<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 15, 1999
MORROW SNOWBOARDS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Oregon 0-27002 93-1011046
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification Number)
</TABLE>
2600 Pringle Road, S.E.
Salem, OR 97302
(Address of principal executive offices)
(503) 375-9300
Registrant's telephone number, including area code
1
<PAGE>
Item 5. Other Events.
Termination of Letter of Intent with Empire of Carolina, Inc.; Default under
Credit Facility
On March 15, 1999, Morrow Snowboards, Inc. ("Morrow" or the "Company") and
Empire of Carolina, Inc., a Delaware corporation traded on the American Stock
Exchange under the symbol EMP ("Empire"), terminated a non-binding letter of
intent Morrow and Empire entered into on March 2, 1999 ("Letter of Intent"). As
reported in its Current Report on Form 8-K filed on March 9, 1999, the Letter of
Intent provided for the commencement of discussions regarding the merger of
Morrow with and into Empire (the "Merger") and provision by Empire of interim
financing of up to $2,000,000 pending the closing of the Merger ("Interim
Financing"). Empire and Morrow have terminated discussions regarding the Interim
Financing and the Merger because certain conditions required by the Letter of
Intent were not met.
Morrow also has received notice from Foothill Capital Corporation ("Foothill")
that the Company is in default under the Loan and Security Agreement among
Foothill, Morrow and Morrow's affiliate company, Morrow Westbeach Snowboard,
U.S.A. ("Agreement") as a result of overadvances under the Agreement. Based on
draft year-end financials, management believes, and Foothill is aware, that the
Company has also fallen below the EBITDA and net worth requirements of the
Agreement. At this time, Foothill has imposed the default rate under the
Agreement (5.5 percentage points above the normal rate) but is not currently
exercising its further rights and remedies under the Agreement. The Agreement
and other documents related to the Company's credit line with Foothill are
contained in the Company's Current Report on Form 8-K filed on May 22, 1998.
The Company is working closely with Foothill to address the lender's concerns.
Morrow has submitted a plan to Foothill to enable Morrow to continue to receive
advances under the credit facility until the Company has made arrangements for
adequate additional working capital. Modifications to that proposal are being
submitted. While Morrow expects a favorable response to this plan, there is no
assurance Foothill will continue to forbear from exercising its rights and
remedies under the Agreement, or that funds advanced under the credit facility
will be sufficient to fund Morrow's continued operations.
Morrow currently has over $2,000,000 in past-due payables, principally to
vendors for raw materials and related products. As of Friday, March 19, 1999,
two groups of vendors advised Morrow they had retained counsel preceding
discussions that afternoon with the vendors regarding payment of their accounts.
Morrow expects to present a plan this week to vendors to provide for payment of
their accounts. However, there is no assurance such vendors will accept this
plan or refrain from pursuing other legal remedies available to them.
To address Foothill's concerns, as well as its own projected working capital
needs, Morrow will be required to raise additional capital and/or sell
assets/business lines. Following the termination of the Letter of Intent, Morrow
received several unsolicited offers from third parties related to business
combinations or the purchase of all or a portion of Morrow's assets. Because the
Letter of Intent with Empire had terminated, the Morrow Board of Directors
intends to pursue discussions with these parties and attempt to structure a
transaction to address Morrow's working capital needs, satisfy current
creditors, allow the continuation of the Morrow and Westbeach brands and
maximize the potential return on investment to the shareholders of Morrow.
However, there is no assurance Morrow will be able to structure such a
transaction, or that if consummated, such transaction will satisfy any or all of
these objectives.
Statements in this report are made pursuant to the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
such forward looking statements involve risks and uncertainties, including
without limitation the continuing cooperation of Foothill, adequacy of available
working capital, continuing forbearance by Foothill and other creditors, and
Morrow's ability to consummate a transaction to allow it to continue operations.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Salem, State of Oregon, on March 18, 1999.
MORROW SNOWBOARDS, INC.
By: /s/ P. Blair Mullin
P. Blair Mullin
President and Chief Financial Officer
(Principal Executive, Financial and
Accounting Officer)
3
