UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
NevStar Gaming & Entertainment Corporation
(Name of Issuer)
Common Stock
(Title of Class of Securities)
64156G102
(CUSIP Number)
Kenneth D. Polin, Esq.
Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P.
101 West Broadway, 17th Floor
San Diego, California 92101
(619) 515-9600
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 31, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d- 1(b)(3) or (4), check the following box [ ]
Note: Six copies of this statement, including all exhibits, should be filed
with the commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
Page 1 of 9 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 64156G102
1 NAMES OF REPORTING PERSONS
Richard R. Kelley
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
N/A
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS
PF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
7 SOLE VOTING POWER
422,208
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0-
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 422,208
PERSON WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
422,208
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [x]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.9%
14 TYPE OF REPORTING PERSON
IN
Page 2 of 9 Pages
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, $.01 par value per share (the
"Common Stock") of NevStar Gaming & Entertainment Corporation whose principal
executive offices are located at 3175 West Post Road, Las Vegas, Nevada 89118.
ITEM 2. IDENTITY AND BACKGROUND.
(a), (b) and (c) The Reporting Person is:
Dr. Richard R. Kelley ("Dr. Kelley"), c/o Outrigger Enterprises, 4800 South
Lafayette Street, Englewood, Colorado 80110-7011. Present principal
occupation: Chairman of the Board, Outrigger Enterprises, Inc.
By virtue of the fact that Dr. Richard Tam ("Dr. Tam") is a participant in the
Kelley Debt (as described below), and pursuant to such indebtedness, Drs.
Kelley and Tam received warrants to purchase Common Stock and received Common
Stock in the payment of interest, Dr. Tam might be considered a member of a
group pursuant to Rule 13d-5 under the Securities Exchange Act of 1934 (the
"Act") with Dr. Kelley. Pursuant to Rule 13d-4 under the Act, Dr. Kelley
expressly declares that the filing of this statement and the information herein
shall not be construed as an admission by Dr. Kelley that for purposes of
Section 13(d) or 13(g) of the Act, Dr. Kelley is a member of a group with Dr.
Tam or his affiliates or is the beneficial owner of any securities which may be
owned by Dr. Tam or his affiliates. Dr. Kelley has included information in
this report concerning the holdings of Dr. Tam and his affiliates, which are
known to him. The address of Dr. Tam is 2140 West Charleston Boulevard, Las
Vegas, Nevada 89102 and reference is made to the Schedule 13D filed by Dr. Tam
with respect to the holdings of securities of the Issuer for further
information.
(d) During the last five years, Dr. Kelley has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(e) During the last five years, Dr. Kelley was not a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
resulting in him being subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandatory activities subject to,
Federal or State securities laws or finding any violation with respect to such
laws.
(f) Dr. Kelley is a citizen of the United States of America.
Page 3 of 9 Pages
<PAGE>
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
In May 1997, Dr. Kelley purchased 60,060 shares of Common Stock from PMJ
Enterprises, Inc. ("PMJ") for $100,901 and at the same time Dr. Tam purchased
220,338 shares of Common Stock from PMJ for $370,168. The source of Dr.
Kelley's funds was personal funds.
In connection with the Kelley Debt (see below), the Issuer issued a warrant
exercisable until August 13, 2002 to purchase 200,000 shares of Common Stock to
Dr. Kelley at a per share exercise price of $2.75 and issued an identical
warrant to Dr. Tam.
On or about September 24, 1997, Dr. Kelley purchased for $99,000, 18,000 Units,
each consisting of one share of Common Stock and two warrants to purchase
shares of Common Stock at a per share exercise price of $5.50 in the Issuer's
initial public offering ("IPO"). The source of these funds was personal funds.
On March 31, 1998, the Issuer issued to Dr. Kelley a five year warrant to
purchase 37,500 shares of Common Stock for $2.00 per share in consideration of
issuing a commitment to loan additional funds to the Issuer as described below.
Dr. Tam was also issued an identical warrant.
As of March 31, 1998, the Issuer issued 70,648 shares of Common Stock to each
of Dr. Tam and Dr. Kelley as payment of interest due on the Kelley Debt (as
defined below).
THE KELLEY DEBT
The Issuer and Dr. Kelley entered into a Convertible Loan Agreement, dated as
of August 14, 1995 (the "Loan Agreement") pursuant to which Dr. Kelley agreed
to loan (the "First Kelley Loan") to the Issuer up to a maximum of $1,460,000
plus $43,800 as a commitment fee thereunder (for a total of $1,503,800) to
finance certain working capital requirements of the Issuer.
On or about September 15, 1995, Dr. Kelley and Dr. Tam, each as to an undivided
50% tenant in common interest purchased notes issued by the Issuer from
unrelated third parties (the "Notes") for the amount of principal and interest
due thereon in the amount of $2,412,631.
Pursuant to an Amended and Restated Convertible Loan Agreement, dated April 18,
1996 between the Issuer and Dr. Kelley (the "New Kelley Loan Agreement"), the
Issuer, Dr. Kelley and, pursuant to the Participation and Intercreditor
Agreement (as discussed below), Dr. Tam agreed (i) to increase the credit
available under the First Kelley Loan Agreement, and (ii) to consolidate the
obligations under the Notes, and the First Kelley Loan into one loan (the "New
Kelley Loan") evidenced by a convertible promissory note (the "New Kelley
Note"). Under the New Kelley Loan Agreement, the terms of which superseded in
its entirety the First Kelley Loan Agreement, the New Kelley Note was in the
principal amount of $5,750,800.
Pursuant to the Participation and Intercreditor Agreement dated April 16, 1996,
between Dr. Kelley and Dr. Tam ("Participation and Intercreditor Agreement"),
Dr.
Page 4 of 9 Pages
<PAGE>
Tam agreed to become a participant under the New Kelley Loan Agreement. Under
the Participation and Intercreditor Agreement, Dr. Kelley and Dr. Tam agreed to
each loan 50% of all loan proceeds, on the terms set forth in the New Kelley
Loan Agreement and receive 50% of the repayments and benefits thereof,
including any warrants issued in connection therewith or shares received upon
conversion of the New Kelley Note.
Subsequent to April 1996, Dr. Kelley and Dr. Tam advanced in equal amounts an
additional $550,000 to the Issuer as additional loans secured by deeds of
trust. In August 1997, the New Kelley Loan and the subsequent advances
(collectively, the "Kelley Debt") were restructured. The Kelley Debt was
extended and is now payable over an approximate two-year period ending August
15, 1999 and the convertibility of the New Kelley Note was eliminated. The New
Kelley Loan is secured by a first deed of trust and the Issuer's assets and the
later advances by several subordinate deeds of trust on the Issuer's property
in Mesquite, Nevada. All of the Kelley deeds of trust have been subordinated
to the construction deed of trust in favor of First Credit Bank. The extended
Kelley Debt bears interest at the greater of the prime rate of interest plus
three percent or 11%, and is payable on a monthly basis, interest only, until
August 15, 1999, at which time all principal and accrued interest is due and
payable. The Issuer has the option to make interest payments on the Kelley
Debt (in equal amounts to Drs. Kelley and Tam) in the form of shares of Common
Stock (to be valued at the average closing price of the Common Stock on the
NASDAQ SmallCap Market for the five (5) business days preceding the interest
payment date) or cash subject to the following restrictions: (a) only up to a
cumulative $525,000 in interest may be paid through the issuance of shares of
Common Stock; and (b) the Issuer must pay interest in cash and not in Common
Stock to the extent the Issuer determines that it has sufficient positive cash
flow from operations in excess of its working capital needs. Interest from
September 24, 1997 through March 15, 1998 in the amount of $405,750.46 was paid
in the form of 70,648 shares of Common Stock issued to each of Drs. Tam and
Kelley on March 31, 1998.
The Kelley Debt which is owed equally to Drs. Kelley and Tam can be summarized
as follows: (i) $5,750,800 in principal amount secured by a deed of trust on
the Issuer's real property and its other assets; (ii) $300,000 in principal
amount secured by a deed of trust on the Issuer's real property; (iii) $250,000
in principal amount secured by a deed of trust on the Issuer's real property;
and (iv) $25,000 in principal amount secured by a deed of trust on the Issuer's
real property. All accrued and unpaid interest on the Kelley Debt as of the
closing of Issuer's IPO in the amount of $959,812 was added to principal and
bears interest at the stated rate. As of March 15, 1998, the principal and
accrued interest on the Kelley Debt was $7,610,927.32, prior to the payment of
interest in the form of stock on March 31, 1998 as described above.
On March 31, 1998, Drs. Kelley and Tam executed a financing commitment to lend
to the Issuer up to $1,000,000 on the terms set forth therein. The obligations
of Drs. Kelley and Tam under the commitment were conditioned upon the execution
of legal documentation satisfactory to the parties and their counsel. The loan
is to bear interest at the greater of Bank of Hawaii prime rate of interest
plus 3% per annum or 12% per annum with a $10,000 commitment fee. The loan is
to be secured by a deed of trust encumbering the Issuer's property in Mesquite,
Nevada and governed by the terms of the New Kelley Loan Agreement. Advances
can be obtained
Page 5 of 9 Pages
<PAGE>
for current working capital purposes upon 20 days advance notice no sooner than
June 1, 1998 and no later than March 26, 1999. A condition to any advance is
that the Issuer shall possess all gaming licenses required to fully operate the
Mesquite Star Hotel and Casino. The loan would be due and payable one year
from the initial draw date. As consideration for the loan commitment, Drs.
Kelley and Tam were issued warrants in the amount of 37,500 shares each to
purchase shares of Common Stock at an exercise price of $2.00 per share. In
addition, for each $100,000 principal amount advanced under the loan, Drs.
Kelley and Tam are to receive an additional 7,500 warrants each to purchase
shares of Common Stock at a purchase price of $2.00 per share. All warrants
are immediately exercisable for a term of five years and include a cashless
exercise feature. The warrants are subject to certain registration rights.
ITEM 4. PURPOSE OF TRANSACTION.
Dr. Kelley purchased all the shares of Common Stock solely for investment
purposes. Dr. Kelley currently has no present plans or proposals with respect
to the matters set forth in subsections (a) through (j) of Item 4, provided
that, Dr. Kelley may from time to time seek to acquire or dispose of shares of
Common Stock in market transactions or transactions negotiated with other
persons, at prices and/or other terms acceptable to him. In addition, Drs. Tam
and Kelley may be issued additional shares of Common Stock as interest on the
Kelley Loan or additional warrants for advances under the loan commitment.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
(a) and (b) Based on the number of shares of Common Stock outstanding on April
8, 1998, as will be set forth in Issuer's Annual Report on Form 10-KSB for the
year ended December 31, 1997 which is 3,597,613 the following are the interests
of the Reporting Person in securities of the Issuer:
(1) Dr. Kelley beneficially owns 422,208 shares of Common Stock, equal to
10.9%, including 148,708 shares of Common Stock owned directly, warrants to
purchase 200,000, 36,000 and 37,500 shares of Common Stock at per share
exercise prices of $2.75, $5.50 and $2.00, respectively. Dr. Kelley has the
sole power to vote or direct the vote and to dispose or to direct the
disposition, of all these shares.
Dr. Kelley has been advised that Dr. Tam directly beneficially owns 504,679
shares of Common Stock equal to 12.2%, including 167,341 shares of Common Stock
owned directly, warrants to purchase 200,000, 79,838, 37,500 and 20,000 shares
of Common Stock at a per share exercise price of $2.75, $0.25, $2.00 and $2.00,
respectively. This does not include an option to purchase 12,500 shares of
Common Stock at an exercise price of $2.03 which may become exercisable on
December 11, 1998. In addition, Dr. Kelley has been advised that Dr. Tam may
also be deemed to beneficially own 270,395 shares of Common Stock equal to 7.5%
which are owned of record by Valley Star, LLC and Interworld Group, LLC,
entities which are affiliated with Dr. Tam. Although the interests of Dr. Tam
are noted for completeness, pursuant to Rule 13d-4, Dr. Kelley expressly
declares that the filing of this statement shall not be construed as an
admission that Dr. Kelley is, for the purposes of Section 13(d) or 13(g) of the
Act, a member of a group with Dr. Tam or his affiliates or the beneficial owner
of any securities held by them.
Page 6 of 9 Pages
<PAGE>
(c) See Item 3 for a description of transactions in the Common Stock effected
during the past 60 days by the Reporting Person.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
None.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
(a) Convertible Loan Agreement, dated as of August 14, 1995, between the
Issuer and Richard R. Kelley (filed as Exhibit 10.51 to Amendment No. 2 to
Registration Statement No. 333-518-LA and incorporated herein by reference).
(b) Amended and Restated Convertible Loan Agreement, dated April 18, 1996,
between the Issuer and Dr. Kelley and all amendments thereto (filed as Exhibit
10.78 to Amendment No. 2 to Registration Statement No. 333-518-LA and
incorporated herein by reference).
(c) Participation and Intercreditor Agreement dated April 18, 1996 between
Drs. Kelley and Tam (filed as Exhibit 10.53 to Amendment No. 2 to Registration
Statement No. 333-518-LA and incorporated herein by reference).
(d) Financing commitment issued by Drs. Kelley and Tam to the Issuer on March
31, 1998 (filed as Exhibit (d) to Schedule 13D filed by Richard Tam, Valley
Star, LLC and Interworld Group, LLC on April 10, 1998 and incorporated herein
by reference).
(e) Power of Attorney of Dr. Kelley appointing Terrence A. Everett, Esq. to
sign on his behalf.
Page 7 of 9 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
April 10, 1998 /S/ RICHARD R. KELLEY
Richard R. Kelley
By: T.A. Everett, attorney in fact
Page 8 of 9 Pages
<PAGE>
Exhibit (e)
POWER OF ATTORNEY
The undersigned, Dr. Richard Kelley, hereby grants a power of attorney to
Terrence A. Everett to execute, deliver, file and record in his name, place and
stead such instruments or documents as may be necessary or appropriate with the
United States Securities and Exchange Commission in order to report interests
of the undersigned in the securities of Nevstar Gaming & Entertainment
Corporation and all other documents or materials related thereto, including but
not limited to a Schedule 13D and amendments thereto. This power of attorney
shall expire on June 1, 1998.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
on the date set forth below.
April 6, 1998 /S/ DR. RICHARD KELLEY
Dr. Richard Kelley
Page 9 of 9 Pages
