As filed with the Securities and Exchange Commission on May 12, 2000
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
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 84043-9534
(801) 768-4481
(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 84043-9534
(801) 768-4481
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copy to:
Harlan M. Hatfield
Covol Technologies, Inc.
3280 North Frontage Road
Lehi, Utah 84043-9534
(801) 768-4481
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:
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o Title of Each Class of Securities to Be
Registered: Common Stock ($.001 par value)
o Amount to Be Registered: 1,482,272 shares (1)
o Proposed Maximum Offering Price Per
Share (2) $1.88
o Proposed Maximum Aggregate Offering
Price (2) $2,786,671
o Amount of Registration Fee (2)(3) $735.68
(1) Shares which may be resold by the selling stockholder. No consideration
will be received by the Registrant for such shares being registered hereby.
(2) Calculated in accordance with Rule 457(c) on the basis of the average of
the high and low prices as of May 11, 2000 of Registrant's Common Stock as
reported by The Nasdaq National Market(sm).
(3) Registration Fee is calculated on the basis of $264 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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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.
Preliminary prospectus Subject to Completion dated May 12, 2000
Prospectus
1,482,272 SHARES
COVOL TECHNOLOGIES, INC.
COMMON STOCK
This is an offering of shares of common stock of Covol Technologies, Inc.
Only the selling stockholder, Cherokee Associates LLC, is 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 May 11, 2000, the last reported sale price for the common stock
on The Nasdaq Stock Market(sm) was $1.81 per share.
Covol's executive offices and telephone number are:
3280 North Frontage Road
Lehi, Utah 84043-9534
(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 May __, 2000
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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.................................................... 10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 10
USE OF PROCEEDS.......................................................... 11
SELLING STOCKHOLDER...................................................... 11
PLAN OF DISTRIBUTION..................................................... 12
LEGAL MATTERS............................................................ 12
EXPERTS.................................................................. 12
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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 $74,000,000 from February
1987 through December 31, 1999. All quarters except for the March 31, 2000
quarter have had net losses, including a loss of approximately $1,900,000 for
the quarter ended December 31, 1999. We may not be profitable in the future. We
are dependent on collection of license fees and other payments from licensees
for revenue.
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 four additional
facilities which utilize a technology that we acquired during fiscal 1999.
Collectively, these 28 facilities do not presently operate at levels needed to
generate adequate 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 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.
Debt Terms and Covenants Restrict Our Activities
On March 17, 1999 we entered into debt 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 ended
December 31, 1999 and for subsequent quarters. The consolidated earnings target
for the quarter ended December 31, 1999, adjusted principally for interest,
taxes, depreciation and amortization, was $5,000,000 and was met. The
consolidated earnings target for the quarter ended March 31, 2000, adjusted
principally for interest, taxes, depreciation and amortization, was $5,500,000
and was also met. The earnings target increases in subsequent quarters. These
terms and conditions also restrict or prohibit specific activities without debt
holder approval, including for example, materially changing the business of
Covol, incurring more than $4,000,000 of additional indebtedness, entering into
a merger, reorganization, recapitalization, or similar transaction, selling or
encumbering of assets, making capital expenditures greater than $300,000 or 15
percent of EBITDA, repurchasing equity securities and issuing debt or equity
securities in a senior position. Non-compliance could result in immediate
convertibility, acceleration of repayment, increased interest charges or
assignment of royalty payments from related collateral. See our Form 8-K filed
March 24, 1999 and the 1999 Form 10-K for a discussion of these debt terms.
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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 1999, "ITEM 1. BUSINESS - Tax Credits" for an explanation of qualifications
for Section 29 tax credits.
Based upon the language of Section 29 of the tax 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. In addition, the Section
29 credit is subject to phase out after the unregulated oil price reaches a
certain level, adjusted annually for inflation. The most recent published
information is for 1999 and based on that information, the credit would begin to
be phased out if the unregulated oil price reached a price of approximately
$47.03 per barrel and would be completely phased out if the price reached
approximately $59.04 per barrel. The 1999 unregulated oil price as published by
the IRS was $15.56 per barrel. The inability of a licensee to claim tax credits
would 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 the synthetic fuel equipment and facilities. If the synthetic
fuel facilities lose their qualification under Section 29, the equipment and
facilities could be overvalued in any alternative highest and best use.
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 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, licensees must manage
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their costs of production and feedstock, and they 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 1999, "ITEM 1. BUSINESS - Background" for a
discussion of non-coal applications of our technology.
New Technologies and Other New Business Plans May Not Be Commercially Viable
In addition to our efforts to develop our technology in non-coal
applications, Covol is investigating the commercialization of the technologies
of others. Covol is also investigating business opportunities unrelated to
technology commercialization. All of Covol's future business plans outside of
the coal-based synthetic fuel industry are at an early stage of development,
will require significant time and capital investment, and may not prove to be
profitable. Covol's implementation of new business plans will likely require the
approval of Covol's Board and the March 1999 debt holder because of covenants
restricting Covol's activities.
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 $13,500,000, of
which approximately $2,500,000 is due between now and December 31, 2000. A
significant portion of equipment held for sale as well as license fees payable
to us from the production and sale of synthetic fuel from approximately 50% of
the licensed synthetic fuel facilities are collateral for debt. We are required
pay approximately 80% of the future cash received from deferred payments related
to sales of synthetic fuel facilities to redeem any outstanding balances of
convertible debt.
Our cash needs will differ depending on the operations of the licensees'
synthetic fuel facilities. There can be no assurance that we will be able to
raise any additional funds when needed on terms acceptable to us.
We are Dependent Upon Third Party Licensees for Commercial Application of
Technology
We depend on licensees to commercially employ our synthetic fuel
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 1999, "ITEM 1. BUSINESS -
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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,
hardness, special handling requirements and other characteristics of the
synthetic fuel product may affect its marketability, including sales price. Our
licensees may be unable to meet the product quality requirements of all their
customers. Many industrial coal users are also limited in the amount of
synthetic fuel product they can purchase from 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 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 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
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
for operation. See our Form 10-K for fiscal year 1999, "ITEM 1. BUSINESS -
Supply of Raw Materials" for a discussion of the 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 1999, "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.
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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 1999, "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 security measures 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 1999, "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 1999, "ITEM 1. BUSINESS - Background" 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, such as 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 our operations 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 holder is also
restricted and prohibited by covenant as long as the debt issued in our March
1999 financing is outstanding.
Common Stock Price May Continue to be Volatile
Our common stock is currently traded on The Nasdaq Stock Market(sm). 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
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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.
Conversion of Convertible Securities May Dilute Stockholders
We have issued a significant amount of securities which are convertible
into common stock. As of May 11, 2000, we had approximately 23,400,000 shares of
common stock outstanding and approximately 6,800,000 additional shares are
issuable upon conversion of convertible preferred stock and convertible debt,
and upon exercise of warrants and options. 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. We may sell or issue
common stock or convertible securities in the future at market prices or at
prices below the current market price, which issuance would cause dilution to
stockholders.
Registration Rights may Affect our Ability to Raise Additional Capital
A significant portion of shares we have issued in private placements and
shares underlying our outstanding convertible securities are subject to
registration rights. Potential investors may be concerned that the public resale
of the registered shares would negatively affect the market price for our common
stock. Our ability to raise additional capital may therefor be impaired. The
current registration rights also limit our ability to grant registration rights
required in the future by potential investors.
Potential Liabilities could Result from the Sale and Resulting Relocation of
Synthetic Fuel Facilities
In connection with the development and construction of the synthetic fuel
facilities held for sale and subsequently sold, we entered into certain
agreements. These agreements call for sharing royalties received from these
facilities, paying amounts for the operation of the facilities, purchasing
feedstock from certain parties, paying marketing fees to certain parties for the
sale of production from these facilities and performing certain other
commitments. Relocation of these facilities will require us to terminate most if
not all of these agreements. Termination of these agreements will result in
potential
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liabilities to these various parties. We do not currently know what all of these
liabilities will be, but they could be in excess of $2,000,000.
These settlement charges could significantly reduce future earnings from
operations or increase future losses from operations. These charges could have a
significant impact on the future price and market for our common stock.
FORWARD LOOKING STATEMENTS
Statements regarding Covol's expectations as to the financing, development,
construction, operation and sale of facilities utilizing the Covol binder
technologies, the marketing of products, the receipt of licensing fees, the
ability to extend or refinance existing obligations, and other information about
Covol that are not purely historical by nature, including those statements
regarding Covol's future business plans, the operation of facilities, the
estimated capacity of facilities, the availability of coal fines, the
marketability of the synthetic fuel and other briquettes and the financial
viability of the facilities, constitute forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although Covol
believes that its expectations are based on reasonable assumptions within the
bounds of its knowledge of its business and operations, there can be no
assurance that actual results will not differ materially from its expectations.
In addition to matters affecting Covol's industry or the coal industry or the
economy generally, factors which could cause actual results to differ from
expectations stated in these forward looking statements include, among others,
the following:
(1) The commercial success of the Covol binder technologies.
(2) Dependence on licensees to successfully implement Covol binder technologies
and make license and other payments to Covol.
(3) Operating issues for licensed facilities including feedstock availability,
moisture content, Btu content, correct application of binder formulation,
operability of equipment, product durability, resistance to water
absorption and overall costs of operations.
(4) Marketing issues relating to market acceptance of products manufactured
using Covol's technology, including control of moisture content, hardness,
special handling requirements and other characteristics of the synthetic
fuel product which affect its marketability and its sales price.
(5) Securing of necessary sites, including permits and raw materials, for
relocation and operation of facilities.
(6) Maintenance of placed in service requirements under Section 29 of the tax
code by synthetic fuel manufacturing facilities.
(7) Changes in governmental regulations or failure to comply with existing
regulations which may result in operational shutdowns of Covol or licensee
facilities.
(8) The availability of tax credits under Section 29 of the tax code.
(9) The commercial feasibility of the Covol synthetic fuel technologies upon
the expiration of Section 29 tax credits.
(10) Ability to obtain needed additional capital on terms acceptable to Covol.
(11) Ability to meet financial commitments under existing contractual
arrangements.
(12) Ability to meet non-financial commitments under existing contractual
arrangements.
(13) Ability to commercialize the non-synthetic fuel related Covol binder
technologies which have only been tested in the laboratory and not in
full-scale operations.
(14) Ability to commercialize the technology of others and implement
non-technology based business plans which are at an early stage of
investigation and which will require significant time and capital
investment.
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(15) The market acceptance of products manufactured with Covol binder
technologies in the face of competition from traditional products.
(16) Success in the face of competition by others producing synthetic fuel and
other recycled products.
(17) Sufficiency of intellectual property protections.
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 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 Current report on Form 8-K filed March 24, 1999,
o Current report on Form 8-K filed November 10, 1999,
o Annual report on Form 10-K filed January 13, 2000, for the fiscal year
ended September 30, 1999,
o Proxy statement dated January 19, 2000 and filed January 20, 2000,
o Current report on Form 8-K filed January 24, 2000, as amended on Form 8-K/A
filed March 16, 2000,
o Quarterly report on Form 10-Q filed February 14, 2000, for the quarterly
period ended December 31, 2000,
o Current report on Form 8-K filed February 22, 2000,
o Current report on Form 8-K filed March 2, 2000,
o Current report on Form 8-K filed March 22, 2000,
o Current report on Form 8-K filed March 30, 2000,
o Quarterly report on Form 10-Q filed May 10, 2000, for the quarterly period
ended March 31, 2000, 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.
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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 84043-9534
Telephone Number: (801) 768-4481
USE OF PROCEEDS
The net proceeds from the sale of common stock will be received by the
selling stockholder. Covol will not receive any of the proceeds from any sale of
the shares by the selling stockholder.
The selling stockholder may acquire shares upon exercise of warrants. Any
proceeds to Covol from the exercise of warrants will be used as working capital.
SELLING STOCKHOLDER
The information in the table below is taken as of May 11, 2000. The selling
stockholder listed in the table does not necessarily intend to sell any of its
shares. Covol filed the registration statement which includes this prospectus
due to registration rights granted to the selling stockholder, not because the
stockholder had expressed an intent to immediately sell its shares.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Number of Shares After the Offering,
Beneficially Owned Shares to be Assuming All Registered
Prior to the Offering, Registered for Shares Are Sold
Name of Including Convertible Sale in the ----------------
Beneficial Owner Securities(1) Offering(1) Number Percent(2)
- ------------------------------------- ----------------------------- ------------------ ----------------------------------
<S> <C> <C> <C> <C>
Cherokee Associates LLC(3) 1,185,818 1,185,818
(Lender; affiliated with Director) w396,454 w296,454 w100,000 Less than 1%
- ------------------------------------- ----------------------------- ------------------ ----------------------------------
</TABLE>
(1) This column indicates shares of common stock. The letter "w" indicates
shares issuable upon exercise of warrants.
(2) Indicates the percentage of Covol's common stock outstanding, assuming
exercise of warrants by the selling stockholder.
(3) Cherokee Associates LLC, a lender to Covol, is controlled by an individual
who also controls Trans Pacific Stores, Ltd. One of the minority owners of
Cherokee and an officer of Trans Pacific Stores is a member of Covol's
Board of Directors.
This prospectus applies to the offer and sale by the selling stockholder of
common stock of Covol. The shares being offered for sale include 1,185,818
shares currently owned by the selling stockholder and 296,454 shares obtainable
by exercising warrants which it owned as of the date of this prospectus.
11
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholder may sell some or all of its shares at any time and
in any of the following ways. It may sell its 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(sm) 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 the selling stockholder complies with the requirements of the
rule; or
o By any other legally available means.
The selling stockholder 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 seller purchased in the ordinary course of
investment.
At the time the seller purchased the securities to be resold, it
represented to Covol that it had purchased the securities for its own account
and not with a view to distribution or resale.
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 may have agreed to indemnify the selling stockholder against liabilities
under the Securities Act, or to contribute to payments the selling stockholder
may be required to make under the Securities Act.
LEGAL MATTERS
Harlan M. Hatfield, Vice President and General Counsel of Covol, 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 of Covol Technologies, Inc. for the
fiscal year ended September 30, 1999, have been so incorporated in reliance upon
the report of PricewaterhouseCoopers LLP, independent accountants, given upon
the authority of said firm as experts in auditing and accounting.
12
<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...................................... $ 735.68
Accountants' Fees and Expenses............................ $ 2,000.00
Legal Fees and Expenses................................... $ 2,000.00
Miscellaneous............................................. $ 1,000.00
------------
TOTAL................................................ $ 5,735.68
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.
13
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits.
Exhibit
Number Description Location
<S> <C> <C>
2.1 Agreement and Plan of Reorganization, dated July 1, 1993 (1)
between the Registrant and the Stockholders of R1001
2.2 Agreement and Plan of Merger dated August 14, 1995 between (1)
the Registrant and Covol Technologies, Inc., a Delaware
corporation
2.3 Stock Purchase Agreement, dated July 1, 1993, among the (1)
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 September (1)
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 among (1)
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 of (1)
the Construction Companies
2.5.2 Amendment No. 2 to Share Purchase Agreement regarding the (2)
sale of the Construction Companies
3.1 Certificate of Incorporation of the Registrant (1)
3.1.1 Certificate of Amendment of the Certificate of Incorporation of (1)
the Registrant dated January 22, 1996
3.1.2 Certificate of Amendment of the Certificate of Incorporation (3)
dated June 25, 1997
3.1.3 Certificate of Designation, Number, Voting Powers, Preferences (4)
and Rights of the Registrant's Series A 6% Convertible Preferred
Stock (Originally designated as Exhibit No. 3.1.2)
14
<PAGE>
3.1.4 Certificate of Designation, Number, Voting Powers, Preferences (5)
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, Preferences (8)
and Rights of Covol's Series C 7% Convertible Preferred Stock.
3.1.6 Certificate of Designations, Number, Voting Powers, Preferences (9)
and Rights of the Series of the Preferred Stock of Covol
Technologies, Inc. to be Designated Series D 7% Cumulative
Convertible Preferred Stock.
3.1.6.1 Amendment and Waiver to Certificate of Designations (11)
Preferences and Rights of the Series of the Preferred Stock of
Covol Technologies, Inc. to be Designated Series D Cumulative
Convertible Preferred Stock.
3.1.7 Certificate of Amendment of the Certificate of Incorporation (10)
dated March 1, 2000
3.2 By-Laws of the Registrant (1)
3.2.1 Certificate of Amendment to Bylaws of the Registrant dated (1)
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, L.L.C. (6)
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 OZ (9)
Master Fund, Ltd., dated as of March 17, 1999 (filed as exhibit
10.58.1 to the filing referenced in the next column)
15
<PAGE>
5.1 Opinion of Harlan M. Hatfield regarding legality of shares *
23.1 Consent of PricewaterhouseCoopers LLP *
24.1 Power of Attorney (included in Part II of this Registration
Statement)
- ------------------------
</TABLE>
* Attached hereto.
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 Current Report on Form 8- K, for event dated February 29,
2000, filed on March 2, 2000.
(11) Incorporated by reference to the indicated exhibit filed with the
Registrant's Current Report on Form 8- K, for event dated March 15, 2000,
filed on March 30, 2000.
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");
16
<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.
17
<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.
18
<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 May 12, 2000.
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 as
true and lawful attorney-in-fact and agent 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 attorney-in-fact and agent
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 said attorney-in-fact and agent 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 May 12, 2000
- -------------------------- Director
Name
/s/ Brent M. Cook President and Director May 12, 2000
- --------------------------
Name
/s/ Steven G. Stewart Chief Financial and Accounting May 12, 2000
- -------------------------- Officer
Name
/s/ DeLance W. Squire Director May 12, 2000
- --------------------------
Name
/s/ James A. Herickhoff Director May 12, 2000
- --------------------------
Name
/s/ Raymond J. Weller Director May 12, 2000
- --------------------------
Name
/s/ John P. Hill, Jr. Director May 12, 2000
- --------------------------
Name
19
May 12, 2000
Covol Technologies, Inc.
3280 North Frontage Road
Lehi, Utah 84043
Re: Registration Statement on Form S-3 of Covol Technologies, Inc.
Ladies and Gentlemen:
I 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-_____ filed on May 12, 2000, 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 1,482,272 shares (the "Shares") of common stock of the Company, par value
$.001 per share (the "Common Stock"), including i) 1,185,818 shares of Common
Stock owned by the person listed in the Registration Statement as the selling
stockholder (the "Selling Stockholder"), and ii) 296,454 shares of Common Stock
issuable to the Selling Stockholder upon exercise of Common Stock purchase
warrants for purchase of Common Stock ("Warrants") issued by the Company, to be
offered for sale by the Selling Stockholder of the Company 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, I have reviewed the Registration Statement and other
documents, corporate records, certificates, and other instruments for purposes
of this opinion.
In such examination, I have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to me as originals, the conformity of all documents submitted to me as
certified, conformed or photostatic copies and the authenticity of the originals
of such documents. In making my examination of documents executed by parties
other than the Company, I 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, I have, to the extent I deemed appropriate,
relied upon statements and representations of officers and other representatives
of the Company and others.
This opinion only relates to the Shares included in the Registration
Statement and no opinion is expressed with respect to additional shares of
Common Stock which may be issuable under the Warrants pursuant to anti-dilution
or price adjustment provisions.
My opinions expressed herein are limited to the corporate law of the State
of Delaware, and I do not express any opinion herein concerning any other law.
Based upon and subject to the foregoing, and to the limitations,
qualifications, exceptions and assumptions set forth herein, I am of the opinion
that i) the shares of Common Stock currently outstanding and
<PAGE>
owned by the Selling Stockholder and being registered on the Registration
Statement have been authorized and legally issued, and are fully paid and
non-assessable, and ii) the shares of Common Stock being registered on the
Registration Statement to be issued by the Company to the Selling Stockholder
upon exercise of the Warrants have been duly authorized and, when sold to the
Selling Stockholder and paid for in the manner provided in the Registration
Statement and the various agreements and instruments governing the Warrants of
the Selling Stockholder and the Company, will be legally issued, fully paid and
non-assessable.
In rendering this opinion, I have assumed that
i) the certificates representing the Shares will conform to the
form of specimen examined by me and such certificates will be duly
executed and delivered by the Company; and
ii) the consideration for Shares as provided in the applicable
resolutions of the Board of Directors of the Company, including
the consideration paid or to be paid for the Warrants, has been
actually received by the Company as provided therein.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus. In giving this consent, I do not thereby admit that
I am 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/ Harlan M. Hatfield
-------------------------
Harlan M. Hatfield
2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report, dated January 13, 2000, relating to the
consolidated financial statements, which appears in Covol Technologies, Inc.'s
Annual Report on Form 10-K for the year ended September 30, 1999. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
Salt Lake City, Utah
May 12, 2000
