Covol Technologies, Inc. Announces Record Earnings for Third Quarter; Company Cuts Debt by 81% and Turns $5.5 Million Loss Into $2.2 Million Income.

Business Editors

LEHI, Utah--(BUSINESS WIRE)--Aug. 3, 2000

Covol Technologies, Inc. (Nasdaq:CVOL) today reported that synthetic fuel production during the fiscal third quarter ended June 30, 2000, increased four-fold when compared to the comparable 1999 quarter. This resulted in a 400% increase in license fees and binder sales and caused operations to improve from a net loss of $(5.5) million to net income of $2.2 million for the quarter ended June 30, 2000. This significant improvement occurred despite the extraordinary costs incurred during the nine-month period ended June 30, 2000, in connection with the early extinguishment of debt which resulted from Covol reducing its outstanding debt by 81% or $31.4 million. For the first three quarters of Covol's fiscal year, Covol achieved year-to-date net income of $610,000 and expects to be profitable for the fiscal year ending Sept. 30, 2000.

For the quarter and nine months ended June 30, 2000, revenues were $15.0 million and $33.9 million, respectively, with net income of $2.2 million and $610,000, or $0.09 and $0.01 basic and diluted income per share. This compares to revenues of $1.6 million and $4.1 million, and a net loss of $(5.5) million and $(15.1) million, or $(0.48) and $(1.28) basic and diluted net loss per share, for the quarter and nine months ended June 30, 1999, respectively.

Included in the June 30, 2000, quarter's results are several material non-recurring transactions, including gains on sales of facilities of $8.5 million, asset write-offs and non-recurring charges of $1.6 million, and an extraordinary loss on early extinguishment of debt of $6.0 million. Of note, with this quarter's net income, Covol is now able to report a profit for the nine months ended June 30, 2000. Covol expects to report a profit in the last quarter of the year, which will make the fiscal 2000 year the first profitable year in Covol's history.

Kirk A. Benson, Covol's Chief Executive Officer and Chairman, commented, "We have had an exciting quarter as evidenced by our financial results and the continued strength generated by our royalty revenues. The growth during the quarter was consistent with expectations, growing from 296,000 tons of fuel sold in June 1999 to l.3 million tons in the June 2000 quarter. It was another record quarter in production and sales."

Mr. Benson continued, "Consistent with the sales of synthetic fuel, sales of our proprietary binder product also set a new record for the quarter, with sales of over 2.4 million dry pounds of chemical binder materials. These sales set new revenue records from binder sales for a quarter at over $2.7 million."

"Covol's financial position as reflected on its balance sheet strengthened significantly during the quarter. We were able to achieve several production targets, providing the Company with $10 million in cash flow. Cash obtained from performance payments, operating cash, and cash generated from some refinancing opportunities allowed us to improve many financial ratios. For example, our debt to equity has gone from 3.1:1 as of March 31, 2000, to .76:1 at the end of the June 30, 2000, quarter. Our debt has decreased from $43 million to $7 million over the last 12 months, with cash growing from $2 million to $11 million."

Covol has accomplished two of the three goals set forth in last year's annual report. First, it has sold the four synthetic fuel facilities that it built and has been paid most of the contingent payments keyed to the operational status of two of these facilities. Second, Covol has significantly increased its royalty stream and reduced its costs. The third goal set forth in the annual report was to seek additional business opportunities to fuel future growth. Covol has proposed to its stockholders that its name be changed to Headwaters Incorporated to reflect its proposed new role as a corporate accelerator of emerging high-tech companies. Covol is using its free cash flow and other corporate resources to make equity investments in, or to acquire control of, emerging new economy companies that can benefit from cash infusions and the experience and knowledge of a well-established operations infrastructure. A special meeting of shareholders has been called for Sept. 6 when its shareholders will be asked to approve this name change. More information will be forthcoming in its letter to shareholders, which will be posted on the Company's Web site at www.covol.com early in September. There is also a scheduled conference call to discuss third quarter fiscal 2000 results Thursday, Aug. 3, at 8 a.m. MT. The call may be accessed by dialing 888/886-7046 at least five minutes before start time.

Statements in this news release that relate to future plans, possible transactions, or projected valuations are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including any statement with respect to anticipated products to be produced using Covol's technology and Covol's strategy. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. There are a number of business factors which singularly or combined may affect Covol's future operating results. 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 set forth in above identified forward-looking statements include but are not limited to the following: commercial success of the Covol binder technologies, operating issues for licensed facilities, marketing issues relating to market acceptance of products manufactured using Covol's technology, securing of necessary sites for relocation and operation of facilities, maintenance of placed-in-service requirements under Section 29 of the tax code by synthetic fuel manufacturing facilities, changes in governmental regulations or failure to comply with existing regulations which may result in operational shutdowns of licensee facilities, availability of tax credits under Section 29 of the tax code, commercial feasibility of the Covol synthetic fuel technologies upon the expiration of Section 29 tax credits, ability to meet financial commitments under existing contractual arrangements, ability to meet non-financial commitments under existing contractual arrangements, ability to commercialize the non-synthetic fuel related to Covol binder technologies which have only been tested in the laboratory and not in full-scale operations, ability to commercialize the technology of others and implement non-technology based business plans, dependence on licensees to successfully implement Covol binder technologies and making license and other payments to Covol, market acceptance of products manufactured with Covol binder technologies in the face of competition from traditional products, success in the face of competition by others producing synthetic fuel and other recycled products, and sufficiency of intellectual property protections.

                       COVOL TECHNOLOGIES, INC.
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
      (thousands of dollars and shares, except per-share amounts)

                                  Quarter Ended      Nine Months Ended
                                     June 30,            June 30,
                                  1999     2000       1999      2000
Revenues:
License fees                      $853   $3,591     $2,140   $12,424
Binder sales                       409    2,709      1,365     5,945
Gains on non-recurring
 transactions                       --    8,527         --    14,947
Other                              315      173        597       633
Total revenues                   1,577   15,000      4,102    33,949
Operating costs and expenses:
Cost of binder                     291    1,860        941     4,088
Cost of operations               3,027      777      9,226     3,066
Asset write-offs and
 non-recurring charges              --    1,559        556    14,019
Other                            2,087    1,996      4,574     4,086
Total operating expenses         5,405    6,192     15,297    25,259
Operating income (loss)         (3,828)   8,808    (11,195)    8,690
Interest income (expense), net  (1,673)    (627)    (3,096)   (3,282)
Other income (expense), net        (26)      78       (851)       62
Income (loss) before income
 taxes and extraordinary item   (5,527)   8,259    (15,142)    5,470
Income tax credit                   --       --         --     3,000
Extraordinary loss on early
 extinguishment of debt             --   (6,037)        --    (7,860)
Net income (loss)              ($5,527)  $2,222   ($15,142)     $610
Basic and diluted income
 (loss) per share               ($0.48)   $0.09     ($1.28)    $0.01
Weighted average shares
 outstanding -- basic           12,512   22,988     12,320    18,208
Weighted average shares
 outstanding -- diluted         12,512   24,266     12,320    21,416


                       COVOL TECHNOLOGIES, INC.
           CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
                        (thousands of dollars)

                                               Sept. 30,    June 30,
                                                 1999         2000
Assets:
Current assets:
Cash and cash equivalents                        $461      $11,326
Receivables                                     5,877        5,558
Facilities and equipment held for sale         20,139        1,680
Other                                             592          212
Total current assets                           27,069       18,776
Property, plant and equipment, net             14,182        2,872
Note and interest receivable                    7,879        6,538
Deferred income taxes                              --        3,000
Intangible assets and other                     8,965        2,717
Total assets                                  $58,095      $33,903
Liabilities:
Current liabilities:
Accounts payable                               $1,179         $255
Notes payable, current                         20,626        7,113
Other                                           7,063        5,967
Total current liabilities                      28,868       13,335
Notes and interest payable, non-current        18,097          251
Other non-current liabilities                     208          177
Deferred revenues                               7,501       10,451
Total liabilities and deferred revenues        54,674       24,214
Minority interest                                 117           --
Redeemable convertible preferred stock          4,332           --
Stockholders' equity (deficit):
Convertible preferred stock and
 common stock -- par value                         14           24
Capital in excess of par value                 78,457       83,847
Accumulated deficit                           (71,713)     (73,293)
Related party receivables collateralized
 by stock                                      (6,564)        (318)
Deferred compensation from stock options       (1,222)        (539)
Common stock in treasury                           --          (32)
Total stockholders' equity (deficit)           (1,028)       9,689
Total liabilities and stockholders'
 equity (deficit)                             $58,095      $33,903