As filed with the Securities and Exchange Commission on October 28, 1999
Registration No. 333-79385
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COVOL TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 87-0547337
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
3280 North Frontage Road
Lehi, Utah 84043
(801) 768-4481
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(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Kirk A. Benson
Chairman of the Board of Directors
3280 North Frontage Road
Lehi, Utah 84043
(801) 768-4481
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(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
Richard T. Beard, Paul H. Shaphren
Callister Nebeker & McCullough
Gateway Tower East, Suite 900
10 East South Temple
Salt Lake City, Utah 84133
(801) 530-7300
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Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE:
o Title of Each Class of Securities to Be Registered:
Common Stock ($.001 par value)
<TABLE>
<CAPTION>
Added this
Original Amount Amendment Total
<S> <C> <C> <C>
o Amount to Be Registered: 2,026,484 shares (1) 1,501,596(1) 3,528,080(1)
o Proposed Maximum Offering Price Per Share (2) $4.39 $2.50
o Proposed Maximum Aggregate Offering Price (2) $8,896,265 $3,753,990
o Amount of Registration Fee (2)(3) $2,473.16 $1,043.61 $3,516.77
</TABLE>
(1) Shares which may be resold by selling stockholders. No consideration
will be received by the Registrant for such shares being registered
hereby. Includes the resale of shares issuable by the Registrant on
conversion of its Series D Preferred Stock and on exercise of
outstanding warrants.
(2) Calculated in accordance with Rule 457(c) on the basis of the average
of the high and low prices as of May 25, 1999 and October 27, 1999 of
Registrant's Common Stock as reported by the Nasdaq National
Market(SM).
(3) Registration Fee is calculated on the basis of $278 per $1,000,000 of
the Proposed Maximum Aggregate Offering Price.
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Covol hereby amends this Form S-3 on such date or dates as may be
necessary to delay its effective date until Covol shall file a further amendment
which specifically states that this Form S-3 shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until this Form
S-3 shall become effective on such date as the SEC, acting pursuant to said
Section 8(a), may determine.
The information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the Form S-3 filed with the SEC
is effective. This prospectus is not an offer to sell these securities and is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
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Preliminary prospectus Subject to Completion dated October 28, 1999
Prospectus
3,528,080 SHARES
COVOL TECHNOLOGIES, INC.
COMMON STOCK
This is an offering of shares of common stock of Covol Technologies,
Inc. Only the selling stockholders identified in this prospectus are offering
shares to be sold in the offering. Covol is not selling any shares in the
offering.
Covol's common stock is quoted on the Nasdaq Stock Market(SM) under the
symbol CVOL. On October 27, 1999, the last reported sale price for the common
stock on the Nasdaq Stock Market(SM) was $2.50 per share.
Covol's executive offices and telephone number are:
3280 North Frontage Road
Lehi, Utah 84043
(801) 768-4481
This investment involves high risks. See "Risk Factors" beginning on page 3.
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The common stock offered in this prospectus has not been approved by the SEC or
any state securities commission, nor have these organizations determined that
this prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is November __, 1999
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You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
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TABLE OF CONTENTS
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Page
RISK FACTORS..................................................................3
FORWARD LOOKING STATEMENTS....................................................9
AVAILABLE INFORMATION.........................................................9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................10
MATERIAL CHANGES.............................................................11
USE OF PROCEEDS..............................................................12
SELLING STOCKHOLDERS.........................................................12
PLAN OF DISTRIBUTION.........................................................13
LEGAL MATTERS................................................................14
EXPERTS......................................................................14
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RISK FACTORS
You should consider carefully the following risk factors and other
information in this document before investing in our common stock.
We Have a History of Losses; No Assurance of Profit
We have incurred total losses of approximately $58,000,000 from
February 1987 through June 30, 1999. All quarters have had operating losses,
including a loss of approximately $5,500,000 for the quarter ended June 30,
1999. We may not be profitable in the future.
Ongoing Financial Viability Depends on Operations Success for License Revenues
Our existence depends on the ability of our licensees to produce and
sell synthetic fuel which will generate license fees to us. There are
twenty-four synthetic fuel plants that utilize our patented technology and from
which we intend to earn license fees. There are four additional facilities which
utilize a technology that we acquired during the six months ended March 31,
1999. Collectively, these 28 facilities do not presently operate at levels
needed to generate significant revenues to us. Improved operations at each of
these plants depends on the ability of the plant owner to produce a marketable
quality of synthetic fuel, and the ability of the plant owner to market the
synthetic fuel. Licensees and our owned facilities must successfully address all
operating issues, including but not limited to, feedstock availability, cost,
moisture content, Btu content, correct binder formulation, operability of
equipment, product durability, resistance to water absorption and overall costs
of operations, which in many cases to date have resulted in unit costs in excess
of resale prices. It is not certain what time will be required to resolve these
operating issues or whether these issues can be resolved, and it is not certain
how much time will be required for the synthetic fuel to obtain market
acceptance. These problems are in some ways beyond our control.
Our Owned Facilities Have Not Been Sold and Have Substantial Operating Cash
Needs
We currently own three synthetic fuel facilities that are held for
sale. Operation of these facilities requires a substantial amount of cash. In
September 1999, we obtained debt financing which provided net proceeds of
approximately $800,000 with availability for additional borrowings of up to
$2,800,000. These proceeds will be used for operating expenses and debt service
requirements until sufficient operating revenues are generated or the facilities
are sold. It is not certain when or whether license revenues will be sufficient
to meet operating and debt service requirements. Therefore, we do not know how
long the current capital will last. We are continuing to cut operating costs,
but further potential cost reductions are limited due to our need to work with
plant owners in order to increase license revenues. Operating expenses
associated with these plants currently cost approximately $500,000 per month.
Marketing difficulties have kept us from generating sales revenues equal to
operating expenses, negatively affecting cash flows and increasing capital
requirements. We are actively trying to sell these plants and enter into license
agreements under which we would be paid advance license fees and license fees
based on production. None of these plants is presently under contract for sale.
A non-binding letter of intent has been signed, which if fully consummated,
would result in the sale of Covol's synthetic fuel business, including the three
owned synthetic fuel facilities. More information on this proposed transaction
is provided in Covol's Form 8-K filed July 7, 1999.
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Debt Terms and Covenants Restrict Our Activities
We entered on March 17, 1999 into debt and equity financing that
contains restrictions on business activities and covenants for future
activities. We also agreed to meet specific quarterly earnings targets beginning
with the quarter ending December 31, 1999 and for subsequent quarters. The
consolidated earnings target for the quarter ending December 31, 1999, adjusted
principally for interest, taxes, depreciation and amortization, is $5,000,000.
The earnings target increases in subsequent quarters. These terms and conditions
also restrict or prohibit specific activities, including for example, incurring
more than $4,000,000 of additional indebtedness, and the issuance of debt or
equity securities in a senior position. Non-compliance could result in penalty
charges, acceleration of repayment, increased interest or assignment of royalty
payments from related collateral. See our Form 8-K filed March 24, 1999 for a
discussion of the debt terms.
We or our Licensees May Not Qualify for Tax Credits Granted by Congress to
Encourage Production of Alternative Fuels
Section 29 of the Internal Revenue Code provides a tax credit for the
production and sale of qualified synthetic fuel. We received a private letter
ruling from the IRS in which the IRS agrees that synthetic fuel manufactured
using our technology qualifies for the Section 29 tax credits. At least seven
other private letter rulings have been issued by the IRS to licensees of our
technology. These rulings may be modified or revoked by the IRS if the IRS
adopts regulations that are different from these rulings. Also, a private letter
ruling may not apply if the actual practice differs from the information given
to the IRS for the ruling. Therefore, tax credits may not be available in the
future, which would materially adversely impact us. See our Form 10-K for fiscal
year 1998, "ITEM 1. BUSINESS - Tax Credits" for an explanation of qualifications
for Section 29 tax credits.
Based upon the language of Section 29 of the Internal Revenue Code and
private letter rulings issued by the IRS to us and our licensees, we and our
licensees believe the synthetic fuel facilities built and completed by June 30,
1998 are eligible for Section 29 tax credits. However, the ability to claim the
tax credits is dependent upon a number of conditions including, but not limited
to, the following:
o The facilities were constructed pursuant to a binding contract entered
into on or before December 31, 1996;
o All steps were taken for the facility to be considered placed in
service;
o Manufacturing procedures are applied to produce a significant chemical
change and hence a "qualified fuel";
o The synthetic fuel is sold to an unrelated party; and
o The owner of the facility is in a tax paying position and can therefore
use the tax credits.
The IRS may challenge us or our licensees on any one of these or other
conditions. Also, we or our licensees may not be in a financial position to
claim the tax credits if we or they are not profitable. The inability of a
licensee to claim tax credits would potentially reduce our income from the
licensees.
Our accounting and valuation procedures assume qualification for
Section 29 tax credits so that synthetic fuel production will continue to be the
highest and best use of our equipment and facilities. If they lose their
qualification under Section 29, the equipment and facilities could be overvalued
in any alternative highest and best use.
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Synthetic Fuel Facilities May Not Be Commercially Viable After the Tax Credits
Expire
The synthetic fuel facilities that qualify for tax credits under
Section 29 of the tax code receive economic benefits from the tax credits in
addition to the benefits, if any, from operations. It is possible that synthetic
fuel facilities that are not eligible for tax credits cannot be built and
operated profitably.
Section 29 expires on December 31, 2007 after which tax credits will
not apply to the synthetic fuel facilities. In order to remain competitive and
commercially viable after 2007, we must manage our costs of production and
feedstock, and we must also develop the market for synthetic fuel with adequate
prices to cover the costs.
Other Applications of Our Technology May Not Be Commercially Viable
We have developed and patented technologies related to the briquetting
of wastes and by products from the coal, coke and steel industries. We have also
tested in the laboratory the briquetting of other materials. However, to date we
have only commercialized our coal-based synthetic fuel application. The other
applications have not been commercialized or proven out in full-scale
operations. We may not be able to employ these other applications profitably.
See our Form 10-K for fiscal year 1998, "ITEM 1. BUSINESS - Business Strategy -
Engineered Resources" for a discussion of non-coal applications of our
technology.
We May Be Unable to Obtain Necessary Additional Funding
We have significant cash outflow requirements for:
o debt repayments,
o working capital, and
o implementation of our business strategy.
The current amount of outstanding debt is approximately $40,000,000, of
which approximately $4,000,000 is due between now and December 31, 1999.
Additional debt of approximately $17 million is due in the calendar year 2000.
Substantially all of our property, plant and equipment and facilities held for
sale are collateral for debt.
Our cash needs will differ depending on the operations of the
licensees' synthetic fuel facilities and the timing of the sale of three
facilities which are currently owned by us and held for sale. Our ability to pay
debt as it matures is dependent primarily upon our ability to sell the
facilities which are held for sale. There can be no assurance that we will sell
the facilities or be able to raise any additional funds when needed on terms
acceptable to us.
Potential Asset Impairment for Advances on Inventories
From February 1997 through May 1999, Covol paid approximately
$3,900,000 to acquire coal fines for feedstock for the Utah Synfuel plant and to
lease the related property where the coal fines are located. Coal fines
representing approximately $200,000 of the amount paid have been used in
operations. The balance of $3,700,000 has been recorded as an advance on
inventories on Covol's balance sheet, and a possible future impairment could
reduce Covol's recorded inventories in an amount up to $3,700,000. Covol has
learned that there is a dispute over the ownership of the property and is also
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concerned there may be less recoverable coal fines on the property than was
understood when the contract was entered into. As a result of these
developments, Covol has demanded the lessor to modify the lease and has stopped
making quarterly payments under the contract. See "Material Changes--Earthco
Lease" in this prospectus.
Covol may need to record a future asset impairment for all or a portion
of the amount recorded as advances on inventories if:
o the legal ownership of the fines is not satisfactorily resolved,
o Covol can not use the coal fines paid for prior to contract termination
or any extension thereof, or
o the quantity of coal fines at the site is materially less than what was
understood and Covol is unable to recover amounts already paid.
We are Dependent Upon Third Party Licensees for Commercial Application of
Technology
We depend on licensees to commercially employ our technology. The
payments received by us as royalties and from sales of our patented chemical
binder to the facilities, are directly related to the level of production and
sales of the synthetic fuel. There is no assurance that our licensees will be
able to operate the facilities at a sufficient level of production to provide
adequate payments to us to meet our ongoing financial needs. See our Form 10-K
for fiscal year 1998, "ITEM 1. BUSINESS - Synthetic Fuel Manufacturing
Facilities" for a list of our licensees and a discussion of our license and
royalty agreements with them.
Market Acceptance of Synthetic Fuel Products is Uncertain
We are uncertain of the market acceptance of products manufactured
using our technology. Synthetic fuel is a relatively new product and competes
with standard coal products. Industrial coal users must be satisfied that the
synthetic fuel is a suitable substitute for standard coal products. Moisture
control, hardness, special handling requirements and other characteristics of
the synthetic fuel product may affect its marketability, including sales price.
We may be unable to meet the product quality requirements of all our customers.
Many industrial coal users are also limited in the amount of synthetic fuel
product they can purchase from us and our licensees because they have committed
a substantial portion of their coal requirements through long-term contracts.
Reliance on spot markets have generally produced lower resale prices compared to
long-term coal supply contracts in the utility industry. For these and other
possible reasons, customers may not purchase the synthetic fuel products made
with our technology. To date our owned facilities and licensees have secured
contracts for the sale of only a portion of their production. The suitability of
synthetic fuel as a coal substitute and particularly the quality characteristics
of synthetic fuel, the overall downward trend in coal prices, and the
traditional long-term supply contract practices of fuel buying in the utility
industry have made the identification of purchasers of synthetic fuel difficult.
We do not know if our owned facilities and licensees will be able to secure
market contracts for their synthetic fuel products at full production levels.
Supply of Sufficient Raw Materials for Synthetic Fuel Facilities is Not Assured
We and our licensees have not secured all the raw materials needed to
operate all of the facilities for the full term of the tax credit. Some of the
owners of facilities are constructing coal washing facilities to provide
feedstock and some of the facilities may have to be moved to sites with enough
raw materials
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for operation. See our Form 10-K for fiscal year 1998, "ITEM 1. BUSINESS -
Supply of Raw Materials" for a discussion of our principal sources of raw
materials.
We Must Comply With Government Environmental Regulations
The synthetic fuel facilities which use our technology must satisfy
regulations regarding the discharge of pollutants into the environment. We or
the facility owners may be subject to fines for any violation of regulations due
to design flaws, construction flaws, or operation errors. A violation may
prevent a facility from operating until the violation is cured. We or our
licensees may be liable for environmental damage from facilities not operated
within environmental guidelines. See our Form 10-K for fiscal year 1998, "ITEM
1. BUSINESS - Government Regulation" for a discussion of the principal areas of
federal and state regulation which we are subject to.
We have Significant Competitors
We experience competition from:
o Other alternative fuel technology companies and their licensees,
o Companies that specialize in the disposal and recycling of waste
products generated by coal, coke, steel and other resource production,
and
o Traditional coal, fuel, and natural resource suppliers.
Competition may come in the form of the licensing of competing
technologies or in the marketing of similar products. We currently have limited
experience in manufacturing and marketing. Many of our competitors have greater
financial, management and other resources than we have. We may not be able to
compete successfully. See our Form 10-K for fiscal year 1998, "ITEM 1. BUSINESS
- - Competition" for a discussion of the competitors in the synthetic fuel
industry that we are aware of.
Limitation on Protection of Key Intellectual Property
We rely on patent, trade secret, copyright and trademark law, as well
as confidentiality agreements and other security measures to protect our
intellectual property. These rights or future rights or properties may not
protect our interests in present and future intellectual property. Competitors
may successfully contest our patents or may use concepts and processes which
enable them to circumvent our technology. See our Form 10-K for fiscal year
1998, "ITEM 1. BUSINESS - Proprietary Protection" for a list of our trade names,
patents and other intellectual property and a discussion of its value to us.
Technological Developments by Third Parties Could Increase Our Competition
Alternative fuel sources and the recycling of waste products are the
subject of extensive research and development by our competitors. If a
competitive technology were developed which greatly increased the demand for
waste products or reduced the costs of alternative fuels or other resources, the
economic viability of our technology would be adversely affected.
Furthermore, we may not be able to develop or refine our technology to
keep up with future synthetic fuel requirements or to commercialize the other
applications of our technology as discussed in our business strategy. See our
Form 10-K for fiscal year 1998, "ITEM 1. BUSINESS - Business Strategy -
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Licensing and Technology Transfer" for a discussion of our efforts to continue
to develop and refine our technology.
Operations Liability May Exceed Insurance Coverage
We are subject to potential operational liability risks, such as
liability for workers compensation and injuries to employees or third parties,
which are inherent in the manufacturing of industrial products. While we have
obtained casualty and property insurance in the amount of $10,000,000, with the
intent of covering these risks, there can be no assurance that operation of our
owned facilities will not expose us to operational liabilities beyond our
insurance coverage.
No Dividends Are Contemplated in the Foreseeable Future
We have never paid and do not intend to pay dividends on common stock
in the foreseeable future. In addition, dividends on common stock cannot be paid
until cumulative dividends on our outstanding preferred stock are fully paid.
Our ability to pay dividends without approval of the debt and equity holders is
also restricted and prohibited by covenant as long as the debt and equity issued
in our March financing is outstanding.
Common Stock Price May Continue to be Volatile
Our common stock is traded on the Nasdaq Stock Market_ . The market for
our common stock has been volatile. Factors such as announcements of production
or marketing of synthetic fuel from the synthetic fuel facilities, technological
innovations or new products or competitors announcements, government regulatory
action, litigation, patent or proprietary rights developments, and market
conditions in general could have a significant impact on the future market for
our common stock. You may not be able to sell our common stock at or above your
purchase price.
Preferred Dividends Accumulate Until Paid and Must Be Paid Prior to Any
Dividends to Holders of Common Stock
We have issued preferred stock that has preferential dividend rights,
which dividends will accumulate if unpaid. Dividends on common stock are
prohibited until the preferential rights of the preferred stock are satisfied.
If we are liquidated, the preferred stockholders are entitled to liquidation
proceeds after creditors but before common stockholders. The preferred stock can
be converted to common stock. See our Form 8-K filed March 24, 1999 for a
discussion of rights of the preferred stock.
Future Sales of Common Stock May Dilute Stockholders
We have the authority to issue up to 12,234,474 additional shares of
common stock and 9,922,490 additional shares of preferred stock. We may issue
stock in the future at amounts below current market prices which would cause
dilution to stockholders.
Conversion of Convertible Securities May Dilute Stockholders
We have issued many securities which are convertible into registered
common stock. As of October 28, 1999, we had approximately 12,765,000 shares
outstanding and substantially all remaining authorized shares are issuable upon
conversion of convertible preferred stock and convertible debt, and
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upon exercise of warrants and options. Approximately 3,700,000 shares are
issuable upon exercise or conversion at prices below the current market price.
We have commitments to issue approximately 2,975,000 shares of common stock to
current and prior management, consultants, advisors and board of director
members under all option agreements. Approximately 1,070,000 options are
exercisable at prices below the current market price. These options have a
weighted average exercise price of $1.50 per share. These numbers are as of
October 28, 1999 and do not reflect additional shares we may issue in the future
pursuant to anti-dilution provisions. To the extent warrants, options and other
convertible securities are converted into common stock, stockholder interests in
us will be diluted. If the market value of the common stock decreases
significantly, the offering price per share in our private placements or public
offerings may decrease causing dilution of ownership to other stockholders.
Dilution of Stockholders Due to Sales of Common Stock and Conversion of
Convertible Securities May Affect Our Ability to Raise Additional Capital
Sales of common stock and convertible preferred stock, and the exercise
of options, warrants and other convertible securities may have an adverse effect
on the trading price of and market for our common stock. A significant portion
of shares underlying our outstanding convertible securities and options and
warrants are subject to registration rights. These rights may affect our ability
to raise additional capital because financial institutions which require
registration rights may be unwilling to proceed with a financing where there are
registration rights already in place which impair the value of any new
registration rights.
We are Under a Grand Jury Inquiry Which has Not Been Resolved
In 1997 we received a notice of violation and order of compliance from
the State of Utah, Division of Air Quality alleging improper asbestos handling.
We signed a settlement with the state and paid a fine in the amount of $11,000.
In 1997 the U.S. Environmental Protection Agency began its own investigation.
The U.S. Attorney has proceeded with a grand jury inquiry. The outcome of this
matter may have adverse effects on us.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Such information can be
identified by the use of "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. These statements are subject to known and unknown
risks, uncertainties and other factors that could cause our actual results to
differ materially from those contemplated by the statements.
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference
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rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. You may also read and copy these documents at the offices of the Nasdaq
Stock Market(SM) in Washington, D.C.
This prospectus is part of a Form S-3 registration statement that we
filed with the SEC. This prospectus provides you with a general description of
the securities that may be offered for sale, but does not contain all of the
information that is in the registration statement. To see more detail, you
should read the entire registration statement and the exhibits filed with the
registration statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until all of the securities are sold. Our file number with the SEC is 0-27808.
o Annual report on Form 10-K filed January 13, 1999, for the fiscal year
ended September 30, 1998, as amended on Form 10-K/A filed October 7,
1999,
o Proxy statement dated and filed January 28, 1999,
o Quarterly report on Form 10-Q filed February 16, 1999, for the fiscal
quarter ended December 31, 1998, as amended on Form 10-Q/A filed
October 6, 1999,
o Current report on Form 8-K filed March 24, 1999,
o Quarterly report on Form 10-Q filed May 14, 1999, for the fiscal
quarter ended March 31, 1999, as amended on Form 10-Q/A filed October
6, 1999,
o Current report on Form 8-K filed July 7, 1999, relating to 1) the
proposed sale of Covol's River Hill synthetic fuel facility, and 2) the
proposed sale of substantially all of Covol's synthetic fuel business,
o Quarterly report on Form 10-Q filed August 16, 1999, for the fiscal
quarter ended June 30, 1999, as amended on Form 10-Q/A filed October 6,
1999,
o Current report on Form 8-K filed September 13, 1999, related to the
sale of Covol's River Hill synthetic fuel facility, as amended on Form
8-K/A filed September 28, 1999, and
o Description of securities contained in Item 11 of Covol's Registration
Statement on Form 10/A, Amendment No. 2 filed April 24, 1996.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Investor Relations Department
Covol Technologies, Inc.
3280 North Frontage Road
Lehi, Utah 84043
Telephone Number: (801) 768-4481
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MATERIAL CHANGES
The Company has experienced the following material events since the
date of filing of its last Annual Report on Form 10-K, which have not previously
been the subject of subsequent Quarterly Reports on Form 10-Q or Current Reports
on Form 8-K:
1. Earthco Lease
In February 1997, Covol entered into a contract with Earthco to acquire
coal fines and to lease property allowing Covol to conduct fines recovery and
preparation activities at a location near Wellington, Utah, approximately six
miles from the Utah Synfuel plant site. The terms of the contract included an
initial payment to Earthco upon execution of the contract and an agreement to
acquire the fines and make quarterly payments through May 2000, with options to
extend the contract or purchase the property.
Covol entered into the contract based on the understanding that Earthco
was the fee owner of the property and that there were in excess of 2 million
tons of recoverable coal fines on the property. Subsequently, Covol learned that
Nevada Electric Investment Company disputes that Earthco is the owner of the
property, and that there may be substantially less than 2 million tons of
recoverable fines on the property. Consequently, in August 1999, Covol notified
Earthco that unless Earthco could procure and provide evidence that it could
warrant title to the property and adjust contract payments to reflect the actual
recoverable fines at the property, Covol may elect to terminate the contract and
seek appropriate damages. On this basis, Covol has refused to make further
quarterly payments to Earthco under the contract. Covol has previously made
payments under the contract totaling $3,916,664 and the contract called for
future quarterly payments totaling $1,583,732 through May 2000. Earthco has
responded by denying Covol's claims and alleging issues of property reclamation
and bonding, U.S. Department of Interior fees, and failed contract payment.
Covol denies these allegations. The dispute is at an early stage and resolution
is uncertain. However, if the matter is resolved adversely to Covol it could
result in a reduction of Covol's recorded inventories in an amount up to
$3,700,000.
2. Secured Convertible Debt
On September 17, 1999, Covol entered into a financing arrangement with
Aspen Capital Resources to provide up to $4 million of funding in the form of
convertible secured debt. Covol can make draws under this arrangement as working
capital is needed. Amounts drawn under this arrangement are convertible into
Covol common stock at the lesser of $3.00 or current market rates at the time of
conversion. The arrangement also requires issuance of warrants for the purchase
of Covol common stock at an exercise price of $3.60 per share. The number of
warrants issued is equal to 40% of the Covol common shares issuable pursuant to
the actual convertible secured debt issued under this arrangement. Covol can
redeem all outstanding debt under this arrangement at a rate equal to 125 % of
the face value of the debt. Covol assigned royalties to be received from one of
its licensed synthetic fuel facilities as collateral for this financing.
Borrowings under this arrangement are due March 17, 2001, if not converted or
redeemed earlier.
11
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of common stock will be received by the
selling stockholders. Covol will not receive any of the proceeds from any sale
of the shares by the selling stockholders.
Some selling stockholders may acquire shares upon exercise of warrants.
Any proceeds to Covol from the exercise of warrants will be used as working
capital.
SELLING STOCKHOLDERS
The information in the table below is taken as of October 28, 1999. The
amounts in the table assume full conversion of Series D preferred stock held by
a selling stockholder at a conversion price of $2.27 per share which has been
adjusted based on current changes in market price of the common stock and is
subject to future market price changes. The table also assumes full exercise of
all warrants held by selling stockholders. The selling stockholders listed in
the table do not necessarily intend to sell any of their shares. Covol filed the
registration statement which includes this prospectus due to registration rights
granted to the selling stockholders, not because the stockholders had expressed
an intent to immediately sell their shares.
<TABLE>
<CAPTION>
- ------------------------------ --------------------------- ------------------- -------------------------------
Shares Beneficially
Owned After the
Number of Shares Offering, Assuming All
Beneficially Owned Prior Shares to be Registered Shares Are
to the Offering, Registered for Sold
Name of Including Convertible Sale in the -------------------------------
Beneficial Owner Securities(1) Offering(1) Number Percent(2)
- ------------------------------ --------------------------- ------------------- -------------------------------
<S> <C> <C> <C> <C>
CSD 3,000,000
DP 2,644,454 DP 2,644,454 CSD 3,000,000
OZ Master Fund, Ltd.(3) w 971,430 w 571,430 w 400,000 17.5%
- ------------------------------ --------------------------- ------------------- ----------------- -------------
Leeds Group Inc.(4) w 156,098 w 156,098 0 0
- ------------------------------ --------------------------- ------------------- ----------------- -------------
Howard L. Schwartz w 54,634 w 54,634 0 0
- ------------------------------ --------------------------- ------------------- ----------------- -------------
Jack A. Schwebel w 54,634 w 54,634 0 0
- ------------------------------ --------------------------- ------------------- ----------------- -------------
Brent M. Lockwood w 46,830 w 46,830 0 0
- ------------------------------ --------------------------- ------------------- ----------------- -------------
</TABLE>
(1) This column indicates shares of common stock issuable on exercise of
warrants by the letter "w," shares issuable upon conversion of Series D
Preferred Stock by the letters "DP," and shares issuable upon
conversion of Convertible Secured Debt by the letters "CSD."
(2) Indicates the percentage of Covol's common stock outstanding, assuming
conversion of convertible securities and exercise of warrants by the
indicated selling stockholders.
(3) Covol has been informed that OZ Master Fund, Ltd. is owned by more than
150 investors and is managed by OZ Management L.L.C.
(4) Covol has been informed that Leeds Group Inc. is owned 50% by Robert A.
Bernstein and 50% by Jeffrey T. Leeds.
12
<PAGE>
This prospectus applies to the offer and sale by the selling
stockholders of common stock of Covol. The shares being offered for sale include
883,626 shares obtainable by exercising warrants, and 2,644,454 shares
obtainable by converting the shares of Series D Preferred Stock which they owned
as of the date of this prospectus.
Each share of the Series D Preferred Stock is convertible into a number
of shares of common stock determined by dividing the original purchase price of
$100 per preferred share, plus accrued dividends, by the lesser of $5.25 or 90%
of the market value of Covol's common stock on the date of conversion. Dividends
on Series D Preferred Stock accrue at 7% per year. There are 60,000 shares of
Series D Preferred Stock outstanding.
If the outstanding Series D Preferred Stock were converted into common
stock as of October 28 1999, the total number of shares of common stock issued
on conversion would be 2,644,454 shares. The actual number of shares may be more
than this amount depending upon the amount of dividends which accrue on the
preferred stock prior to conversion into common stock and the market value of
Covol's common stock on the date of conversion.
PLAN OF DISTRIBUTION
The selling stockholders may sell some or all of their shares at any
time and in any of the following ways. They may sell their shares:
o To underwriters who buy the shares for their own account and resell
them in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the
time of sale. Any public offering price and any discount or concessions
allowed or reallowed or paid to dealers may be changed from time to
time;
o Through brokers, acting as principal or agent, in transactions, which
may involve block transactions, on the Nasdaq Stock Market_ or on other
exchanges on which the shares are then listed, in special offerings,
exchange distributions pursuant to the rules of the applicable
exchanges or in the over-the-counter market, or otherwise, at market
prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices;
o Directly or through brokers or agents in private sales at negotiated
prices; or
o In open market transactions in reliance upon rule 144 under the
Securities Act, provided they comply with the requirements of the rule;
or
o By any other legally available means.
Selling stockholders may pay part of the proceeds from the sale of
shares in commissions and other compensation to underwriters, dealers, brokers
or agents who participate in the sales.
To the knowledge of Covol, the sellers purchased in the ordinary course
of investment.
At the time the sellers purchased the securities to be resold, they
represented to Covol that they had purchased the securities for their own
account and not with a view to distribution or resale.
13
<PAGE>
Some states may require shares to be sold only through registered or
licensed brokers or dealers. In addition, some states may require the shares to
be registered or qualified for sale unless an exemption from registration or
qualification is available and complied with.
We have agreed to indemnify some of the selling stockholders against
liabilities under the Securities Act, or to contribute to payments the selling
stockholders may be required to make under the Securities Act.
LEGAL MATTERS
The law firm of Callister Nebeker & McCullough, Salt Lake City, Utah,
has rendered an opinion as to the validity of the shares offered under this
prospectus.
EXPERTS
The consolidated financial statements incorporated in this prospectus
by reference to the annual report on Form 10-K/A for the fiscal year ended
September 30, 1998, have been so incorporated in reliance upon the report, which
includes an explanatory paragraph relating to the restatement of the 1998 and
1997 financial statements, of PricewaterhouseCoopers LLP, independent
accountants, given upon the authority of said firm as experts in auditing and
accounting.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the Shares being
registered hereby.
SEC Registration Fee...................... $3,516.77
Accountants' Fees and Expenses............ $2,000.00
Legal Fees and Expenses................... $5,000.00
Miscellaneous............................. $1,000.00
----------
TOTAL............................ $11,516.77
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
allows us to indemnify our officers, directors, employees and agents, as well as
persons who have served in these capacities for other corporations at our
request, for reasonable costs and expenses associated with civil and criminal
suits related to their services in these capacities. The indemnification applies
to civil cases arising from acts made in good faith, reasonably believing that
they were in the best interests of the corporation. It may also apply to
criminal cases if the person had no reason to believe his conduct was unlawful.
In some cases, the availability of indemnification may be up to the discretion
of the court in which the suit was brought.
The Registrant's Certificate of Incorporation, as amended, has the
following indemnification provisions:
This Corporation shall indemnify and shall advance expenses on
behalf of its officers and directors to the fullest extent not
prohibited by law in existence either now or hereafter.
The Registrant's By-laws similarly provide that the Registrant shall
indemnify its officers and directors to the fullest extent permitted by the
Delaware Law.
15
<PAGE>
Item 16. Exhibits.
Exhibit
Number Description Location
- --------------------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization, dated July 1, (1)
1993 between the Registrant and the Stockholders of R1001
2.2 Agreement and Plan of Merger dated August 14, 1995 (1)
between the Registrant and Covol Technologies, Inc.,
a Delaware corporation
2.3 Stock Purchase Agreement, dated July 1, 1993, among (1)
the Registrant, Lloyd C. McEwan, Michael McEwan, Dale F.
Minnig and Ted C. Strong regarding the purchase of
Industrial Management & Engineering, Inc. and Central
Industrial Construction, Inc.
2.4 Stock Sale Transaction Documentation, effective as of (1)
September 30, 1994, between the Registrant and Farrell F.
Larson regarding Larson Limestone Company, Inc.
2.5 Stock Purchase Agreement dated February 1, 1996 by and (1)
among the Registrant, Michael McEwan and Gerald Larson
regarding the sale of State, Inc., Industrial Engineering &
Management, Inc., Central Industrial Construction, Inc.,
and Larson Limestone Company, Inc.
2.5.1 Amendment to Share Purchase Agreement regarding the sale (1)
of the Construction Companies
2.5.2 Amendment No. 2 to Share Purchase Agreement regarding (2)
the sale of the Construction Companies
3.1 Certificate of Incorporation of the Registrant (1)
3.1.1 Certificate of Amendment of the Certificate of (1)
Incorporation of the Registrant dated January 22, 1996
3.1.2 Certificate of Amendment of the Certificate of (3)
Incorporation dated June 25, 1997
3.1.3 Certificate of Designation, Number, Voting Powers, (4)
Preferences and Rights of the Registrant's Series A 6%
Convertible Preferred Stock (Originally designated as
Exhibit No. 3.1.2)
3.1.4 Certificate of Designation, Number, Voting Powers, (5)
Preferences and Rights of the Registrant's Series B
Convertible Preferred Stock (Originally designated as
Exhibit No. 3.1.3)
3.1.5 Certificate of Designation, Number, Voting Powers, (8)
Preferences and Rights of Covol's Series C 7% Convertible
Preferred Stock.
16
<PAGE>
Exhibit
Number Description Location
- --------------------------------------------------------------------------------
3.1.6 Certificate of Designations, Number, Voting Powers, (9)
Preferences and Rights of the Series of the Preferred Stock
of Covol Technologies, Inc. to be Designated Series D 7%
Cumulative Convertible Preferred Stock.
3.2 By-Laws of the Registrant (1)
3.2.1 Certificate of Amendment to Bylaws of the Registrant (1)
dated January 31, 1996
3.2.2 Certificate of Amendment to the Bylaws dated May 20, 1997 (3)
(Originally designated as Exhibit No. 3.2.1)
3.2.3 Certificate of Amendment to the Bylaws dated June 25, 1997 (3)
(Originally designated as Exhibit No. 3.2.2)
4.1 Promissory Note between Covol and Mountaineer Synfuel, (6)
L.L.C. dated May 5, 1998 (filed as Exhibit 10.52.2 to the
filing referenced in the next column)
4.2 Promissory Note dated December 8, 1998 of Covol to (7)
Mountaineer Synfuel, L.L.C. (filed as Exhibit 10.52.4 to
the filing referenced in the next column)
4.3 Security Agreement dated December 8, 1998 between (7)
Mountaineer Synfuel, L.L.C. and Covol (filed as Exhibit
10.52.5 to the filing referenced in the next column)
4.4 Convertible Secured Note executed by Covol in favor of (9)
OZ Master Fund, Ltd., dated as of March 17, 1999 (filed as
exhibit 10.58.1 to the filing referenced in the next
column)
5.1 Opinion of Callister Nebeker & McCullough regarding *
legality of shares
10.1 Securities Purchase Agreement dated September 17, 1999 (10)
between Aspen Capital Resources, L.L.C. and Covol
10.2 Security Agreement dated September 17, 1999 between (10)
Aspen Capital Resources, L.L.C. and Covol
23.1 Consent of PricewaterhouseCoopers LLP *
24.1 Power of Attorney (included in Part II of this
Registration Statement)
- ------------------------
* Attached hereto.
17
<PAGE>
Unless another exhibit number is indicated as the exhibit number for the exhibit
as "originally filed," the exhibit number in the filing in which any exhibit was
originally filed and to which reference is made hereby is the same as the
exhibit number assigned herein to the exhibit.
(1) Incorporated by reference to the indicated exhibit filed with the
Registrant's Registration Statement on Form 10, filed February 26,
1996.
(2) Incorporated herein by reference to the indicated exhibit filed with
the Registrant's Registration Statement on Form 10/A, Amendment No. 2,
dated April 24, 1996.
(3) Incorporated by reference to the indicated exhibit filed with the
Registrant's Quarterly Report on Form 10-Q, for the quarterly period
ended June 30, 1997.
(4) Incorporated by reference to the indicated exhibit filed with the
Registrant's Current Report on Form 8-K, dated August 19, 1997.
(5) Incorporated by reference to the indicated exhibit filed with the
Registrant's Current Report on Form 8-K, for event dated September 18,
1997, filed October 28, 1997.
(6) Incorporated by reference to the indicated exhibit filed with the
Registrant's Quarterly Report on Form 10-Q, for the quarterly period
ended June 30, 1998.
(7) Incorporated by reference to the indicated exhibit filed with the
Registrant's Annual Report on Form 10-K, for the fiscal year ended
September 30, 1998.
(8) Incorporated by reference to the indicated exhibit filed with the
Registrant's Quarterly Report on Form 10-Q, for the quarterly period
ended December 31, 1998.
(9) Incorporated by reference to the indicated exhibit filed with the
Registrant's Current Report on Form 8-K, for event dated March 17,
1999, filed on March 24, 1999.
(10) Incorporated by reference to the indicated exhibit filed with the
Registrant's Registration Statement on Form S-3/A, Amendment No. 4,
filed on October 7, 1999.
Item 17. Undertakings.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Act");
18
<PAGE>
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in
the Registration Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do
not apply if the Registration Statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission (the "Commission") by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
19
<PAGE>
D. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
[INTENTIONALLY LEFT BLANK]
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Salt Lake City, State of Utah on October 28,
1999
COVOL TECHNOLOGIES, INC.
By: /s/ Kirk A. Benson
----------------------------------
Chief Executive Officer, Chairman
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below in so signing also makes, constitutes and appoints Harlan M.
Hatfield and Stanley M. Kimball and each of them, as true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to execute
and cause to be filed with the Securities and Exchange Commission any and all
amendments (including pre-effective and post-effective amendments) to this
Registration Statement, with exhibits thereto and other documents in connection
therewith, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and purposes as
he might or could do in person, and hereby ratifies and confirms all that said
attorneys-in-fact and agents or their or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Kirk A. Benson Chief Executive Officer and October 28, 1999
- ------------------------ Director
Name
/s/ Brent M. Cook President and Director October 28, 1999
- ------------------------
Name
/s/ Steven G. Stewart Chief Financial and Accounting October 28, 1999
- ------------------------ Officer
Name
/s/ DeLance W. Squire Director October 28, 1999
- ------------------------
Name
/s/ James A. Herickhoff Director October 28, 1999
- ------------------------
Name
/s/ Raymond J. Weller Director October 28, 1999
- ------------------------
Name
/s/ John P. Hill, Jr. Director October 28, 1999
- ------------------------
Name
21
CALLISTER NEBEKER
& McCULLOUGH
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
GATEWAY TOWER EAST SUITE 900
10 EAST SOUTH TEMPLE
SALT LAKE CITY, UTAH 84133
TELEPHONE 801-530-7300
FAX 801-364-9127
October 28, 1999
Covol Technologies, Inc.
3280 North Frontage Road
Lehi, Utah 84043
Re: Registration Statement on Form S-3 of Covol Technologies, Inc.
Ladies and Gentlemen:
We have acted as counsel to Covol Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-3 of the Company, SEC File No. 333-79385 filed on May 27, 1999, as
amended pursuant to Amendment No. 1, to which this opinion is attached as
Exhibit 5.1 (the "Registration Statement"), with the Securities and Exchange
Commission (the "Commission"). The Registration Statement relates to 3,528,080
shares (the "Shares") of common stock of the Company, par value $.001 per share
(the "Common Stock") including (i) 2,644,454 shares of Common Stock issuable by
the Company to certain of the persons listed in the Registration Statement as
selling stockholders (the "Selling Stockholders") upon conversion of the
Company's Series D Cumulative Convertible Preferred Stock ("Series D
Preferred"), and (ii) 883,626 shares of Common Stock issuable to certain of the
Selling Stockholders by the Company upon exercise of Common Stock purchase
warrants (collectively "Warrants") issued by the Company, to be offered for sale
by the Selling Stockholders as described in the prospectus included in the
Registration Statement.
This opinion is an exhibit to the Registration Statement, and is being
furnished to you in accordance with the requirements of Item 601(b)(5) of
Regulation S-K under the Securities Act of 1933, as amended (the "1933 Act").
In that capacity, we have reviewed the Registration Statement and
originals, or copies certified or otherwise identified to our satisfaction, of
other documents, corporate records, certificates and other instruments as we
have deemed necessary or appropriate for purposes of this opinion.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity of all documents submitted to us as
certified, conformed or photostatic copies and the authenticity of the originals
of such documents. In making our examination of documents executed by parties
other than the Company, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity, binding effect and enforceability thereof. As to any facts material to
the opinions expressed herein, we have, to the extent we deemed appropriate,
relied upon statements and representations of officers and other representatives
of the Company and others.
Our opinions expressed herein are limited to the corporate law of the
State of Delaware, and we do not express any opinion herein concerning any other
law.
<PAGE>
Based upon and subject to the foregoing, and to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that (i) the shares of Common Stock being registered on the Registration
Statement to be issued by the Company to a certain Selling Stockholder upon
conversion of the Series D Preferred have been duly authorized and, when issued
to the Selling Stockholder upon conversion of the Series D Preferred will be
legally issued, fully paid and non-assessable, (ii) the shares of Common Stock
being registered on the Registration Statement to be issued by the Company to
certain of the Selling Stockholders upon exercise of the Warrants have been duly
authorized and, when sold to the Selling Stockholders and paid for in the manner
provided in the Registration Statement and the various agreements and
instruments governing the Warrants of the Selling Stockholders and the Company,
will be legally issued, fully paid and non-assessable.
In rendering this opinion, we have assumed that
(i) the certificates representing the Shares will conform to
the form of specimen examined by us and such certificates will be duly
executed and delivered by the Company;
(ii) the consideration for Shares as provided in the
applicable resolutions of the Board of Directors of the Company has
been actually received by the Company as provided therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus. In giving this consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the 1933 Act or the rules and regulations of the Commission promulgated
thereunder.
Very truly yours,
/s/CALLISTER NEBEKER & McCULLOUGH
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report, which includes an explanatory paragraph
relating to the restatement of the 1998 and 1997 financial statements, dated
December 22, 1998, except for the last paragraph of Note 1, as to which the date
is October 5, 1999, relating to the consolidated financial statements which
appears in Covol Technologies, Inc.'s Annual Report on Form 10-K/A for the year
ended September 30, 1998. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Salt Lake City, Utah
October 25, 1999
