As filed with the Securities and Exchange Commission on March 3, 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.
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(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)
Copy to:
Harlan M. Hatfield
Covol Technologies, Inc.
3280 North Frontage Road
Lehi, Utah 84043
(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: 6,877,454 shares (1)
o Proposed Maximum Offering Price Per
Share (2) $1.61
o Proposed Maximum Aggregate Offering
Price (2) $11,072,701
o Amount of Registration Fee (2)(3) $2,923.19
(1) Shares which may be resold by the selling stockholder. 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 convertible debt 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 March 2, 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 March 3, 2000
Prospectus
6,877,454 SHARES
COVOL TECHNOLOGIES, INC.
COMMON STOCK
This is an offering of shares of common stock of Covol Technologies,
Inc. Only the selling stockholder, OZ Master Fund, Ltd., 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 March 2, 2000, the last reported sale price for the common stock
on the Nasdaq Stock Market(sm) was $1.63 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 March __, 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...................................................... 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 10
MATERIAL CHANGES.......................................................... 10
USE OF PROCEEDS........................................................... 10
SELLING STOCKHOLDER....................................................... 11
PLAN OF DISTRIBUTION...................................................... 11
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 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.
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 fiscal 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 When Expected and Have Substantial
Operating Cash Needs
We have one remaining synthetic fuel facility to be sold. Operation of
this facility and the other three facilities recently sold has required a
substantial amount of cash. From September 1999 through December 1999, we
obtained debt financing which provided net proceeds of approximately $3,500,000.
These proceeds, along with proceeds from the sale of a synthetic fuel facility
in December 1999 and the sale of another synthetic fuel facility in January
2000, are being used for operating expenses and debt service requirements until
sufficient operating revenues are generated and the remaining facility is sold.
It is not certain when or whether earned royalties from licensees 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 reduce
operating costs, but further potential cost reductions are limited due to our
need to work with licensees in order to increase earned royalties. 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 the remaining facility and enter into license
agreements under which we would be paid earned royalties based on production.
However, there can be no assurance that the facility will be sold or that if it
is sold, that it will be on favorable terms to us or that we will be able to
enter into license agreements and be paid royalties based on production.
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Debt Terms and Covenants Restrict Our Activities
On March 17, 1999 we entered 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 ended December 31, 1999, adjusted
principally for interest, taxes, depreciation and amortization, was $5,000,000
and was met. 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 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.
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. 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 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 1999, "ITEM 1. BUSINESS - Background" 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 $26,000,000, of
which approximately $14,500,000 is due between now and December 31, 2000
Substantially all facilities and equipment held for sale and most of Covol's
property, plant and equipment and license fees payable to us from the production
and sale of synthetic fuel from owned and licensed synthetic fuel facilities 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 the remaining
facility which is currently held for sale. There can be no assurance that we
will sell the facility or 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 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 - Synthetic Fuel Manufacturing
Facilities" for a list of our licensees and a discussion of our license and
royalty agreements with them.
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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. 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 for operation. See our Form 10-K for fiscal year 1999, "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 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.
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.
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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 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
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 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 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 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.
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You may not be able to sell our common stock at or above your purchase price. If
our common stock is delisted from Nasdaq, volatility may increase.
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.
Conversion of Convertible Securities May Dilute Stockholders
We have issued a significant amount of securities which are convertible
into common stock. As of March 2, 2000, we had approximately 18,000,000 shares
of common stock outstanding and approximately 14,000,000 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 as well as the conversion price of the outstanding
convertible securities, 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.
Our Common Stock could be Delisted from the Nasdaq Stock Market(sm)
Our common stock currently trades on the Nasdaq Stock Market(sm). On
January 18, 2000, we received a letter from Nasdaq notifying us that we may not
meet the net tangible assets requirement for continued listing on the Nasdaq
Stock Market(sm). Covol responded to this letter and on February 11, 2000, we
received a second letter from Nasdaq notifying us that our listing would be
continued subject to Covol meeting certain conditions on or before March 31,
2000. If our stock were to be delisted, it may be more difficult for
shareholders to sell their shares of common stock and for current shareholders
and potential shareholders to buy our common stock. A delisting may also
decrease the price of our common stock due to reduced liquidity and
marketability of our common stock.
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
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stock. Our ability to raise additional capital may therefor be impaired. The
current registration rights may 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, 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. Sale and
relocation of these facilities will require us to terminate most if not all of
these agreements. Termination of these agreements will result in potential
liabilities to these various parties. We do not currently know what these
liabilities will be, but they could be significant.
These settlement charges could significantly reduce future earnings
from operations or increase future losses form operations. These charges could
have a significant impact on the future price and market for our common stock.
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 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.
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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 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,
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, 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
MATERIAL CHANGES
The Company has experienced the following material events since the
date of filing of its last Quarterly Report on Form 10-Q:
Nasdaq Stock Market(sm) Listing
On January 18, 2000, we received a letter from Nasdaq informing us that
Covol may not meet continued listing requirements of the Nasdaq Stock
Market(sm). We submitted our response, and on February 11, 2000, we received a
letter from Nasdaq notifying us that our listing would be continued subject to
Covol meeting certain conditions on or before March 31, 2000.
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.
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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 March 2, 2000. The
table assumes full exercise of all warrants held by the selling stockholder. 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
Number of Shares Owned 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 Offering(1) Number Percent(2)
- --------------------------- --------------------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C>
OZ Master Fund, Ltd.(3) DP3,691,638 DP3,477,454
CSD3,000,000 CSD3,000,000 DP214,184
w971,430 w400,000 w571,430 3.0%
- --------------------------- --------------------- ------------------- --------------- ---------------
</TABLE>
(1) This column indicates shares issuable on exercise of warrants by the
letter "w," shares issuable upon conversion of Series D Preferred Stock
by the letter "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
selling stockholder.
(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.
This prospectus applies to the offer and sale by the selling
stockholder of common stock of Covol. The shares being offered for sale include
3,477,454 shares obtainable by converting the shares of Series D Preferred Stock
owned as of the date of this prospectus, 3,000,000 shares obtainable by
conversion of convertible debt, and 400,000 shares obtainable by exercising
warrants owned by the selling shareholder.
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:
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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 shareholder 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 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...................................... $ 2,923.19
Accountants' Fees and Expenses............................ $ 2,000.00
Legal Fees and Expenses................................... $ 2,000.00
Miscellaneous............................................. $ 1,000.00
------------
TOTAL................................................ $ 7,923.19
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.
3.1.7 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)
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.
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");
(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
15
<PAGE>
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.
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.
16
<PAGE>
(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.
17
<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 March 3, 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 March 3, 2000
- ------------------------- Director
Name
/s/ Brent M. Cook President and Director March 3, 2000
- -------------------------
Name
/s/ Steven G. Stewart Chief Financial and Accounting March 3, 2000
- ------------------------- Officer
Name
/s/ DeLance W. Squire Director March 3, 2000
- -------------------------
Name
/s/ James A. Herickhoff Director March 3, 2000
- -------------------------
Name
/s/ Raymond J. Weller Director March 3, 2000
- -------------------------
Name
/s/ John P. Hill, Jr. Director March 3, 2000
- -------------------------
Name
18
March 3, 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 March 3, 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 6,877,454 shares (the "Shares") of common stock of the
Company, par value $.001 per share (the "Common Stock") including (i) 3,477,454
shares of Common Stock issuable to the person listed in the Registration
Statement as the selling stockholder (the "Selling Stockholder") upon conversion
of the Company's Series D Cumulative Convertible Preferred Stock ("Series D
Preferred"), (ii) 3,000,000 shares of Common Stock issuable to the Selling
Stockholder by the Company upon conversion of convertible debt ("Convertible
Debt"), and (iii) 400,000 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 Series D Preferred, Convertible
Debt or Warrants pursuant to anti-dilution or price adjustment provisions.
<PAGE>
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 being registered on the Registration
Statement to be issued by the Company to the Selling Stockholder upon conversion
of the Series D Preferred and Convertible Debt have been duly authorized and,
when issued to the Selling Stockholder upon conversion of the Series D Preferred
and Convertible Debt, will be legally issued, 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;
(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
March 3, 2000
