UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
under Securities Exchange Act of 1934
Amendment No. 1*
NevStar Gaming & Entertainment Corporation
(Name of Issuer)
Common Stock, $.01 par value
(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)
October 1, 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: Schedule filed in prior format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act")or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<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
552,007
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0-
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 552,007
PERSON WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
552,007
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [x]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.8%
14 TYPE OF REPORTING PERSON
IN
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 313 Pilot Road, Suite B, Las Vegas, Nevada
89119.
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, as
amended (the "Exchange Act") with Dr. Kelley. Pursuant to Rule 13d-4 under
the Exchange 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 Exchange 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 Amendment No. 1 to 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 mandating 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.
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 (discussed below), in August 1997, 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 described below).
On June 4, 1998, the Issuer issued to Dr. Kelley a five year warrant to
purchase 62,500 shares of Common Stock for $2.50 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.
On August 14, 1998, Dr. Kelley purchased in the open market 1,000 shares of
Common Stock at 2-5/8, 1,000 shares of Common Stock at 2-9/16 and 1,000 shares
of Common Stock at 2-3/8. The source of Dr. Kelley's funds was personal funds.
As of October 1, 1998, the Issuer issued 18,174 shares of Common Stock to each
of Dr. Kelley and Dr. Tam as payment of interest due on the Kelley Debt (as
described below).
On October 1, 1998, the Issuer issued to Dr. Kelley a five year warrant to
purchase 16,125 shares of Common Stock at $2.50 per share and a five year
warrant to purchase 30,000 shares of Common Stock at $2.00 per share as
consideration for an additional loan commitment and an initial advance
thereunder as described below. Dr. Tam was issued identical warrants.
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 18,
1996, between Dr. Kelley and Dr. Tam ("Participation and Intercreditor
Agreement"), Dr. 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 $500,000 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 had the option (which it has
exercised) 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 could be paid through the issuance of shares of Common
Stock; and (b) the Issuer was required to 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. Interest from March 16, 1998
to May 15, 1998, in the amount of $119,249.54 was paid in the form of 18,174
shares of Common Stock issued to each of Drs. Kelley and Tam as of October 1,
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 the Issuer's September 1997 initial public offering in the
amount of $959,812 was added to principal and bears interest at the stated
rate. As of September 30, 1998, the approximate amount owed under the Kelley
Debt was $7,300,000.
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 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. There were no amounts outstanding under this commitment at September
30, 1998. 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.
On June 2, 1998, Drs. Kelley and Tam executed a second financing commitment to
lend the Issuer up to $1,000,000. As consideration, the Issuer granted
warrants to purchase 62,500 shares of Common Stock at an exercise price of
$2.50 per share to each of Drs. Kelley and Tam. The loan is to bear interest
at the greater of either the Bank of Hawaii prime rate of interest plus 3%
per annum, or 12% per annum. The loan is to be secured by a deed of trust
encumbering the Mesquite Hotel and Casino. The agreement calls for a
reduction of the commitment by the net sum received by the Issuer from the
sale of shares of Common Stock pursuant to its June 1998 private placement.
There was no amount outstanding under this commitment at September 30, 1998.
On September 30,1998 a letter of commitment ('New Loan") was entered into with
Drs. Kelley and Tam replacing the March 31, 1998 and June 12, 1998
commitments. The New Loan is for $1,000,000 with interest at 12% and defers
payment of accrued interest of $215,000 on the Kelley Debt until the New Loan
is due in April, 1999. The deferred interest will accrue interest at 12% per
annum. As consideration for the commitment and the initial advance on October
1, 1998, the Issuer granted 16, 125 warrants to purchase Common Stock at a
purchase price of $2.50 per share and 30,000 warrants to purchase Common Stock
at a purchase price of $2.00 per share to each of Drs. Kelley and Tam. For
each additional $100,000 advance, the lenders will be entitled to receive
15,000 warrants to purchase Common Stock at $2.00 per share. An initial
advance of $400,000 was made on October 1, 1998 and was net of a commitment
fee of $10,000 and legal fees of $7,500.
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 warrants for advances under the New
Loan as discussed in Item 3 above.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
(a) and (b) Based on the number of shares of Common Stock outstanding on
September 30, 1998, as set forth in Issuer's Report on Form 10-KSB for the
Transition Period ended June 30,1998, which is 3,899,672, the following are
the interests of the Reporting Person in securities of the Issuer:
(1) Dr. Kelley beneficially owns 552,007 shares of Common Stock, equal to
12.8%, including 169,882 shares of Common Stock owned directly, warrants to
purchase 200,000, 36,000, 37,500, 62,500, 16,125 and 30,000 shares of Common
Stock at per share exercise prices of $2.75, $5.50, $2.00, $2.50, $2.50 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 631,479 shares of
Common Stock equal to 14.4%, including 185,515 shares of Common Stock owned
directly, warrants to purchase 200,000, 79,838, 37,500, 20,000, 62,500, 16,125
and 30,000 shares of Common Stock at a per share exercise prices of $2.75,
$0.25, $2.00, $2.00, $2.50, $2.50 and $2.00 respectively. This does not
include an option to purchase 12,500 shares of Common Stock at an exercise
price of $2.05 which will become exercisable upon the following (i) approval
of an increase in the shares subject to the Company's 1997 Stock Incentive
Plan, and (ii)Dr. Tam serving as director through December 10, 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 6.9% 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.
(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) Loan Agreement dated September 30, 1998 between the Issuer and Drs. Kelley
and Tam (filed as Exhibit 10.32 to the Issuer's Report on Form 10-KSB for the
transition period ended June 30, 1998, filed October 14, 1998 and incorporated
herein by reference.)
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.
November 6, 1998 /s/ Richard R. Kelley
Richard R. Kelley
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