Item 9A. Controls and Procedures
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, 2022 (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, 2022 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.
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.
25
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, 2022.
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, 2022.
Remediation of the Material Weakness
During 2022, management evaluated our policies
and procedures related to accounting for deferred income taxes and goodwill of acquired intangible assets. We have implemented controls
to ensure that (i) the goodwill allocation associated with any acquired intangible assets are properly accounted for and disclosed in
the period of acquisition, and (ii) the deferred income tax effects of acquired intangible assets are properly accounted for and disclosed
in the period of acquisition.
Changes in Internal Control over Financial Reporting
Except as discussed above, there were no changes in
our internal control over financial reporting that occurred during 2022 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER
INFORMATION
None.
ITEM 9C. DISCLOSURE
REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
26
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Corporate Governance Guidelines and Code of
Ethics
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.
27
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
Filed Herewith
3.2
Articles of Incorporation, as amended and currently in effect
10-K
12/31/2013
3.2
4/2/2014
10.1
Stockholders’ Agreement dated October 1, 1999 by and among Danone Foods, Inc., Lifeway Foods, Inc., Michael Smolyansky and certain other parties
8-K
10/1/1999
10.11
10/12/1999
10.2
Letter Agreement dated December 24, 1999
8-K
12/24/1999
10.12
1/12/2000
10.3+
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
10.4
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
10.5
Termination Agreement dated as of August 30, 2022, between the Company and Ludmila Smolyansky
8-K
9/6/2022
10.2
9/13/2022
10.6
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
5/7/2018
10.1
5/11/2018
10.7+
Employment Agreement by and between the Company and Amy Feldman, dated as of October 29, 2018
8-K
10/26/2018
10.1
11/1/2018
10.8+
Employment Agreement by and between the Company and Eric Hanson, dated as of January 18, 2019
8-K
1/1/2019
10.1
1/23/2019
10.9
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
12/31/2018
10.10
4/15/2019
28
10.10
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
12/10/2019
10.1
12/10/2019
10.11
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.
10-Q
9/30/2020
10.1
10/6/2020
10.12
Fourth Modification to Amended and Restated Loan and Security Agreement, dated as of August 18, 2021, 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
8/18/2021
10.1
8/20/2021
10.13+
Amended and Restated Consulting Agreement dated December 28, 2020 by and between the Company and Ludmila Smolyansky
8-K
12/28/2020
10.1
12/28/2020
10.14+
Lifeway Foods, Inc. Omnibus Incentive Plan
8-K
12/14/2015
10.2
12/18/2015
10.15+
Notice of Restricted Stock Unit Award
8-K
12/14/2015
10.3
12/18/2015
10.16+
Notice of Performance Unit Award
8-K
12/14/2015
10.4
12/18/2015
10.17+
Notice of Restricted Stock Award
8-K
12/14/2015
10.5
12/18/2015
10.18+
Notice of Non-Qualified Stock Option Award
8-K
12/14/2015
10.6
12/18/2015
10.19
Settlement Agreement dated as of July 27, 2022, between the Company and Edward Smolyansky and Ludmila Smolyansky
8-K
7/27/2022
10.1
7/29/2022
10.20
Amendment to Settlement Agreement dated as of July 27, 2022, between the Company and Edward Smolyansky and Ludmila Smolyansky
Filed Herewith
10.21+
Lifeway Foods, Inc. 2022 Omnibus Incentive Plan
8-K
8/31/2022
10.1
9/2/2022
10.22+
Form of Notice of Restricted Stock Award under the Lifeway Foods, Inc. 2022 Non-Employee Director Equity and Deferred Compensation Plan
10-Q
9/30/2022
10.6
11/14/2022
10.23+
Form of Notice of Restricted Stock Unit Award under the Lifeway Foods, Inc. 2022 Omnibus Incentive Plan
10-Q
9/30/2022
10.7
11/14/2022
10.24+
Form of Notice of Performance-Based Restricted Stock Unit Award under the 2022 Omnibus Incentive Plan
10-Q
9/30/2022
10.8
11/14/2022
29
10.25+
Lifeway Foods, Inc. 2022 2022 Non-Employee Director Equity and Deferred Compensation Plan
8-K
8/31/2022
10.2
9/2/2022
10.26 +
Form of Notice of Restricted Stock Unit Award under the Lifeway Foods, Inc. 2022 Non-Employee Director Equity and Deferred Compensation Plan
10-Q
9/30/2022
10.6
11/14/2022
10.27
Settlement Agreement dated as of September 1, 2022, between the Company and Edward Smolyansky
8-K
9/6/2022
10.1
9/13/2022
10.28
Stock Purchase Agreement dated as of November 7, 2022, between the Company and Ludmila Smolyansky.
8-K
11/7/2022
10.1
11/9/2022
10.29
Restricted Stock Unit Award Agreement, dated as of April 27, 2022, by and between the Company and Jason Scher.
Filed Herewith
21
List of Subsidiaries of the Registrant
23.1
Consent of Grant Thornton LLP
23.2
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 27, 2023 reporting the Company’s financial results for year ended December 31, 2022.
101*
The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in inline XBRL, include: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.
__________________
+
Indicates a management contract or compensatory plan or arrangement.
*
This exhibit is furnished and not deemed filed with the Securities and Exchange Commission, and is not incorporated by reference into any filing of Lifeway Foods, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of filing this Form 10-K and irrespective of any general incorporation language contained in such filing.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
30
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 27, 2023
By:
/s/ Julie Smolyansky
Julie Smolyansky
Chief Executive Officer, President, and Director
Date: March 27, 2023
By:
/s/ Eric Hanson
Eric Hanson
Chief Financial & Accounting Officer
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 27, 2023
/s/ Julie Smolyansky
Julie Smolyansky
Chief Executive Officer, President, and Director
(Principal Executive Officer)
Date: March 27, 2023
/s/ Eric Hanson
Eric Hanson
Chief Financial & Accounting Officer
(Principal Financial & Accounting Officer)
Date: March 27, 2023
Ludmila Smolyansky
Director
Date: March 27, 2023
/s/ Jason Scher
Jason Scher
Director
Date: March 27, 2023
/s/ Pol Sikar
Pol Sikar
Director
Date: March 27, 2023
/s/ Jody Levy
Jody Levy
Director
Date: March 27, 2023
/s/ Dorri McWhorter
Dorri McWhorter
Director
Date: March 27, 2023
/s/ Juan Carlos Dalto
Juan Carlos Dalto
Director
Date: March 27, 2023
/s/ Perfecto Sanchez
Perfecto Sanchez
Director
31