UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
SCOTT'S LIQUID GOLD, INC.
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(Name of issuer)
COMMON STOCK
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(Title of class of securities)
810-202101
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(CUSIP number)
TIMOTHY J. STABOSZ, 1307 MONROE STREET, LAPORTE, IN 46350 (219) 324-5087
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(Name, address and telephone number of person authorized to receive notices and
communications)
MARCH 18, 2011
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(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 Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box. [_]
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).
CUSIP No. 810-202101
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1. Name of Reporting Person
TIMOTHY JOHN STABOSZ
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2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [_]
NOT APPLICABLE (b) [_]
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3. SEC Use Only
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4. Source of Funds (See Instructions) PF
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5. Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
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6. Citizenship or Place of Organization UNITED STATES
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Number of (7) Sole Voting Power 541,936
Shares ____________________________________________
Beneficially (8) Shared Voting Power 0
Owned by ____________________________________________
Each (9) Sole Dispositive Power 541,936
Reporting ____________________________________________
Person With (10) Shared Dispositive Power 0
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11. Aggregate Amount Beneficially Owned 541,936
by each Reporting Person
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12. Check if the Aggregate Amount in Row (11) Excludes [_]
Certain Shares
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13. Percent of Class Represented by Amount in Row (11) 5.0%
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14. Type of Reporting Person (See Instructions) IN
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ITEM 1. Security and Issuer
Common stock of Scott's Liquid Gold, Inc. ("the company"), 4880 Havana
Street, Denver, CO 80239.
ITEM 2. Identity and Background
The reporting person, Timothy J. Stabosz, 1307 Monroe Street, LaPorte, IN
46350, a natural person and United States citizen, is engaged as a private
investor. He has not been convicted in a criminal proceeding (excluding
traffic violations or other similar misdemeanors) in the last 5 years, and has
not been a party to any proceedings, or subject to any judgements, enjoinments,
decrees, et al., related to violations of state or federal securities laws, in
his lifetime.
ITEM 3. Source and Amount of Funds or Other Consideration
Personal funds in the aggregate amount of $142,037.88 have been used to
effect the purchases. No part of the purchase price represents borrowed funds.
ITEM 4. Purpose of Transaction
The reporting person has acquired the shares for investment purposes.
The reporting person has identified a number of serious concerns at the
company. Very recently, he has been in contact with the company's management
to discuss these concerns, and to seek major change and reform at the company.
These concerns include, but are not limited to: the company's intractable
long-run operating losses, long-run destruction of shareholder value,
questionable corporate strategy, excessive executive pay, low executive
accountability, board insularity, lack of board independence, and other
deficiencies in the company's corporate governance.
More specifically, to date, the reporting person has expressed the
following concerns, and/or has made, and does make, the following requests of
management:
1) Under the current CEO, Mr. Goldstein, the company has LOST MONEY IN 12 OF
THE LAST 13 YEARS. The company's sales have shrunk from $50 million in 1997,
to an estimated $14 million in 2010. Furthermore, over the same time period,
sales of the flagship Scott's Liquid Gold product line have shrunk nearly 60%,
and total shareholders' equity has shrivelled by approximately 63%.
2) Meanwhile, over the same 13 year time period mentioned above, the CEO has
taken out of the company aggregate compensation of $5.3 million (excluding
long-term compensation), which accounts for nearly 40% of the $13.9 million
decline in shareholders' equity over that same 13 year time period.
Clearly, the CEO's pay package is too large, relative to his desultory
lack of success in turning the business around. The CEO needs to show
accountability IMMEDIATELY, and his pay package needs to be restructured,
IMMEDIATELY, to something on the order of $125,000 a year in salary, with an
incentive element equal to 20% of any income from operations above $250,000,
annually, that the company is able to achieve. If the CEO is not willing to
significantly reconstitute his pay package, the board should search for a new
CEO, for a lower cost...someone who almost certainly would have a much better
chance of turning the company around.
3) The board is highly insular, and significantly lacking in independence. The
reporting person believes that the company's boardroom has operated as a sort
of reverberation chamber, over the last 10+ years. There are 4 out of 7
members (Messrs. Goldstein, Hinkle, Johnson, and Passantino), each of whom
work, or recently worked, for the company, for approximately 30 years apiece!
Despite Mr. Johnson's recent retirement, there is a "lock" on the board of
individuals who would obviously have every reason to be highly loyal to Mr.
Goldstein, irrespective of the needs and desires of the outside shareholder
base to STOP the destruction of shareholder value. Worse, except for Mr.
Goldstein, outright ownership of common stock by board members is minimal,
leaving the board woefully "un-vested" in the interest of the outside
shareholder base. This, in the reporting person's opinion, explains the
board's astonishing tolerance of long-run annihilation of shareholder value,
and makes any reasonable observer question whether the board has a bonafide
concern about its fiduciary responsibility.
4) The Compensation Committee needs to be reconstituted to comprise members
that are FULLY arms length from the company, without any preexisting or prior
personal or business relationship with the CEO or his family, and the
Committee needs to meet without the CEO present, when discussing his
compensation arrangements. Being a former executive with the company, Mr.
Field, the Chairman, should step down from the Committee, and be replaced with
a more "rigorously independent" member.
5) Owing to Scott's Liquid Gold's being a "family run" company, and the
longstanding loyalty of a majority of board members to the family, it is
appropriate for the company, at this time, to separate the role of the
Chairman and CEO, in order to make the CEO more independently accountable to
the board. It is imperative that ANY CEO realize that if he fails to perform,
there is always the possibility of his being replaced...irrespective of the
company's being founded by his ancestors. That's just the way it is.
6) The company should eliminate its poison pill (rather than, disturbingly,
extending it, as it recently has). With the long run destruction of
shareholder value under current management, and the need to rebuild the trust
of the outside shareholder base from the ground up, the interest of the
outside shareholders in considering ANY AND ALL potential bids for the company
should be PARAMOUNT, at this point. The reporting person believes that a
self-respecting board would understand, and appreciate that necessity. With
the extension of the poison pill, is it not perfectly logical for the
reporting person, and outside shareholders generally, to fear that the board's
primary consideration may be a continuation of the CEO's (nearly) $400,000 a
year sinecure, rather than the broader interest of maximizing value for the
entire shareholder base?
7) The board needs to adopt a new bylaw to require that it meet in executive
session at EVERY board meeting. Furthermore, in order to avoid insularity,
the board also needs to adopt a policy or bylaw that requires that a MAJORITY
of board members are required to be "never employed" by the company.
8) While the CEO and board have, generally, been communicative and responsive
to the reporting person, the reporting person requests that the board consider
appointing a lead independent director as a formal "ombudsman" for outside
shareholders, and their concerns.
With regard to item #3 above, the reporting person has provided his own
name, and another individual's, as candidates for the board of directors. The
reporting person has asked that he, and/or the other individual, be appointed
to the board. In addition, the reporting person intends to suggest one or more
additional individuals as candidates for the board.
The reporting person intends to review his investment in the company on a
continual basis and engage in discussions with management and the Board of
Directors concerning the business, operations, and future plans of the company.
Depending on various factors, including, without limitation, the company's
financial position and investment strategy, the price levels of the common
stock, conditions in the securities markets, and general economic and industry
conditions, the reporting person may, in the future, take such actions with
respect to his investment in the company as he deems appropriate including,
without limitation, communicating with other stockholders, seeking Board
representation, making proposals to the company concerning the capitalization
and operations of the issuer, purchasing additional shares of common stock or
selling some or all of his shares, or changing his intention with respect to
any and all matters referred to in Item 4.
Other than as indicated above, the reporting person has no plans or
proposals which relate to, or could result in, any matters referred to in
subsections (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. Interest in Securities of the Issuer
As of the close of business on March 25, 2011, the reporting person has
sole voting and dispositive power over 541,936 shares of Scott's Liquid Gold,
Inc.'s common stock. According to the company's most recently filed Form 10-Q,
as of November 10, 2010, there were 10,795,000 common shares outstanding. The
reporting person is therefore deemed to own 5.0% of the company's common stock.
Transactions effected by the respondent in the 60 days prior to the March 18,
2011 "trigger" date, were performed in ordinary brokerage transactions, and are
indicated as follows:
02/17/11 bought 4510 shares @ $.301
02/17/11 bought 200 shares @ $.232
03/03/11 bought 111 shares @ $.232
03/11/11 bought 5000 shares @ $.232
03/14/11 bought 88,000 shares @ $.25
03/15/11 bought 23,000 shares @ $.25
03/16/11 bought 5684 shares @ $.35
03/18/11 bought 2500 shares @ $.355
ITEM 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
Not Applicable
ITEM 7. Material to be Filed as Exhibits
Not Applicable
SIGNATURES
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.
Date 03/25/11
Signature Timothy J. Stabosz
Name/Title Timothy J. Stabosz, Private Investor