UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
under Securities Exchange Act of 1934
Amendment No. 2*
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)
March 26, 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 ("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. 2 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 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.
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 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.
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 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
March 31, 1999, the approximate amount owed under the Kelley Debt was
$7,900,600.
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 is due in, August 1999. The deferred interest accrues
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 $2.00per 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. As of March 31, 1999, principal
outstanding under the New Loan was $900,000 and accrued interest was
approximately $35,000.
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
February 18, 1999 as set forth in Issuer's Report on Form 10-QSB for the
Quarterly Period ended December 31, 1998, which is 3,937,687, 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 that Dr. Tam directly beneficially owns 668,978
shares of Common Stock equal to 15.1%, including 185,515 shares of Common Stock
owned directly, warrants to purchase 200,000, 79,839, 37,500, 20,000, 62,500,
16,125 and 67,500 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. Shares
beneficially owned by Dr. Tam do 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, 1999 provided the Issuer's stockholders have
approved an increase in the shares subject to the Company's 1997 Stock Incentive
Plan in an amount sufficient to cover such options. 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.
May 26, 1999 /S/ Richard R. Kelley
Richard R. Kelley
