sec document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 2)1
LIQUID AUDIO, INC.
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(Name of Issuer)
COMMON STOCK, $0.001 PAR VALUE
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(Title of Class of Securities)
53631T 10 2
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(CUSIP Number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 3, 2001
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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 that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |_|.
NOTE. Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. SEE Rule 13d-7
for other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 9 Pages)
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1 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 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).
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CUSIP No. 53631T 10 2 13D Page 2 of 9 Pages
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================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
STEEL PARTNERS II, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,866,366
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,866,366
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10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,866,366
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.2%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 53631T 10 2 13D Page 3 of 9 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
WARREN G. LICHTENSTEIN
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,866,366
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,866,366
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,866,366
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.2%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 53631T 10 2 13D Page 4 of 9 Pages
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The following constitutes Amendment No. 2 ("Amendment No. 2") to the
Schedule 13D filed by the undersigned. This Amendment No. 2 amends the Schedule
13D as specifically set forth.
Item 3 is hereby amended and restated as follows:
Item 3. Source and Amount of Funds or Other Consideration.
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The aggregate purchase price of the 1,866,366 Shares of Common
Stock owned by Steel Partners II is $4,341,673. The Shares of Common Stock owned
by Steel Partners II were acquired with partnership funds.
Item 4 is hereby amended to add the following:
On October 3, 2001, the Reporting Persons delivered a letter to
certain officers and directors of the Issuer questioning the Issuer's failure to
contact certain members of Steel Partners II to discuss the future prospects of
the Issuer as promised during a prior introductory telephone conversation
initiated by Mr. Lichtenstein. The Reporting Persons also convey to the Issuer
the overwhelming consensus they have received from certain stockholders and
employees of the Issuer since the filing of the initial Schedule 13D that the
Issuer should be sold or liquidated as soon as possible. The letter is filed as
Exhibit 3 to this Amendment No. 2 to the Schedule 13D and incorporated herein by
reference.
The Reporting Persons continue to believe that the Issuer has
not devised a viable business strategy and that the Board has failed to
implement a plan that will maximize or even maintain stockholder value. The
Reporting Persons also believe that the Issuer's dismal financial results will
continue to decline unless immediate action is taken. For the quarter ended June
30, 2001, the Issuer reported a net loss of over $14 million. As of June 30,
2001, the Issuer reported an accumulated deficit of approximately $99.2 million
and sales of only approximately $1.5 million per quarter for the two most recent
quarters. This poor performance is reflected in the Issuer's current stock price
of only $2.13 as of October 5, 2001, 94% below its initial public offering price
of $33.63 in December 1999 and over 50% lower than the net cash value per share
of $4.57. Additionally, the Reporting Persons believe that leading competitors
of the Issuer are consolidating which will prevent the Issuer from competing
with more established companies such as Yahoo, Inc. which recently acquired
Launch Media, Inc., a leading competitor of the Issuer.
Given the poor performance of the Issuer since its inception
and trend of consolidation in the industry, the Reporting Persons have
significant concerns about management's ability to implement a restructuring
plan and preserve the Issuer's cash, its primary asset. The Reporting Persons
believe that the Board should
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CUSIP No. 53631T 10 2 13D Page 5 of 9 Pages
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take immediate steps to substantially reduce operating expenses, including
research and development expenses, and to sell the Issuer or its assets to the
highest bidder.
In order to facilitate a sale of the Issuer, the Reporting
Persons have urged the Board to establish a committee of independent directors
for the purpose of engaging a nationally recognized investment bank and redeem
the rights distributed pursuant to the Issuer's 2001 Stockholders Rights Plan,
commonly known as a "poison pill." The Reporting Persons have already
communicated to the Board that if the poison pill is not terminated by the
Board, the Reporting Persons will submit a stockholder proposal for inclusion in
the Issuer's proxy material for the 2002 Annual Meeting of Stockholders to
terminate the poison pill.
The second paragraph of Item 5(a) is hereby amended and restated as follows:
As of the close of business on October 5, 2001, Steel Partners
II beneficially owned 1,866,366 Shares of Common Stock, constituting
approximately 8.2% of the Shares outstanding. Mr. Lichtenstein beneficially
owned 1,866,366 Shares, constituting approximately 8.2% of the Shares
outstanding. Mr. Lichtenstein has sole voting and dispositive power with respect
to the 1,866,366 Shares owned by Steel Partners II by virtue of his authority to
vote and dispose of such Shares. All of such Shares were acquired in open-market
transactions.
Item 5(c) is hereby amended to add the following:
(c) Schedule A annexed hereto lists all transactions in the
Issuer's Common Stock by the Reporting Persons since the filing of Amendment No.
1 to the Schedule 13D through October 5, 2001.
Item 7 is hereby amended to add the following exhibit:
3. Letter from Steel Partners II, L.P. to certain officers and
directors of Liquid Audio, Inc., dated October 3, 2001.
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CUSIP No. 53631T 10 2 13D Page 6 of 9 Pages
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SIGNATURES
After reasonable inquiry and to the best of his knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: October 5, 2001 STEEL PARTNERS II, L.P.
By: Steel Partners, L.L.C.
General Partner
By: /s/ Warren G. Lichtenstein
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Warren G. Lichtenstein
Chief Executive Officer
/s/ Warren G. Lichtenstein
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WARREN G. LICHTENSTEIN
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CUSIP No. 53631T 10 2 13D Page 7 of 9 Pages
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SCHEDULE A
Transactions in the Shares Since the Filing of
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Amendment No. 1 to the Schedule 13D
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Shares of Common Stock Price Per Date of
Purchased Share($) Purchase
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STEEL PARTNERS II, L.P.
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100,000 2.08090 9/27/01
WARREN LICHTENSTEIN
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None
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CUSIP No. 53631T 10 2 13D Page 8 of 9 Pages
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EXHIBIT INDEX
Exhibit Page
------- ----
1. Joint Filing Agreement, dated July 26, -
2001 (previously filed).
2. Letter from Steel Partners II, L.P. to -
the Board of Directors of Liquid
Audio, Inc., dated September 10, 2001
(previously filed).
3. Letter from Steel Partners II, L.P. to 9
certain officers and directors of
Liquid Audio, Inc., dated October 3,
2001.
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CUSIP No. 53631T 10 2 13D Page 9 of 9 Pages
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STEEL PARTNERS II, L.P.
150 EAST 52ND STREET
21ST FLOOR
NEW YORK, NEW YORK 10022
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TEL (212) 813-1500
FAX (212) 813-2198
October 3, 2001
Silvia Kessel
Ann Winblad
Gerald Kearby
Robert Flynn
Liquid Audio, Inc.
800 Chesapeake Drive
Redwood City, California 94603
It was nice speaking with you last week. I am extremely disappointed that once
again you have not returned numerous phone calls from the members of Steel
Partners, as promised on our phone call last week. We were expecting a phone
call, a meeting, and a draft confidentiality agreement.
As we discussed, Steel Partners II, L.P. has been involved in over 80
transactions during our 11 years in business. Since the filing of our Form 13D
(which included our previous letter to the Board of Directors), we have received
numerous calls from disgruntled shareholders and employees. Never have we
received as many phone calls from fellow stakeholders as we have with Liquid
Audio. The overwhelming consensus from the shareholders is that the company
should be sold or liquidated as soon as possible with a maximum effort to
minimize the cash drain.
We would very much like to sit down with the company's Board of Directors and
senior management to share what we learned and to see if there's a way we can
work together to maximize the value of the company in the short term for all
shareholders.
I can be reached at 212-813-1500 and would welcome a call from each one of you.
Respectfully,
/s/ Warren Lichtenstein
----------------------
Warren Lichtenstein
cc: Steve Wolosky