group, Inc. Code of Business Conduct and Ethics adopted by the Company.  The Code of Business Conduct and Ethics sets forth policies covering a broad range of subjects and requires strict adherence to laws and regulations applicable to the Company’s business.  The Company has also adopted a Financial Code of Ethics for its Chief Executive Officer, Chief Financial Officer and all other finance managers.  The Financial Code of Ethics supplements the Code of Business Conduct and Ethics and is intended to emphasize the importance of honest and ethical conduct in connection with the Company’s financial reporting obligations.  The Code of Business Conduct and Ethics and the Financial Code of Ethics are available on the Company’s website at www.inventuregroup.net, under the “Investors-Governance” captions.  Copies of these Codes may also be obtained, without charge, by any shareholder upon written request directed to the Secretary of the Company at 5050 N. 40 th  St. Suite #300, Phoenix, Arizona 85018.  The Company will post to its website any amendments to these Codes, or waiver from the provisions thereof, applicable to the Company’s directors or any principal executive officer, principal financial officer principal accounting officer or controller, or any person performing similar functions under the “Investors-Governance-Code of Business Conduct-Waivers” caption.

The information regarding Directors and Executive Officers appearing under the headings “Proposal 1: Election of Directors,” “Executive Officers,” “Meetings and Committees of the Board of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s 2009 Proxy Statement is incorporated by reference in this section.

Item 11.     Executive Compensation

The information appearing under the headings “Director Compensation,” “Employment Agreements,” “Compensation Committee Report on Executive Compensation” and “Executive Officer Compensation” of the Company’s 2009 Proxy Statement is incorporated by reference in this section.

Item 12.     Security Ownership of Beneficial Owners and Management and Related Stockholder Matters

The information appearing under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” of the Company’s 2009 Proxy Statement is incorporated by reference in this section.

Item 13.     Certain Relationships and Related Transactions, and Director Independence

The information appearing under the heading “Meetings and Committees of the Board of Directors” and “Certain Relationships and Related Transactions” of the Company’s 2009 Proxy Statement is incorporated by reference in this section.

26

Table of Contents

Item 14.     Principal Accountant Fees and Services

Information appearing under the heading “Independent Auditors” of the Company’s 2009 Proxy Statement is incorporated by reference in this section.

PART IV

Item 15.         Exhibits and Financial Statement Schedules:

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

1.               Financial Statements

Reports of Independent Registered Public Accounting Firms

Consolidated balance sheets as of December 27, 2008 and December 29, 2007

Consolidated statements of income for the years ended December 27, 2008 and December 29, 2007

Consolidated statements of shareholders’ equity for the years ended December 27, 2008 and December 29, 2007

Consolidated statements of cash flows for the years ended December 27, 2008 and December 29, 2007

Notes to consolidated financial statements

2.               Financial Schedules

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

3.               Exhibits required by Item 601 of Regulation S-K:

27

Table of Contents

28

Table of Contents

29

Table of Contents

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.

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.

30

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
The Inventure Group, Inc.
Phoenix, Arizona

We have audited the accompanying consolidated balance sheet of The Inventure Group, Inc. and subsidiaries (the “Company”) as of December 27, 2008 and the related consolidated statements of operations, stockholders’ 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 the financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (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.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 The Inventure Group, Inc. as of December 27, 2008, 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.

/s/ MOSS ADAMS LLP

Scottsdale, Arizona
March 27, 2009

31

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
The Inventure Group, Inc.
Phoenix, AZ

We have audited the accompanying consolidated balance sheet of The Inventure Group, Inc. and subsidiaries (f.k.a. Poore Brothers, Inc. and Subsidiaries) (the “Company”) as of December 29, 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 29, 2007.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 The Inventure Group, Inc. (f.k.a. Poore Brothers, Inc. and Subsidiaries) as of December 29, 2007, and the results of their operations and their cash flows for the year ended December 29, 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona
March 27, 2009

32

Table of Contents

THE INVENTURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

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

33

Table of Contents

THE INVENTURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

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

34

Table of Contents

THE INVENTURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY