Lifeway Foods, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure material information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer, principal financial officer and principal accounting officer, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. As of December 31, 2020 (the “Evaluation Date”), we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020 in ensuring that information required to be disclosed by us under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified under the Exchange Act rules. Management’s Annual Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is identified in Exchange Act Rules 13a-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive officer, principal financial officer and principal accounting officer, and effected by the Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that: · pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; · provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures of the company are being made only in accordance with authorizations of our management and our directors; and · provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements. 27 Internal control over financial reporting has inherent limitations which may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the level of compliance with related policies or procedures may deteriorate. Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2020. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 28 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Corporate Governance Guidelines and Code of Ethics We have adopted Corporate Governance Guidelines and a Code of Ethics applicable to all members of the Board, executive officers, and employees, including our principal executive officer and principal financial officer. The Corporate Governance Guidelines, the Code of Ethics, and other corporate governance documents are available on Lifeway’s website at www.lifewayfoods.com. Any person may, without charge, request a copy of the Corporate Governance Guidelines and/or Code of Ethics by contacting Lifeway at (847) 967-1010 or by email at info@lifeway.net. Other information required by this Item 10 will be included in our definitive Proxy Statement to be filed no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information required by this Item 11 will be included in our definitive Proxy Statement to be filed no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Information required by this Item 12 will be included in our definitive Proxy Statement to be filed no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE. Information required by this Item 13 will be included in our definitive Proxy Statement to be filed no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Information required by this Item 14 will be included in our definitive Proxy Statement to be filed no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. 29 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. 1. A list of the Financial Statements and Financial Statement Schedules filed as part of this Report is set forth in Part II, Item 8, which list is incorporated herein by reference. 2. Financial Statement Schedules – Separate financial statement schedules have been omitted either because they are not applicable or because the required information is included in the consolidated financial statements 3. Exhibits. No. Description Form Period Ending Exhibit Filing Date 3.1 Amended and Restated Bylaws. 10-K 12/31/2017 3.1 3/30/2018 3.2 Articles of Incorporation, as amended and currently in effect 10-K 12/31/2013 3.2 4/2/2014 10.1 Stock Purchase Agreement dated October 1, 1999 by and among Danone Foods, Inc., Lifeway Foods, Inc., Michael Smolyansky and certain other parties 8-K 0 10.1 10/12/1999 10.2 Stockholders’ Agreement dated October 1, 1999 by and among Danone Foods, Inc., Lifeway Foods, Inc., Michael Smolyansky and certain other parties 8-K 0 10.11 10/12/1999 10.3 Letter Agreement dated December 24, 1999 8-K 0 10.12 1/12/2000 10.4 Employment Agreement, dated September 12, 2002, between Lifeway Foods, Inc. and Julie Smolyansky 10-QSB/A No. 2 9/30/2002 10.14 4/30/2003 10.5 Consulting Agreement by and between the Company and Ludmila Smolyansky, dated as of March 8, 2016 10-K 12/31/2015 10.23 3/16/2016 10.6 Endorsement Agreement by and between the Company and Ludmila Smolyansky, dated as of March 14, 2016 10-K 12/31/2015 10.24 3/16/2016 10.7 Amended and Restated Loan and Security Agreement dated as of May 7, 2018 among Lifeway Foods, Inc., Fresh Made, Inc., The Lifeway Kefir Shop, LLC, Lifeway Wisconsin, Inc., and CIBC Bank USA, as Lender. 8-K 10.1 5/11/2018 30 10.8 Employment Agreement by and between the Company and Amy Feldman, dated as of October 29, 2018 8-K 10.1 11/1/2018 10.9 Employment Agreement by and between the Company and Eric Hanson, dated as of January 18, 2019 1/23/2019 10.10 First Modification to Amended and Restated Loan and Security Agreement dated as of April 10, 2019 among Lifeway Foods, Inc., Fresh Made, Inc., The Lifeway Kefir Shop, LLC, Lifeway Wisconsin, Inc., and CIBC Bank USA, as Lender. 10-K 12/31/18 10.1 4/15/2019 10.11 Second Modification to Amended and Restated Loan and Security Agreement, effective as of December 10, 2019 by and among Lifeway Foods, Inc., Fresh Made, Inc., The Lifeway Kefir Shop, LLC, Lifeway Wisconsin, Inc., and CIBC Bank USA, as Lender. 8-K 10.1 12/10/2019 10.12 Third Modification to Amended and Restated Loan and Security Agreement dated as of September 30, 2020 among Lifeway Foods, Inc., Fresh Made, Inc., The Lifeway Kefir Shop, LLC, Lifeway Wisconsin, Inc., and CIBC Bank USA, as Lender. 8-K 9/30/20 10.1 10/6/2020 10.13 Amended and Restated Consulting Agreement dated December 28, 2020 by and between the Company and Ludmila Smolyansky 8-K 12/28/20 10.1 12/28/20 14 Code of Conduct and Ethics 10-K 12/31/13 14 4/2/2014 21 List of Subsidiaries of the Registrant 23.1 Consent of Mayer Hoffman McCann P.C. 31.1 Rule 13a-14(a)/15d-14(a) Certification of Julie Smolyansky 31.2 Rule 13a-14(a)/15d-14(a) Certification of Eric Hanson 32.1 Section 1350 Certification of Julie Smolyansky 32.2 Section 1350 Certification of Eric Hanson 99.1 Press release dated March 25, 2021 reporting the Company’s financial results for year ended December 31, 2020. 101 Interactive Data Files ITEM 16. FORM 10-K SUMMARY. Not applicable. 31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LIFEWAY FOODS, INC. Date: March 25, 2021 By: /s/ Julie Smolyansky Julie Smolyansky Chief Executive Officer, President, and Director Date: March 25, 2021 By: /s/ Eric Hanson Eric Hanson Chief Financial & Accounting Officer 32 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 25, 2021 /s/ Julie Smolyansky Julie Smolyansky Chief Executive Officer, President, and Director (Principal Executive Officer) Date: March 25, 2021 /s/ Edward Smolyansky Edward Smolyansky Chief Operating Officer and Director Date: March 25, 2021 /s/ Eric Hanson Eric Hanson Chief Financial & Accounting Officer (Principal Financial & Accounting Officer) Date: March 25, 2021 /s/ Ludmila Smolyansky Ludmila Smolyansky Chairperson of the Board of Directors Date: March 25, 2021 /s/ Jason Scher Jason Scher Lead Independent Director Date: March 25, 2021 /s/ Pol Sikar Pol Sikar Director Date: March 25, 2021 /s/ Jody Levy Jody Levy Director Date: March 25, 2021 /s/ Dorri McWhorter Dorri McWhorter Director 33