UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
under Securities Exchange Act of 1934
Amendment No. 3*
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)
August 8, 1999
(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).
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
389,507
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0-
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 389,507
PERSON WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
389,507
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [x]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.4%
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, deceased ("Dr. Tam") was 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
have been 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 was a member of a group with
Dr.Tam or his affiliates or was the beneficial owner of any securities which
may have been owned by Dr. Tam or his affiliates or is a member of a group with
the Estate of Richard Tam, deceased (the "Estate") or is the beneficial owner
of any securities which may be owned by the Estate. Dr. Kelley has
included information in this report concerning the holdings of Dr. Tam, his
affiliates and the Estate based upon information provided by the Estate,
which has not been independently verified by Dr. Kelley. The address of the
Estate is c/o Ian Ross, Executor, 2140 West Charleston Boulevard, Las Vegas,
Nevada 89102 and reference is made to Amendment No. 3 to Schedule 13D filed
by the Estate 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 (the "August 1997 Tam
Warrant").
On March 26, 1999, the Company and Dr. Kelley entered into an Amendment to
Warrant pursuant to which this warrant may not be exercised unless and until
Dr. Kelley has provided written notice to the Company that he is terminating
the Amendment to Warrant and sixty-five calendar days have elapsed from the
date upon which Dr. Kelley sends such written notice to the Company. Because
Dr. Kelley does not have a right to exercise the warrant and acquire the
underlying shares within 60 days as a result of the Amendment to warrant
described above, he is not deemed to be the beneficial owner of the
200,000 shares underlying such warrant pursuant to Rule 13d-3(d)(1) and,
accordingly, such shares are not reported as being beneficially owned by Dr.
Kelley herein.
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 (the "March 1998 Tam
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 (the "June 1998 Tam
Warrant").
On August 14, 1998, Dr. Kelley purchased in the open market 1,000 shares of
Common Stock at $2-5/8 per share, 1,000 shares of Common Stock at $2-9/16 per
share and 1,000 shares of Common Stock at $2-3/8 per share. 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
"October 1998 Tam Warrants").
On March 1, 1999, the Issuer issued to Dr. Kelley five year warrants to
purchase an aggregate of 37,500 shares of Common Stock at $2.00 per share as
consideration for additional advances under the October 1, 1998 loan
commitment as described below. Dr. Tam was issued identical warrants (the
"March 1999 Tam Warrants").
The Estate has advised Dr. Kelley that on August 8, 1999, the Company and the
Estate entered into an Amendment to Warrants pursuant to which the August
1997 Tam Warrant, the March 1998 Tam Warrant, the June 1998 Tam Warrant, the
October 1998 Tam Warrants and the March 1999 Tam Warrants (collectively, the
"Tam Warrants") cannot be exercised unless and until the Estate has provided
written notice to the Company that it is terminating the Amendment to
Warrants as to one or more of the Tam Warrants and 65 calendar days have
elapsed from the date upon which the Estate sends such written notice to the
Company. The Estate has also advised Dr. Kelley that because the Estate does
not have a right to exercise the Tam Warrants and acquire the underlying
shares within 60 days as a result of the Amendment to Warrants, the Estate
is not deemed to be the beneficial owner of the shares underlying the Tam
Warrants pursuant to Rule 13d-3(d)(1) and, accordingly, such shares are not
reported as being beneficially owned by the Estate in Amendmeny No. 3 to
Schedule 13D filed by the Estate.
THE KELLEY INDEBTEDNESS
a) 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
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 as
of that date (collectively, the "Kelley Debt") were restructured. The
Kelley Debt was extended and was 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 accrued interest at the greater
of the prime rate of interest plus three percent or 11%, and was payable on
a monthly basis, interest only, until August 15, 1999, at which time all
principal and accrued interest was due and payable. The Kelley Debt
not been paid, is in default and is accruing interest at a default rate.
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; (iv) $25,000 in principal amount secured by a deed of trust on
the Issuer's real property; and (v) costs, legal fees and accrued interest
due under such loans. 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.
b) The New Loan
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
loan was 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 was 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 could have been 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 was 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.
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 was 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 was to be secured by a deed
of trust encumbering the Mesquite Hotel and Casino. The agreement called
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, which was approximately $600,000.
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, which were never drawn upon. The New Loan is for up to
$1,000,000 with interest at 12% and defers payment of accrued interest of
$215,000 on the Kelley Debt until the New Loan was due in, August 1999.
The deferred interest accrued interest at 12% per annum. The New Loan has
not been paid, is in default and is accruing default interest. 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. In consideration for advances of $300,000 and
$200,000 on December 3, 1998 and January 15, 1999, respectively, on March
1, 1999, the Issuer granted warrants to purchase 22,500 and 15,000 shares of
Common Stock, respectively, at a purchase price of $2.00 per share, to each
of Drs. Kelley and Tam.
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.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
(a) and (b) Based on the number of shares of Common Stock outstanding on
July 31, 1999 as advised by the Issuer's transfer agent which was 4,133,687,
the following are the interests of the Reporting Person in securities of
the Issuer:
(1) Dr. Kelley beneficially owns 389,507 shares of Common Stock, equal to
9.4%, including 169,882 shares of Common Stock owned directly, warrants to
purchase, 36,000, 37,500, 62,500, 16,125 and 67,500 shares of Common Stock
at per share exercise prices of $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 also owns a warrant to purchase 200,000 shares of Common Stock at a per
share exercise price of $2.75, which is exercisable only upon sixty-five days
notice to the Company and is therefore not deemed to be beneficially owned by
Dr. Kelley pursuant to rule 13d-3(d)(1).
Dr. Kelley has been advised by the Estate that it beneficially owns 160,373
shares of Common Stock equal to 3.88%, representing shares of Common Stock
owned directly and that the Executor has the sole power to vote or direct
the vote and to dispose or to direct the disposition of all the shares
beneficially owned by the Estate. Dr. Kelley has been advised by the Estate
that as of the date of Amendment No. 3 to its Schedule 13D, the Estate is not
subject to the reporting requirements of Section 13(d) of the Exchange Act
and does not intend to make further filings thereunder unless and until such
time as the Estate again becomes the beneficial owner of more than 5% of the
Issuer's outstanding Common Stock. Although the interests of the Estate 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 the Estate or the beneficial owner of any securities
held by the Estate.
(c) Not applicable.
(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.)
[Balance of Page Intentionally Left Blank]
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 18, 1999 /s/ Richard R. Kelley
Richard R. Kelley
KELLEY 13-D
10
KELLEY 13-D
