UNITED STATES
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
August 27, 1999
Date of Report (Date of earliest event reported)
COVOL TECHNOLOGIES, INC.
------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-27808 87-0547337
- --------------------------------- -------------------------- -------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
3280 N. Frontage Road
Lehi, UT 84043
--------------
(Address of principal executive offices)
(Zip Code)
(801) 768-4481
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name or former address, if changed since last report.)
<PAGE>
Certain statements in this Report constitute forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. As such,
actual results may vary materially from current expectations. For a discussion
of certain of the factors that could cause actual results to differ from
expectations, please see the information set forth under the caption entitled
"Forward Looking Statements" in PART I, ITEM 2 of Covol's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999. There can be no assurance that
Covol's results of operations will not be adversely affected by such factors.
Covol undertakes no obligation to revise or publicly release the results of any
revision to these forward-looking statements. Readers are cautioned not to place
undue reliance on these forward looking statements, which reflect management's
opinion only as of the date hereof.
Item 5. Other Events - Announcement of Sale of River Hill Facility
Covol announced on August 30, 1999 that it sold the Commonwealth/River Hill
synthetic fuel facility. Sale of the four Company-owned facilities has been the
primary focus of the Company's activities and the sale of the first of these
occurred on August 27, 1999. This sale was consummated under a non-binding
letter of intent Covol entered into on June 23, 1999 that was followed by an
announcement on that date and the subsequent filing of a Form 8-K on July 7,
1999. Covol is actively continuing its efforts to sell the remaining three
Company-owned facilities, either through consummation of the other non-binding
letter of intent entered into on June 23, 1999, as previously announced, or
through other possible transactions. The complete text of the August 30, 1999
announcement comprises the following four paragraphs and the last paragraph
summarizes the accounting for the sale.
"Covol Technologies, Inc. announced today that it has sold the
Commonwealth/River Hill synthetic fuel facility to an affiliate of a major U.S.
electric utility company. The sales price consisted of a cash payment to Covol
of $1,250,000, assumption and satisfaction of the facility debt, completion of
capital improvements to the facility, along with an eight-year royalty
arrangement with both Covol and the construction lender. The estimated total
aggregate value of the transaction under this initial arrangement, including the
present value of the projected royalty streams and the cost of expected
improvements to the facility which are part of the transaction, is approximately
$16 million.
Covol can both accelerate and increase its royalty interests upon obtaining firm
synthetic fuel "off-take" agreements in excess of 100,000 tons per year and
operating the facility at rated capacity for a ten-day period. Covol must
achieve these performance milestones by June 30, 2000. The maximum amount under
these provisions is achieved if "off-take" agreements to sell 360,000 tons per
year are put in place for the synthetic fuel production of the facility.
Further, Covol can receive an additional $4 million payment if the facility
operates at 115% of capacity for a three-month period in any consecutive three
months prior to December 31, 2001. If the Company achieves all of these
potential performance milestones, the estimated total value of the transaction
would be approximately $23 million.
Kirk A. Benson, Chief Executive Officer and Chairman of the Board, commented,
"We are extremely pleased to be able to announce the sale of the first of the
four Company owned facilities. We are aggressively pursuing a strategy of
marketing our remaining three facilities and maximizing the value of our royalty
interests."
The Company has entered into an agreement in which it will operate the
Commonwealth/River Hill facility on behalf of the buyer. Covol has also entered
into its standard supply agreements."
Covol has recognized a loss on the sale of approximately $1,750,000, which was
calculated by subtracting the facility cost of approximately $8,000,000 from the
initial sales proceeds of $6,250,000 ($1,250,000 cash plus debt assumption of
$5,800,000, less $800,000 for which Covol remains legally liable). Covol will
recognize revenue and a corresponding gain under the royalty arrangement upon
receipt of the royalty payments and for achievement of performance milestones.
If all milestones are met, the maximum transaction value of $23 million would be
achieved and Covol would recognize up to $11.8 million of revenue with a
corresponding gain in future periods.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COVOL TECHNOLOGIES, INC.
Registrant
Date: September 13, 1999 /s/ Kirk A. Benson
----------------------------
Kirk A. Benson
Chief Executive Officer and
Principal Executive Officer
3