R
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2013
|
|
£
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from: __________ to __________
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Illinois
|
36-3442829
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(State or other jurisdiction of
|
(IRS Employer
|
incorporation or organization)
|
Identification No.)
|
Title of Each Class
|
Name of each exchange on which registered
|
Common Stock, No Par Value
|
Nasdaq Global Market
|
Large accelerated filer
¨
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Accelerated filer
þ
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
PART I
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|||
Item 1.
|
Business
|
2 | |
Item 1A.
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Risk Factors | 12 | |
Item 1B.
|
Unresolved Staff Comments | 12 | |
Item 2.
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Properties
|
12 | |
Item 3.
|
Legal Proceedings
|
13 | |
Item 4.
|
Mine Safety Disclosures
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13 | |
PART II
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|||
Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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14 | |
Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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15 | |
Item 7A.
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Quantitative and Qualitative Disclosures about Market Risk | 16 | |
Item 8.
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Financial Statements and Supplementary Data
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16 | |
Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
35 | |
Item 9A.
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Controls and Procedures
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35 | |
Item 9B.
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Other Information
|
36 | |
PART III
|
|||
Item 10.
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Directors, Executive Officers and Corporate Governance
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37 | |
Item 11.
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Executive Compensation
|
39 | |
Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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41 | |
Item 13.
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Certain Relationships and Related Transactions and Director Independence
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42 | |
Item 14.
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Principal Accountant Fees and Services
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43 | |
PART IV
|
|||
Item 15.
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Exhibits, Financial Statement Schedules
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44 | |
Signatures
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47 | ||
Index of Exhibits
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49 |
Mark/Reg. No.
|
Goods/Services
|
Date of
Registration
|
Expiration of
Registration
|
Comments
|
ProBug Design 1,
Reg. No. 3266378
|
dairy-based beverages; dairy- based food beverages; kefir; soy- based food beverage used as milk substitute
|
July 17, 2007
|
July 17, 2017
|
An Affidavit of Continued Use was timely filed between the fifth and sixth anniversaries of the registration date. Registration is renewable between the ninth and tenth anniversaries of the registration date or the six-month grace period following the registration expiration date.
|
ProBug Design 2,
Reg. No. 3263130
|
dairy-based beverages; dairy- based food beverages; kefir; soy- based food beverage used as milk substitute
|
July 10, 2007
|
July 10, 2017
|
An Affidavit of Continued Use was timely filed between the fifth and sixth anniversaries of the registration date. Registration is renewable between the ninth and tenth anniversaries of the registration date or the six-month grace period following the registration expiration date.
|
Penelope ProBug Design, Reg. No. 3408792
|
dairy-based beverages; dairy- based food beverages; kefir; soy- based food beverage used as milk substitute
|
April 8, 2008
|
April 8, 2018
|
An Affidavit of Continued Use was timely filed between the fifth and sixth anniversaries of the registration date. Registration is renewable between the ninth and tenth anniversaries of the registration date or the six-month grace period following the registration expiration date.
|
BA3APHBIII (a Stylized
presentation of “bazarny” in Cyrillic characters),
Reg. No. 3590660
|
cultured milk products, excluding ice cream, ice milk and frozen yogurt; cheeses and cottage cheese
|
March 17, 2009
|
March 17, 2019
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
BAMBINO,
Reg. No. 2770522
|
cheeses, cottage cheeses and other dairy products, excluding ice cream, ice milk, and frozen yogurt
|
October 7, 2003
|
October 7, 2023
|
A Renewal application was timely filed May 13, 2013. Registration is renewable for ten year periods or during the six-month grace period following the registration expiration date.
|
BAZARNY,
Reg. No. 3597883
|
cultured milk products, excluding ice cream, ice milk and frozen yogurt; cheeses and cottage cheese
|
March 31, 2009
|
March 31, 2019
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
BIO KEFIR,
Reg. No. 3886709
|
yogurt, cheeses, cottage cheeses and other milk products, excluding ice cream, ice milk and frozen yogurt
|
December 7, 2010
|
December 7, 2020
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
CHANGING THE WORLD, ONE MOUTHFUL AT A TIME. (Stylized),
Reg. No. 3541999
|
fruit juices
|
December 2, 2008
|
December 2, 2018
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
FRUIT JUICE (Stylized),
Reg. No. 3413276
|
fruit juices
|
April 15, 2008
|
April 15, 2018
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
Fruit Juice Logo,
Reg. No. 3432421
|
fruit juices
|
May 20, 2008
|
May 20, 2018
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
GOO-BERRY PIE,
Reg. No. 3405134
|
dairy-based beverages; dairy- based food beverages; kefir; soy-based food beverages used as a milk substitute
|
April 1, 2008
|
April 1, 2018
|
An Affidavit of Continued Use was timely filed between the fifth and sixth anniversaries of the registration date. Registration is renewable between the ninth and tenth anniversaries of the registration date or the six-month grace period following the registration expiration date.
|
HELIOS NUTRITION,
Reg. No. 2283716
|
health foods, functional foods and medical foods, namely, dairy products excluding ice cream, ice milk and frozen yogurt
|
October 5, 1999
|
October 5, 2019
|
Registration was timely renewed on April 2, 2010. Registration is renewable for ten year periods or during the six-month grace period following the registration expiration date or the six-month grace period following the sixth anniversary date.
|
KOROVKA,
Reg. No. 2504027
|
dairy-based spread
|
November 6, 2001
|
November 6, 2021
|
Registration was timely renewed on November 6, 2011. Registration is renewable for ten year periods or during the six-month grace period following the registration expiration date.
|
KPECTBRHCKNN (a Stylized presentation of “krestyanskiy” in Cyrillic characters-means “peasant”),
Reg. No. 2187363
|
cheeses, cottage cheeses and other milk products excluding ice cream, ice milk and frozen yogurt
|
September 8, 1998
|
September 8, 2018
|
Registration was timely renewed on August 23, 2008. Registration is renewable for ten year periods or during the six-month grace period following the registration expiration date.
|
KWASHENKA,
Reg. No. 2135974
|
kefir, yogurt, cheeses, cottage cheeses and other milk products, excluding ice cream, ice milk and frozen yogurt
|
February 10, 1998
|
February 10, 2018
|
Registration was timely renewed on May 23, 2008. Registration is renewable for ten year periods or during the six-month grace period following the registration expiration date.
|
LA FRUTA,
Reg. No. 2937061
|
cultured milk products, excluding ice cream, ice milk and frozen yogurt
|
March 29, 2005
|
March 29, 2015
|
An Affidavit of Continued Use was timely filed between the fifth and sixth anniversaries of the registration date. Registration is renewable between the ninth and tenth anniversaries of the registration date or the six-month grace period following the registration expiration date.
|
LIFEWAY,
Reg. No. 1571136
|
cheese and kefir
|
December 12, 1989
|
December 12, 2019
|
Registration was timely renewed on December 12, 2009. Registration is renewable for ten year periods or during the six-month grace period following the registration expiration date.
|
ORANGE CREAMY CRAWLER,
Reg. No. 3263128
|
dairy-based beverages; dairy- based food beverages; kefir; soy- based food beverage used as milk substitute
|
July 10, 2007
|
July 10, 2017
|
An Affidavit of Continued Use was timely filed between the fifth and sixth anniversaries of the registration date. Registration is renewable between the ninth and tenth anniversaries of the registration date or the six-month grace period following the registration expiration date.
|
PHYTOBOOST,
Reg. No. 3982487
|
dairy-based beverages; dairy- based food beverages; kefir; soy-based food beverage used as a milk substitute
|
June 21, 2011
|
June 21, 2021
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
PLAYGROUP PACK,
Reg. No. 3634999
|
fruit juices
|
June 9, 2009
|
June 9, 2019
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
PRIDE OF MAIN STREET, MN
Reg. No. 12947
|
dairy product
|
November 9, 1987
|
November 9, 2017
|
Only for the State of Minnesota, not in US – Registration was renewed in 2007. Registration is renewable for ten years.
|
PRO2O,
Reg. No. 4226923
|
dairy-based beverages; dairy-based food beverages; kefir; soy-based food beverage used as a milk substitute beverages, namely, water and fruit and vegetable juices and fruit juices flavored with tea
|
October 16, 2012
|
October 16, 2022
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
PROBUGS,
Reg. No. 3263129
|
dairy-based beverages; dairy- based food beverages; kefir; soy- based food beverage used as milk substitute
|
July 10, 2007
|
July 10, 2017
|
An Affidavit of Continued Use was timely filed between the fifth and sixth anniversaries of the registration date. Registration is renewable between the ninth and tenth anniversaries of the registration date or the six-month grace period following the registration expiration date.
|
SOYTREAT,
Reg. No. 3530754
|
soy-based food beverage intended for use as cultured milk substitute
|
November 11, 2008
|
November 11, 2018
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
STARFRUIT,
Reg. No. 3513252
|
franchise services, namely, offering technical and business management assistance in the establishment and operation of restaurants
|
October 7, 2008
|
October 7, 2018
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
STARFRUIT,
Reg. No. 3454746
|
restaurant services
|
June 24, 2008
|
June 24, 2018
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
STARFRUIT (Stylized), Reg. No. 3879939
|
kefir
|
November 23, 2010
|
November 23, 2020
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
SUBLIME SLIME LIME,
Reg. No. 3263134
|
dairy-based beverages; dairy- based food beverages; kefir; soy- based food beverage used as milk substitute
|
July 10, 2007
|
July 10, 2017
|
An Affidavit of Continued Use was timely filed between the fifth and sixth anniversaries of the registration date. Registration is renewable between the ninth and tenth anniversaries of the registration date or the six-month grace period following the registration expiration date.
|
SWEET KISS,
Reg. No. 2135975
|
cheeses, cottage cheeses and other milk products, excluding ice cream, ice milk and frozen yogurt
|
February 10, 1998
|
February 10, 2018
|
Registration was timely renewed on May 23, 2008. Registration is renewable for ten year periods or during the six-month grace period following the registration expiration date.
|
TODDLER TASTEBUD TRAINING (Stylized),
Reg. No. 3542008
|
fruit juices
|
December 2, 2008
|
December 2, 2018
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
TRAINING WHEELS FOR HEALTHY EATING (Stylized),
Reg. No. 3412314
|
fruit juices
|
April 15, 2008
|
April 15, 2018
|
Registration is renewable at the time of expiration provided mandatory documents are filed with the USPTO between the fifth and sixth anniversaries of the registration date or the six-month grace period following the sixth anniversary date.
|
Low Bid
|
High Bid
|
|
First Qtr. 2012
|
$ 8.81
|
$ 9.91
|
Second Qtr. 2012
|
$ 8.03
|
$ 10.40
|
Third Qtr. 2012
|
$ 9.10
|
$ 11.10
|
Fourth Qtr. 2012
|
$ 7.90
|
$ 9.88
|
First Qtr. 2013
|
$ 8.39
|
$ 14.00
|
Second Qtr. 2013
|
$ 10.65
|
$ 18.38
|
Third Qtr. 2013
|
$ 12.50
|
$ 19.99
|
Fourth Qtr. 2013
|
$ 12.85
|
$ 17.20
|
(Unaudited)
|
||||||||||||||||
Years Ended
|
||||||||||||||||
December 31, 2013
|
||||||||||||||||
2013
|
2012
|
|||||||||||||||
Sales
|
$ | 108,966,094 | $ | 89,754,007 | ||||||||||||
Less: discounts and allowances
|
(11,441,952 | ) | (8,402,742 | ) | ||||||||||||
Net sales
|
97,524,142 | 97,524,142 | 81,351,265 | 81,351,265 | ||||||||||||
Cost of goods sold
|
68,274,674 | 53,098,191 | ||||||||||||||
Depreciation expense
|
1,626,575 | 1,629,594 | ||||||||||||||
Total cost of goods sold
|
69,901,249 | 54,727,785 | ||||||||||||||
Gross profit
|
27,622,893 | 26,623,480 | ||||||||||||||
Selling expenses
|
11,296,381 | 10,703,980 | ||||||||||||||
General and administrative
|
7,582,397 | 6,319,972 | ||||||||||||||
Amortization expense
|
712,803 | 754,817 | ||||||||||||||
Total operating expenses
|
19,591,581 | 17,778,769 | ||||||||||||||
Income from operations
|
8,031,312 | 8,844,711 | ||||||||||||||
Other income (expense):
|
||||||||||||||||
Interest and dividend income
|
116,380 | 85,383 | ||||||||||||||
Rental income
|
11,727 | 12,285 | ||||||||||||||
Interest expense
|
(203,365 | ) | (177,622 | ) | ||||||||||||
Gain (loss) on sale of investments, net
|
||||||||||||||||
reclassified from OCI
|
195,500 | 71,286 | ||||||||||||||
Loss on disposition of assets
|
(304,958 | ) | ||||||||||||||
Other income (expense)
|
10,577 | (11,169 | ) | |||||||||||||
Total other income (expense)
|
(174,139 | ) | (19,837 | ) | ||||||||||||
Income before provision for
|
||||||||||||||||
income taxes
|
7,857,173 | 8,824,874 | ||||||||||||||
Provision for income taxes
|
2,866,875 | 3,205,076 | ||||||||||||||
Net income
|
$ | 4,990,298 | $ | 5,619,798 | ||||||||||||
Basic and diluted earnings
|
||||||||||||||||
per common share
|
0.31 | 0.34 | ||||||||||||||
Weighted average number of
|
||||||||||||||||
shares outstanding
|
16,346,017 | 16,373,224 | ||||||||||||||
COMPREHENSIVE INCOME
|
||||||||||||||||
Net income
|
$ | 4,990,298 | $ | 5,619,798 | ||||||||||||
Other comprehensive income
|
||||||||||||||||
(loss), net of tax:
|
||||||||||||||||
Unrealized gains (losses) on
|
||||||||||||||||
investments (net of tax)
|
64,674 | 102,816 | ||||||||||||||
Less reclassification adjustment
|
||||||||||||||||
for (gains) losses included in
|
||||||||||||||||
net income (net of taxes)
|
(110,458 | ) | (40,277 | ) | ||||||||||||
Comprehensive income
|
$ | 4,944,514 | $ | 5,682,337 |
Common Stock, No Par Value |
Accumulated
|
|||||||||||||||||||||||||||||||||||
40,000,000 Shares |
# of Shares
|
Other
|
||||||||||||||||||||||||||||||||||
Authorized |
of
|
Comprehensive
|
||||||||||||||||||||||||||||||||||
# of Shares
|
# of Shares
|
Treasury
|
Common
|
Paid In
|
Treasury
|
Retained
|
Income (Loss),
|
|||||||||||||||||||||||||||||
Issued
|
Outstanding
|
Stock
|
Stock
|
Capital
|
Stock
|
Earnings
|
Net of Tax
|
Total
|
||||||||||||||||||||||||||||
Balances at December 31, 2011
|
17,273,776 | 16,409,317 | 864,459 | $ | 6,509,267 | $ | 2,032,516 | $ | (7,606,974 | ) | $ | 34,431,296 | $ | (8,948 | ) | $ | 35,357,157 | |||||||||||||||||||
Redemption of stock
|
— | (63,300 | ) | 63,300 | — | — | (580,708 | ) | — | — | (580,708 | ) | ||||||||||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||||
Unrealized gains on securities, net of taxes
|
— | — | — | — | — | — | — | 62,539 | 62,539 | |||||||||||||||||||||||||||
Net income for the year ended
December 31, 2012
|
— | — | — | — | — | — | 5,619,798 | — | 5,619,798 | |||||||||||||||||||||||||||
Dividends ($.07) per share
|
— | — | — | — | — | — | (1,146,317 | ) | — | (1,146,317 | ) | |||||||||||||||||||||||||
Balances at December 31, 2012
|
17,273,776 | 16,346,017 | 927,759 | $ | 6,509,267 | $ | 2,032,516 | $ | (8,187,682 | ) | $ | 38,904,777 | $ | 53,591 | $ | 39,312,469 | ||||||||||||||||||||
Redemption of stock
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||||
Unrealized gains on securities, net of taxes
|
— | — | — | — | — | — | — | (45,784 | ) | (45,784 | ) | |||||||||||||||||||||||||
Net income for the year ended
December 31, 2013
|
— | — | — | — | — | — | 4,990,298 | — | 4,990,298 | |||||||||||||||||||||||||||
Dividends ($.08) per share
|
— | — | — | — | — | — | (1,307,861 | ) | — | (1,307,861 | ) | |||||||||||||||||||||||||
Balances at December 31, 2013
|
17,273,776 | 16,346,017 | 927,759 | $ | 6,509,267 | $ | 2,032,516 | $ | (8,187,682 | ) | $ | 42,587,214 | $ | 7,807 | $ | 42,949,122 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 4,990,298 | $ | 5,619,798 | ||||
Adjustments to reconcile net income to net
|
||||||||
cash flows from operating activities:
|
||||||||
Depreciation and amortization
|
2,339,378 | 2,384,411 | ||||||
Loss (gain) on sale of investments, net
|
(195,500 | ) | (71,286 | ) | ||||
Deferred income taxes
|
(238,804 | ) | (434,896 | ) | ||||
Bad Debt Expense
|
32,604 | 435,344 | ||||||
Loss (Gain) on sale of equipment
|
304,958 | 11,169 | ||||||
(Increase) decrease in operating assets:
|
||||||||
Accounts receivable
|
(1,741,759 | ) | (1,213,253 | ) | ||||
Other receivables
|
(94,447 | ) | 215,379 | |||||
Inventories
|
(959,822 | ) | (984,711 | ) | ||||
Refundable income taxes
|
(930,119 | ) | (43,512 | ) | ||||
Prepaid expenses and other current assets
|
(6,185 | ) | (17,508 | ) | ||||
Increase (decrease) in operating liabilities:
|
||||||||
Accounts payable
|
2,466,454 | (129,514 | ) | |||||
Accrued expenses
|
128,383 | 601,952 | ||||||
Income taxes payable
|
(254,311 | ) | 254,311 | |||||
Net cash provided by operating activities
|
5,841,128 | 6,627,684 | ||||||
Cash flows from investing activities:
|
||||||||
Purchases of investments
|
(3,518,781 | ) | (1,452,672 | ) | ||||
Proceeds from sale of investments
|
3,001,016 | 1,475,730 | ||||||
Investments in certificates of deposits
|
0 | (150,255 | ) | |||||
Redemption of certificates of deposits
|
423,997 | 0 | ||||||
Purchases of property and equipment
|
(8,479,886 | ) | (1,428,717 | ) | ||||
Proceeds from sale of equipment
|
710,681 | 0 | ||||||
Net cash (used in) provided by investing activities
|
(7,862,973 | ) | (1,555,914 | ) | ||||
Cash flows from financing activities:
|
||||||||
Checks written in excess of bank balances
|
0 | (592,040 | ) | |||||
Purchases of treasury stock
|
0 | (580,708 | ) | |||||
Dividends Paid
|
(1,307,861 | ) | (1,146,317 | ) | ||||
Net proceeds from debt issuance
|
4,975,000 | 250,000 | ||||||
Repayment of notes payable
|
(624,912 | ) | (1,831,626 | ) | ||||
Net cash provided (used in) financing activities
|
3,042,227 | (3,900,691 | ) | |||||
Net (decrease) increase in cash and cash equivalents
|
1,020,382 | 1,171,079 | ||||||
Cash and cash equivalents at the beginning of the period
|
2,286,226 | 1,115,150 | ||||||
Cash and cash equivalents at the end of the period
|
$ | 3,306,608 | $ | 2,286,226 |
Category
|
Years
|
|
Buildings and improvements
|
31 and 39
|
|
Machinery and equipment
|
5 – 12
|
|
Office equipment
|
5 – 7
|
|
Vehicles
|
5
|
Category
|
Years
|
|
Recipes
|
4
|
|
Customer lists and other customer related intangibles
|
7-10
|
|
Lease agreement
|
7
|
|
Trade names
|
15
|
|
Formula
|
10
|
|
Customer relationships
|
12
|
December 31, 2013
|
December 31, 2012
|
|||||||||||||||
Cost
|
Accumulated Amortization
|
Cost
|
Accumulated Amortization
|
|||||||||||||
Recipes
|
$
|
43,600
|
$
|
43,600
|
$
|
43,600
|
$
|
43,600
|
||||||||
Customer lists and other customer related intangibles
|
4,504,200
|
2,474,790
|
4,504,200
|
2,025,736
|
||||||||||||
Lease acquisition
|
87,200
|
87,200
|
87,200
|
87,200
|
||||||||||||
Customer relationship
|
985,000
|
596,785
|
985,000
|
526,701
|
||||||||||||
Trade names
|
2,248,000
|
1,028,334
|
2,248,000
|
878,469
|
||||||||||||
Formula
|
438,000
|
324,850
|
438,000
|
281,050
|
||||||||||||
$
|
8,306,000
|
$
|
4,555,559
|
$
|
8,306,000
|
$
|
3,842,756
|
2014
|
$
|
712,803
|
||
2015
|
712,803
|
|||
2016
|
694,553
|
|||
2017
|
669,003
|
|||
2018
|
629,409
|
|||
Thereafter
|
331,870
|
|||
$
|
3,750,441
|
December 31, 2013
|
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
||||||||||||
Equities
|
$
|
1,006,169
|
$
|
98,213
|
$
|
(32,181)
|
$
|
1,072,201
|
||||||||
Mutual Funds
|
54,847
|
1,994
|
0
|
56,841
|
||||||||||||
Preferred Securities
|
464,585
|
12,960
|
(15,449)
|
462,096
|
||||||||||||
Corporate Bonds
|
973,333
|
1,329
|
(49,420)
|
925,242
|
||||||||||||
Total
|
$
|
2,498,934
|
$
|
114,496
|
$
|
(97,050)
|
$
|
2,516,380
|
December 31, 2012
|
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
||||||||||||
Equities
|
$
|
639,974
|
$
|
90,875
|
$
|
(5,190
|
)
|
$
|
725,659
|
|||||||
Corporate Bonds
|
1,135,064
|
16,212
|
(7,047
|
)
|
1,144,229
|
|||||||||||
Total
|
$
|
1,775,038
|
$
|
107,087
|
$
|
(12,237
|
)
|
$
|
1,869,888
|
Less Than 12 Months
|
12 Months or Greater
|
Total
|
||||||||||||||||||||||
December 31, 2013
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
Equities
|
$
|
213,222
|
$
|
(32,180
|
)
|
$
|
0
|
$
|
0
|
$
|
213,222
|
$
|
(32,180
|
)
|
||||||||||
Mutual Funds
|
0
|
0
|
0
|
0
|
0
|
0
|
||||||||||||||||||
Preferred Securities
|
224,125
|
(15,449
|
)
|
0
|
0
|
224,125
|
(15,449
|
)
|
||||||||||||||||
Corporate Bonds
|
615,986
|
(42,827
|
)
|
96,726
|
(6,593
|
)
|
712,712
|
(49,420
|
)
|
|||||||||||||||
$
|
1,053,333
|
$
|
(90,456
|
)
|
$
|
96,726
|
$
|
(6,593
|
)
|
$
|
1,150,059
|
$
|
(97,049
|
)
|
Less Than 12 Months
|
12 Months or Greater
|
Total
|
||||||||||||||||||||||
December 31, 2012
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
Equities
|
$
|
63,620
|
$
|
(3,745
|
)
|
$
|
21,910
|
$
|
(1,445
|
)
|
$
|
85,530
|
$
|
(5,190
|
)
|
|||||||||
Corporate Bonds
|
301,229
|
(2,721
|
)
|
193,930
|
(4,326
|
)
|
495,159
|
(7,047
|
)
|
|||||||||||||||
$
|
364,849
|
$
|
(6,466
|
)
|
$
|
215,840
|
$
|
(5,771
|
)
|
$
|
580,689
|
$
|
(12,237
|
)
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Finished goods
|
$
|
3,027,900
|
$
|
2,462,548
|
||||
Production supplies
|
2,690,097
|
2,599,668
|
||||||
Raw materials
|
1,181,011
|
876,970
|
||||||
Total inventories
|
$
|
6,899,008
|
$
|
5,939,186
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Land
|
$
|
1,856,370
|
$
|
1,178,160
|
||||
Buildings and improvements
|
14,587,022
|
11,904,919
|
||||||
Machinery and equipment
|
19,633,164
|
15,185,204
|
||||||
Vehicles
|
1,244,560
|
1,346,078
|
||||||
Office equipment
|
433,679
|
411,773
|
||||||
Construction in process
|
177,519
|
612,468
|
||||||
37,932,314
|
30,638,602
|
|||||||
Less accumulated depreciation
|
17,107,866
|
15,651,826
|
||||||
Total property and equipment
|
$
|
20,824,448
|
$
|
14,986,776
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Accrued payroll and payroll taxes
|
$
|
477,312
|
$
|
356,280
|
||||
Accrued property tax
|
306,608
|
302,573
|
||||||
Other
|
500,140
|
496,824
|
||||||
$
|
1,284,060
|
$
|
1,155,677
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Note payable to Private Bank in monthly installments of $42,222, plus variable interest rate, currently at 2.6677%, with a balloon payment for the remaining balance. Collateralized by substantially all assets of the Company. In May 2013, the Company refinanced this note under similar terms which extended the maturity date to May 31, 2018.
|
$
|
4,858,889
|
$
|
5,365,556
|
||||
Line of credit with Private Bank at variable interest rate, currently at 3.25%. The agreement has been extended with terms allowing borrowings up to $5 million. Collateralized by substantially all assets of the Company and matures on May 31, 2014.
|
0
|
0
|
||||||
Note payable to Private Bank in monthly installments of $27,778, plus variable interest rate, currently at 2.6677% with a balloon payment for the remaining balance, maturing on May 31, 2019, collateralized by substantially all assets of the Company
|
4,916,667
|
0
|
||||||
Notes payable to Ford Credit Corp. payable in monthly installments of $1,778.23 at 5.99%, due July 2015, secured by transportation equipment.
|
32,124
|
50,871
|
||||||
Note payable to Fletcher Jones of Chicago, Ltd LLC in monthly installments of $1,768.57 at 6.653%, due May 24, 2017, secured by transportation equipment.
|
66,334
|
82,499
|
||||||
Total notes payable
|
9,874,014
|
5,498,926
|
||||||
Less current maturities
|
875,002
|
542,981
|
||||||
Total long-term portion
|
$
|
8,999,012
|
$
|
4,955,945
|
For the Period Ended December 31,
|
||||
2014
|
$
|
875,002
|
||
2015
|
870,787
|
|||
2016
|
859,875
|
|||
2017
|
849,084
|
|||
2018
|
3,165,558
|
|||
Thereafter
|
3,253,708
|
|||
Total
|
$
|
9,874,014
|
2014
|
$
|
44,138
|
||
2015
|
45,461
|
|||
2016
|
46,825
|
|||
2017
|
48,229
|
|||
2018
|
49,676
|
|||
Total
|
$
|
234,329
|
For the Years Ended
|
||||||||
December 31,
|
||||||||
2013
|
2012
|
|||||||
Current:
|
||||||||
Federal
|
$
|
2,551,505
|
$
|
2,757,332
|
||||
State and local
|
554,174
|
882,640
|
||||||
Total current
|
3,105,679
|
3,639,972
|
||||||
Deferred
|
(238,804
|
)
|
(434,896)
|
|||||
Provision for income taxes
|
$
|
2,866,875
|
$
|
3,205,076
|
For the Years Ended
|
||||||||||||||||
December 31,
|
||||||||||||||||
2013
|
2012
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
Federal income tax expense computed at the statutory rate
|
$
|
2,666,223
|
34.0%
|
|
$
|
3,000,457
|
34.0%
|
|
||||||||
State and local tax expense, net
|
744,974
|
9.5%
|
|
838,363
|
9.5%
|
|
||||||||||
U.S. domestic manufacturers’ deduction & other permanent differences
|
(455,442
|
)
|
(5.8)%
|
|
(427,525)
|
(4.9)%
|
|
|||||||||
Change in tax estimate
|
(88,880
|
)
|
(1.1)%
|
|
(206,219)
|
(2.2)%
|
|
|||||||||
Provision for income taxes
|
$
|
2,866,875
|
36.6%
|
|
$
|
3,205,076
|
36.4%
|
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Non-current deferred tax assets (liabilities) arising from:
Temporary differences -
|
||||||||
Accumulated depreciation and amortization
|
||||||||
from purchase accounting adjustments
|
$
|
(2,896,058
|
)
|
$
|
(3,164,716
|
)
|
||
Capital loss carry-forwards
|
52,632
|
136,198
|
||||||
Total non-current net deferred tax liabilities
|
(2,843,426
|
)
|
(3,028,518
|
|||||
Current deferred tax assets arising from:
|
||||||||
Unrealized losses (gain) on investments
|
(7,589
|
)
|
(41,260
|
)
|
||||
Inventory
|
307,910
|
265,072
|
||||||
Allowance for doubtful accounts and discounts
|
21,750
|
10,875
|
||||||
Total current deferred tax assets
|
322,071
|
234,687
|
||||||
Net deferred tax liability
|
$
|
(2,521,355
|
)
|
$
|
(2,793,831
|
)
|
For the Years Ended
|
||||||||
December 31,
|
||||||||
2013
|
2012
|
|||||||
Interest
|
$
|
205,739
|
$
|
191,277
|
||||
Income taxes
|
$
|
4,362,991
|
$
|
3,413,687
|
● |
Quoted prices for similar assets or liabilities in active markets;
|
● |
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
● |
Inputs other than quoted prices that are observable for the asset or liability;
|
● |
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
Assets and Liabilities at Fair Value as of December 31, 2013
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Cash
|
$
|
3,306,608
|
$
|
0
|
$
|
0
|
$
|
3,306,608
|
||||||||
Certificate of Deposits
|
0
|
15,378
|
0
|
15,378
|
||||||||||||
Mutual Funds
|
56,841
|
0
|
0
|
56,841
|
||||||||||||
Stocks
|
1,072,201
|
0
|
0
|
1,072,201
|
||||||||||||
Preferred Securities
|
0
|
462,096
|
0
|
462,096
|
||||||||||||
Corporate Bonds
|
0
|
925,242
|
0
|
925,242
|
||||||||||||
Notes Payable
|
0
|
9,874,014
|
0
|
9,874,014
|
Assets and Liabilities as Fair Value as of December 31, 2012
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Cash
|
$
|
2,286,226
|
$
|
0
|
$
|
0
|
$
|
2,286,226
|
||||||||
Certificate of Deposits
|
0
|
439,982
|
0
|
439,982
|
||||||||||||
Stocks
|
725,670
|
0
|
0
|
725,670
|
||||||||||||
Corporate Bonds
|
0
|
1,144,229
|
0
|
1,144,229
|
||||||||||||
Notes Payable
|
0
|
5,498,926
|
0
|
5,498,926
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
● |
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 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 financial statements.
|
Name
|
Year
|
Salary
|
Bonus
|
All other Comp.
|
Total
|
||||||||||||
Julie Smolyansky, CEO and President(1)
|
2013
|
$ | 900,000 | $ | 115,000 | $ | 44,500 | $ | 1,059,500 | ||||||||
2012
|
$ | 890,903 | $ | 125,000 | $ | 14,280 | $ | 1,030,183 | |||||||||
(5) | |||||||||||||||||
Edward P. Smolyansky,
|
2013
|
$ | 1,000,000 | $ | 150,000 | $ | 38,500 | $ | 1,188,500 | ||||||||
CFO, Chief Accounting Officer, Treasurer, Chief
|
2012
|
$ | 928,403 | $ | 150,000 | $ | 31,280 | $ | 1,109,683 | ||||||||
Operating Officer and Secretary (2)
|
(6) | ||||||||||||||||
Valeriy Nikolenko, Vice President of Operations
|
2013
|
$ | 200,000 | $ | 50,000 | $ | 32,000 | $ | 282,000 | ||||||||
and Secretary (4)(8)
|
2012
|
$ | 153,800 | $ | 60,000 | $ | 29,210 | $ | 243,010 | ||||||||
(7) | |||||||||||||||||
(1)
|
The Board appointed Julie Smolyansky as the CEO, CFO, President and Treasurer of the Company on June 10, 2002. From September 21, 1998 until such appointments, she had been Director of Sales and Marketing of the Company. Since November 2004, Ms. Smolyansky has served solely as CEO and President.
|
(2)
|
The Board appointed Edward Smolyansky as the CFO, Chief Accounting Officer and Treasurer of the Company in November 2004.
|
(3)
|
The Company approves, on an annual basis, the payment to Ludmila Smolyansky of salary and bonus as other compensation for continuing advisory services to the Company and in light of her extensive experience. Ludmila Smolyansky devotes as much time as necessary to the business of the Company.
|
(4)
|
The Board appointed Valeriy Nikolenko as the Vice President of Operations and Secretary of the Company in December 1993.
|
(5)
|
Represents (i) the Company’s portion of the matching contributions to the Company’s 401(k) plan on behalf of the following named executive officer, Julie Smolyansky: $17,500 for 2013; (ii) $12,000 for health insurance premiums; and (iii) $15,000 related to personal usage of automobiles leased by the Company, which includes lease payments, insurance premiums and fuel.
|
(6)
|
Represents (i) the Company’s portion of the matching contributions to the Company’s 401(k) plan on behalf of the following named executive officer, Edward Smolyansky: $17,500 for 2013; (ii) $6,000 for health insurance premiums; and (iii) $15,000 related to personal usage of automobiles leased by the Company, which includes lease payments, insurance premiums and fuel.
|
(7)
|
Represents (i) the Company’s portion of the matching contributions to the Company’s 401(k) plan on behalf of the following named executive officer, Val Nikolenko: $10,000 for 2013; (ii) $12,000 for health insurance premiums; and (iii) $10,000 related to personal usage of automobiles leased by the Company, which includes lease payments, insurance premiums and fuel.
|
Name
|
Fees Earned or
Paid in Cash
|
All Other
Compensation
|
Total
|
|||||||||
Ludmila Smolyansky
|
$
|
408,000
|
(1) |
$
|
14,200
|
(2) |
$
|
422,300
|
||||
Pol Sikar
|
$
|
7,500
|
—
|
$
|
7,500
|
|||||||
Renzo Bernardi
|
$
|
7,500
|
—
|
$
|
7,500
|
|||||||
Gustavo Carlos Valle
|
—
|
—
|
—
|
|||||||||
Eugene Katz
|
$
|
—
|
—
|
$
|
—
|
|||||||
Paul Lee
|
$
|
4,500
|
—
|
$
|
4,500
|
|||||||
Jason Sher
|
4,500
|
—
|
4,500
|
(1)
|
Of the Fees Paid in Cash, $408,000 represents the annual fees paid to Ms. Smolyansky for her services as a consultant to the Company. Ms. Smolyansky did not receive any additional retainer fees or other meeting attendance fees in her capacity as a director.
|
(2)
|
Represents (i) the Company’s portion of the matching contributions to the Company’s 401(k) plan on behalf of Ludmila Smolyansky: $8,200 for 2013; and (ii) $6,000 for health insurance premiums.
|
(1)
|
With the exception of Gustavo Carlos Valle and Danone Foods, Inc., the address for all Directors and shareholders listed in this table is 6431 Oakton St., Morton Grove, IL 60053. The address of Gustavo Carlos Valle and Danone Foods, Inc. is 100 Hillside Avenue, White Plains, NY 10603-2861.
|
(2)
|
Based upon 16,346,017 shares of Common Stock outstanding as of March 28, 2014.
|
(3)
|
A director or officer of the Company.
|
(4)
|
Mr. Valle is also an officer of the Dannon Company, Inc., which is an affiliate of Danone Foods, Inc.
|
(5)
|
Mr. Gabelli directly or indirectly controls or acts as the chief investment officer of Gabelli funds, LLC, GAMCO Asset Management, Inc. and Teton Advisors, Inc. The 831,805 shares of the Company's common stock that Mr. Gabelli may be deemed to beneficially own, include (i) 5,500 shares held directly by Mr. Gabelli, (ii) 326 shares held by Gabelli Funds, LLC, (iii) 286,305 shares held by GAMCO Asset Management, Inc., and (iv) 213,000 shares held by Teton Advisors, Inc.
|
(6)
|
Includes 7,369,584 shares held by the Ludmila Smolyansky Trust 2/1/05, of which Ms. Smolyansky is the trustee.
|
(7)
|
Includes 5,000 shares held by Ms. Smolyansky on behalf of minor children.
|
Plan category
|
(a)
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
(b)
Weighted-average exercise price of outstanding options, warrants and rights
|
(c)
Number of securities remaining available for
future issuance under equity compensation plans (excluding securities reflected in column (a))
|
Equity compensation plans approved by security holders
|
0
|
$0
|
940,000
|
Equity compensation plans not approved by security holders
|
0
|
$0
|
—
|
Total
|
0
|
$0
|
—
|
3.1
|
Amended and Restated Bylaws (incorporated by reference to Exhibit No. 3.5 of Lifeway’s Current Report on Form 8-K dated and filed on December 10, 2002 (File No. 000-17363)).
|
3.2
|
Articles of Incorporation, as amended and currently in effect.
|
4.1
|
Revolving Note dated February 6, 2009 (incorporated by reference to Exhibit 10.2 on Lifeway’s Current Report on Form 8-K dated February 6, 2009 and filed on February 13, 2009 (File No. 000- 17363)).
|
4.2
|
Term Note dated February 6, 2009 (incorporated by reference to Exhibit 10.3 on Lifeway’s Current Report on Form 8-K dated February 6, 2009 and filed on February 13, 2009 (File No. 000-17363)).
|
4.3
|
Promissory Note dated September 4, 2013 (incorporated by reference to Exhibit 4.1 of Lifeway’s Current Report on Form 8-K dated September 4, 2013 and filed on September 20, 2013 (File No. 000-17363)).
|
10.1
|
Lifeway Foods, Inc. Consulting and Services Compensation Plan, dated June 5, 1995 (incorporated by reference to Lifeway’s Registration Statement on Form S-8, (File No. 333-93306)).
|
10.2
|
Stock Purchase Agreement dated October 1, 1999 by and among Danone Foods, Inc., Lifeway Foods, Inc., Michael Smolyansky and certain other parties (incorporated by reference to Exhibit 10.10 of Lifeway’s Current Report on Form 8-K dated October 1, 1999, and filed October 12, 1999 (File No. 000-17363)).
|
10.3
|
Stockholders’ Agreement dated October 1, 1999 by and among Danone Foods, Inc., Lifeway Foods, Inc., Michael Smolyansky and certain other parties (incorporated by reference to Exhibit 10.11 of Lifeway’s Current Report on Form 8-K dated October 1, 1999, and filed October 12, 1999 (File No. 000-17363)).
|
10.4
|
Letter Agreement dated December 24, 1999 (amending original Stockholders’ Agreement with Danone Foods, Inc.) (incorporated by reference to Exhibit 10.12 of Lifeway’s Current Report on Form 8-K dated December 24, 1999, and filed January 12, 2000 (File No. 000-17363)).
|
10.5
|
Employment Agreement, dated September 12, 2002, between Lifeway Foods, Inc. and Julie Smolyansky (incorporated by reference to Exhibit 10.14 of Amendment No. 2 filed April 30, 2003 to Lifeway’s Quarterly Report on Form 10- QSB/A for the quarter ended September 30, 2002 (File No. 000-17363)).
|
10.6
|
Loan and Security Agreement dated February 6, 2009 by and among Lifeway Foods, Inc., Fresh Made, Inc., LFI Enterprises, Inc., Helios Nutrition Limited, Pride Main Street Dairy, LLC and Starfruit, LLC and The Private Bank and Trust Company (incorporated by reference to Exhibit 10.1 of Lifeway’s Current Report on Form 8-K dated February 6, 2009 and filed on February 13, 2009 (File No. 000- 17363)).
|
10.7
|
First Modification Agreement dated August 13, 2009 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC (incorporated by reference to Exhibit 10.15 of Lifeway’s Annual Report on Form 10-K dated December 31, 2009 and filed on March 31, 2010 (File No. 000- 17363)).
|
10.8
|
Second Modification Agreement dated November 12, 2009 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC (incorporated by reference to Exhibit 10.16 of Lifeway’s Annual Report on Form 10-K dated December 31, 2009 and filed on March 31, 2010 (File No. 000- 17363)).
|
10.9
|
Third Modification Agreement dated February 6, 2010 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC (incorporated by reference to Exhibit 10.17 of Lifeway’s Annual Report on Form 10-K dated December 31, 2009 and filed on March 31, 2010 (File No. 000- 17363)).
|
10.10
|
Fourth Modification Agreement dated March 31, 2011 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC (incorporated by reference to Exhibit 10.10 of Lifeway’s Annual Report on Form 10-K dated December 31, 2010 and filed on March 31, 2011 (File No. 000- 17363)).
|
10.11
|
Fifth Modification Agreement dated June 20, 2011 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC. (incorporated by reference to Exhibit 10.11 of Lifeway’s Annual Report on Form 10-K dated December 31, 2012 and filed on April 1, 2013 (File No. 000-17363)).
|
10.12
|
Sixth Modification Agreement dated June 13, 2012, effective as of May 31, 2012, by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC. (incorporated by reference to Exhibit 10.12 of Lifeway’s Annual Report on Form 10-K dated December 31, 2012 and filed on April 1, 2013 (File No. 000-17363)).
|
10.13
|
Seventh Modification to Loan and Security Agreement dated as of May 14, 2013, by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC, and Starfruit, LLC (incorporated by reference to Exhibit 10.1 of Lifeway’s Quarterly Report on Form 10-Q dated March 31, 2013 and filed on May 15, 2013 (File No. 000-17363)).
|
10.14
|
Eighth Modification to Loan and Security Agreement dated as of September 4, 2013, by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC, Starfruit, LLC and Lifeway Wisconsin, Inc. (incorporated by reference to Exhibit 10.4 of Lifeway’s Quarterly Report on Form 10-Q dated September 30, 2013 and filed on November 14, 2013 (File No. 000-17363)).
|
10.15
|
Asset Purchase Agreement dated as of May 14, 2013, by and between Charles A. Stanziale, Jr., in his capacity as Chapter 7 Trustee, by and on behalf of the Estate of Golden Guernsey Dairy, LLC and Lifeway Foods, Inc. (incorporated by reference to Exhibit 10.1 of Lifeway’s Current Report on Form 8-K dated May 14, 2013 and filed on May 20, 2013 (File No. 000-17363)).
|
10.16
|
Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of September 4, 2013, by and between Lifeway Foods, Inc. and The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.1 of Lifeway’s Current Report on Form 8-K dated September 4, 2013 and filed on September 20, 2013 (File No. 000-17363)).
|
10.17
|
Amendment to Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of September 4, 2013, by and between Lifeway Foods, Inc. and The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.5 of Lifeway’s Quarterly Report on Form 10-Q dated September 30, 2013 and filed on November 14, 2013 (File No. 000-17363)).
|
10.18
|
Assignment of Rents and Leases dated as of September 4, 2013 executed by Lifeway Wisconsin, Inc. to and for the benefit of The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.2 of Lifeway’s Current Report on Form 8-K dated September 4, 2013 and filed on September 20, 2013 (File No. 000-17363)).
|
10.19
|
Environmental Indemnity Agreement dated as of September 4, 2013, executed by Lifeway Foods, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC, Starfruit, LLC and Lifeway Wisconsin, Inc. to and for the benefit of The PrivateBank and Trust Company. (incorporated by reference to Exhibit 10.3 of Lifeway’s Current Report on Form 8-K dated September 4, 2013 and filed on September 20, 2013 (File No. 000-17363)).
|
14
|
Code of Conduct and Ethics
|
21
|
List of Subsidiaries of the Registrant
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Julie Smolyansky
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Edward P. Smolyansky
|
32.1
|
Section 1350 Certification of Julie Smolyansky
|
32.2
|
Section 1350 Certification of Edward P. Smolyansky
|
101
|
Interactive Data Files
|
LIFEWAY FOODS, INC.
|
|||
Date: April 1, 2014
|
By:
|
/s/ Julie Smolyansky
|
|
Julie Smolyansky
|
|||
Chief Executive Officer, President, and Director
|
Date: April 1, 2014
|
By:
|
/s/ Edward P. Smolyansky
|
|
Edward P. Smolyansky
|
|||
Chief Financial and Accounting Officer, Treasurer, Chief Operating Officer and Secretary
|
Date: April 1, 2014
|
/s/ Julie Smolyansky
|
||
Julie Smolyansky
|
|||
Chief Executive Officer, President, and Director
|
Date: April 1, 2014
|
/s/ Ludmila Smolyansky
|
||
Ludmila Smolyansky
|
|||
Chairperson of the Board of Directors
|
Date: April 1, 2014
|
/s/ Pol Sikar
|
||
Pol Sikar
|
|||
Director
|
Date:
|
|||
Gustavo Carlos Valle
|
|||
Director
|
Date: April 1, 2014
|
/s/ Renzo Bernardi
|
||
Renzo Bernardi
|
|||
Director
|
Date: April 1, 2014
|
/s/ Paul Lee
|
||
Paul Lee
|
|||
Director
|
|||
|
|||
Date: April 1, 2014
|
/s/ Jason Scher
|
||
Jason Scher
|
|||
Director
|
3.1
|
Amended and Restated Bylaws (incorporated by reference to Exhibit No. 3.5 of Lifeway’s Current Report on Form 8-K dated and filed on December 10, 2002 (File No. 000-17363)).
|
3.2
|
Articles of Incorporation, as amended and currently in effect.
|
4.1
|
Revolving Note dated February 6, 2009 (incorporated by reference to Exhibit 10.2 on Lifeway’s Current Report on Form 8-K dated February 6, 2009 and filed on February 13, 2009 (File No. 000- 17363)).
|
4.2
|
Term Note dated February 6, 2009 (incorporated by reference to Exhibit 10.3 on Lifeway’s Current Report on Form 8-K dated February 6, 2009 and filed on February 13, 2009 (File No. 000-17363)).
|
4.3
|
Promissory Note dated September 4, 2013 (incorporated by reference to Exhibit 4.1 of Lifeway’s Current Report on Form 8-K dated September 4, 2013 and filed on September 20, 2013 (File No. 000-17363)).
|
10.1
|
Lifeway Foods, Inc. Consulting and Services Compensation Plan, dated June 5, 1995 (incorporated by reference to Lifeway’s Registration Statement on Form S-8, (File No. 333-93306)).
|
10.2
|
Stock Purchase Agreement dated October 1, 1999 by and among Danone Foods, Inc., Lifeway Foods, Inc., Michael Smolyansky and certain other parties (incorporated by reference to Exhibit 10.10 of Lifeway’s Current Report on Form 8-K dated October 1, 1999, and filed October 12, 1999 (File No. 000-17363)).
|
10.3
|
Stockholders’ Agreement dated October 1, 1999 by and among Danone Foods, Inc., Lifeway Foods, Inc., Michael Smolyansky and certain other parties (incorporated by reference to Exhibit 10.11 of Lifeway’s Current Report on Form 8-K dated October 1, 1999, and filed October 12, 1999 (File No. 000-17363)).
|
10.4
|
Letter Agreement dated December 24, 1999 (amending original Stockholders’ Agreement with Danone Foods, Inc.) (incorporated by reference to Exhibit 10.12 of Lifeway’s Current Report on Form 8-K dated December 24, 1999, and filed January 12, 2000 (File No. 000-17363)).
|
10.5
|
Employment Agreement, dated September 12, 2002, between Lifeway Foods, Inc. and Julie Smolyansky (incorporated by reference to Exhibit 10.14 of Amendment No. 2 filed April 30, 2003 to Lifeway’s Quarterly Report on Form 10- QSB/A for the quarter ended September 30, 2002 (File No. 000-17363)).
|
10.6
|
Loan and Security Agreement dated February 6, 2009 by and among Lifeway Foods, Inc., Fresh Made, Inc., LFI Enterprises, Inc., Helios Nutrition Limited, Pride Main Street Dairy, LLC and Starfruit, LLC and The Private Bank and Trust Company (incorporated by reference to Exhibit 10.1 of Lifeway’s Current Report on Form 8-K dated February 6, 2009 and filed on February 13, 2009 (File No. 000- 17363)).
|
10.7
|
First Modification Agreement dated August 13, 2009 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC (incorporated by reference to Exhibit 10.15 of Lifeway’s Annual Report on Form 10-K dated December 31, 2009 and filed on March 31, 2010 (File No. 000- 17363)).
|
10.8
|
Second Modification Agreement dated November 12, 2009 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC (incorporated by reference to Exhibit 10.16 of Lifeway’s Annual Report on Form 10-K dated December 31, 2009 and filed on March 31, 2010 (File No. 000- 17363)).
|
10.9
|
Third Modification Agreement dated February 6, 2010 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC (incorporated by reference to Exhibit 10.17 of Lifeway’s Annual Report on Form 10-K dated December 31, 2009 and filed on March 31, 2010 (File No. 000- 17363)).
|
10.10
|
Fourth Modification Agreement dated March 31, 2011 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC (incorporated by reference to Exhibit 10.10 of Lifeway’s Annual Report on Form 10-K dated December 31, 2010 and filed on March 31, 2011 (File No. 000- 17363)).
|
10.11
|
Fifth Modification Agreement dated June 20, 2011 by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC. (incorporated by reference to Exhibit 10.11 of Lifeway’s Annual Report on Form 10-K dated December 31, 2012 and filed on April 1, 2013 (File No. 000-17363)).
|
10.12
|
Sixth Modification Agreement dated June 13, 2012, effective as of May 31, 2012, by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC and Starfruit, LLC. (incorporated by reference to Exhibit 10.12 of Lifeway’s Annual Report on Form 10-K dated December 31, 2012 and filed on April 1, 2013 (File No. 000-17363)).
|
10.13
|
Seventh Modification to Loan and Security Agreement dated as of May 14, 2013, by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC, and Starfruit, LLC (incorporated by reference to Exhibit 10.1 of Lifeway’s Quarterly Report on Form 10-Q dated March 31, 2013 and filed on May 15, 2013 (File No. 000-17363)).
|
10.14
|
Eighth Modification to Loan and Security Agreement dated as of September 4, 2013, by and among The PrivateBank and Trust Company, Lifeway Foods, Inc., Fresh Made, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC, Starfruit, LLC and Lifeway Wisconsin, Inc. (incorporated by reference to Exhibit 10.4 of Lifeway’s Quarterly Report on Form 10-Q dated September 30, 2013 and filed on November 14, 2013 (File No. 000-17363)).
|
10.15
|
Asset Purchase Agreement dated as of May 14, 2013, by and between Charles A. Stanziale, Jr., in his capacity as Chapter 7 Trustee, by and on behalf of the Estate of Golden Guernsey Dairy, LLC and Lifeway Foods, Inc. (incorporated by reference to Exhibit 10.1 of Lifeway’s Current Report on Form 8-K dated May 14, 2013 and filed on May 20, 2013 (File No. 000-17363)).
|
10.16
|
Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of September 4, 2013, by and between Lifeway Foods, Inc. and The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.1 of Lifeway’s Current Report on Form 8-K dated September 4, 2013 and filed on September 20, 2013 (File No. 000-17363)).
|
10.17
|
Amendment to Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated as of September 4, 2013, by and between Lifeway Foods, Inc. and The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.5 of Lifeway’s Quarterly Report on Form 10-Q dated September 30, 2013 and filed on November 14, 2013 (File No. 000-17363)).
|
10.18
|
Assignment of Rents and Leases dated as of September 4, 2013 executed by Lifeway Wisconsin, Inc. to and for the benefit of The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.2 of Lifeway’s Current Report on Form 8-K dated September 4, 2013 and filed on September 20, 2013 (File No. 000-17363)).
|
10.19
|
Environmental Indemnity Agreement dated as of September 4, 2013, executed by Lifeway Foods, Inc., Helios Nutrition Limited, Pride of Main Street Dairy, LLC, Starfruit, LLC and Lifeway Wisconsin, Inc. to and for the benefit of The PrivateBank and Trust Company. (incorporated by reference to Exhibit 10.3 of Lifeway’s Current Report on Form 8-K dated September 4, 2013 and filed on September 20, 2013 (File No. 000-17363)).
|
14
|
Code of Conduct and Ethics
|
21
|
List of Subsidiaries of the Registrant
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Julie Smolyansky
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Edward P. Smolyansky
|
32.1
|
Section 1350 Certification of Julie Smolyansky
|
32.2
|
Section 1350 Certification of Edward P. Smolyansky
|
101
|
Interactive Data Files
|
a.
|
When amendment effects a name change, insert the new corporate name below. Use Page 2 for all other amendments.
|
Dated:
|
June 25
|
, 2013
|
Lifeway Foods, Inc.
|
|
(Month & Day)
|
(Year)
|
(Exact Name of Corporation at date of execution)
|
||
/s/ Edward Smolyansky
|
||||
(Any Authorized Officer’s Signature)
|
||||
Edward Smolyansky
|
||||
Chief Financial and Accounting Officer, Treasurer, Chief Operating Officer and Secretary
|
||||
(Type or Print Name and Title)
|
£
|
By a majority of the incorporators, provided no directors were named in the articles of Incorporation and no directors have been elected;
|
|
£
|
By a majority of the board of directors, in accordance with Section 10.10, the corporation having Issued no shares as of the time of adoption of this amendment;
|
|
£
|
By a majority of the board of directors, in accordance with Section 10.16, shares having been issued but shareholder action not being required for the adoption of the amendment;
|
|
£
|
By the shareholders, in accordance with Section 10.20, a resolution of the board of directors having been duly adopted and submitted to the shareholders. At a meeting of shareholders, not less than the minimum number of votes required by statute and by the articles of incorporation were voted in favor of the amendment;
|
|
S
|
By the shareholders, In accordance with Sections 10.20 and 7.10, a resolution of the board of directors haling been duty adopted and submitted to the shareholders. A consent in writing has been signed by shareholders having not less than the minimum number of votes required by statute and by the articles of incorporation. Shareholders who have not consented in writing have been given notice in accordance with Section 7.10:
|
|
£
|
By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent In writing has been signed by all the shareholders entitled to vote on this amendment
|
|
a.
|
When amendment effects a name change, insert the new corporate name below. Use Page 2 for all other amendments.
|
|
Article I: The name of the corporation is:
|
b.
|
(if amendment affects the corporate purpose, the amended purpose is required to be set forth in its entirety. If there is not sufficient space to do so, add one or more sheets of this size.)
|
4.
|
The manner. if not set forth in Article 3b, in which any exchange, reclassification or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, provided for or affected by this amendment, is as follows: (
If not applicable, insert “No change”
)
|
No change.
|
5.
|
(a) The manner, if not set forth in Article 3b, in which said amendment effects a change in the amount of paid-in capital (Paid-in capital replaces the terms Stated Capital and Paid-in Surplus and is equal to the total of these accounts) is as follows: (
If not applicable, insert “No change
)
|
Before Amendment
|
After Amendment
|
|||||
Paid-in Capital
|
$ 6,186,426 | $ 6,186,426 |
6.
|
The undersigned corporation has cause these articles to be signed by a duly authorized officer who affirms, under penalties of perjury, that the facts stated herein are true.
|
“The Company and each of its directors, officers and employees are expected to comply with all laws that apply to the Company, its personnel and its and their activities, both in letter and spirit, to adhere to the highest standards of ethical conduct and to avoid even the appearance of improper conduct.” |
INTRODUCTION
|
4
|
ANALYTIC FRAMEWORK
|
4
|
CONDUCT AS AN EMPLOYEE
|
5
|
Living Company Values
|
5
|
Avoiding Conflicts of Interest
|
6
|
Working in a Positive Environment
|
7
|
Safeguarding Company Information and Property
|
8
|
Compliance with Law and Reporting with Integrity
|
9
|
CONDUCT WITH OTHER EMPLOYEES
|
11
|
Honoring the Individual
|
11
|
Inviting Full Participation
|
11
|
Respecting Each Other’s Privacy
|
11
|
Our Obligation
|
11
|
CONDUCT WITH CUSTOMERS AND COMPETITORS
|
12
|
Providing Quality Products and Services
|
12
|
Seeking Business Openly and Honestly
|
12
|
Safeguarding the Property of Others
|
13
|
Complying with Antitrust Laws
|
13
|
CONDUCT WITH SUPPLIERS
|
13
|
Seeking Long-Term Relationships
|
13
|
Avoiding Influence by Gifts
|
14
|
CONDUCT WITH OTHERS
|
14
|
Avoiding Political Contributions
|
14
|
Payments to Government Personnel
|
15
|
Complying with Antibribery Laws
|
15
|
Health, Safety and Environmental Protection
|
16
|
Requiring Ethical Behavior of Outside Consultants, Representatives and Agents
|
16
|
Complying with Antiboycott Laws
|
16
|
Complying with Export Control Laws
|
16
|
Complying with Insider Trading Laws
|
16
|
Memberships
|
17
|
COMPLIANCE PROGRAM
|
17
|
The Audit Committee
|
17
|
Managers and Supervisors
|
18
|
All Employees, Directors and Officers
|
18
|
Reporting Procedures
|
18
|
Investigations and Employee Protection
|
19
|
Disciplinary Action
|
20
|
WAIVERS AND AMENDMENTS
|
20
|
CODE OF ETHICS FOR CEO AND SENIOR FINANCIAL OFFICERS
|
21
|
EFFECTIVE DATE
|
21
|
●
|
Do I have all of the important facts
? In order to reach the right solutions, you must be as fully informed as possible.
|
●
|
What specifically am I doing or being asked to do
? This will enable you to focus on the specific question that you face and the alternatives that you have.
|
●
|
Is this conduct legal
? When in doubt, consult counsel for the Company.
|
●
|
Does this conduct comply with Company policies and procedures
?
|
●
|
Is this conduct fair or does it seem unethical or improper
? Use your judgment and common sense; if something seems wrong, it probably is.
|
●
|
What is my responsibility
? In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and discuss the situation.
|
●
|
Did I ask for help from an appropriate source
?
|
●
|
Did I discuss the problem with my supervisor or manager
? In many cases, your supervisor or manager will be more knowledgeable about the situation, and will appreciate being brought into the decision-making process. Remember that it is the responsibility of your supervisor or manager to help solve problems.
|
●
|
Did I seek help from Company resources
? In cases where it may not be appropriate to discuss a situation with your supervisor or manager or where you do not feel comfortable approaching your supervisor or manager, discuss it with a member of the management team. If that also is not appropriate, use the other resources described below as a means for raising your concerns.
|
●
|
If my conduct were videotaped and broadcast on television, would I still feel good about myself
?
|
●
|
You may report suspected ethical violations in confidence and without fear of retaliation
. If your situation requires that your identity be kept secret, your anonymity will be protected to the extent possible, consistent with applicable law and policy. The Company does not permit retaliation of any kind against employees for good faith reports of ethical violations.
|
●
|
Always ask first, act later
. If you are unsure of what to do in any situation, seek guidance
before you act
.
|
●
|
Act responsibly and in a manner that reflects favorably upon the Company as a whole and us individually.
|
●
|
Carry out our assignments guided by the principles set forth in this Code and other Company policies and procedures.
|
●
|
Endeavor to maintain a workplace environment that does not create pressures that would encourage any departure from the principles and standards set forth in this Code.
|
●
|
Endeavor to provide educational materials, including this Code, so that all of us are informed of the ethical, legal and other standards applicable to our conduct.
|
●
|
Endeavor to provide an organizational structure and reporting channels through which we are able to report suspected violations of this Code without fear of reprisal.
|
●
|
Keep reports about suspected violations that are made in good faith confidential, except where the law may require otherwise.
|
●
|
Accepts a gift (other than a de minimis gift permitted as described elsewhere herein) or receives personal discounts or other benefits as a result of the employee’s position with the Company, from a current or potential customer, supplier or competitor.
|
●
|
Owns a substantial financial interest in or serves in a business capacity with another enterprise that does or wishes to do business with, or is a competitor of, the Company (not including routine investments in publicly traded companies and non-material passive investments in other companies).
|
●
|
Serves as an intermediary for the benefit of a third party in transactions involving the Company.
|
●
|
Uses confidential or proprietary information of the Company or its suppliers or customers for personal benefit or benefit of another person.
|
●
|
Uses Company funds or assets for personal benefit or benefit of another person (not including incidental personal use that does not interfere with use by the Company and does not impact the Company or its business).
|
●
|
Conducts business for another enterprise during normal working hours.
|
●
|
Simultaneously serves or works for or provides consulting services to a competitor, customer or supplier.
|
●
|
Provide a healthy and safe work environment that is conducive to conducting business and allows us to exercise self-initiative, innovative thinking and full participation through self-directed teams and other means.
|
●
|
Encourage us to act and lead with passion, energy, intelligence and respect for others, to follow safety and health rules and practices and to report to the appropriate Company authority all accidents, injuries, and unsafe equipment, practices and conditions. See COMPLIANCE PROGRAM – Reporting Procedures.
|
●
|
Provide for open, timely, interdependent communications that help achieve organizational goals, share information, increase understanding and participation in the decision-making process, enhance pride in the Company and provide recognition for work-related successes.
|
●
|
Provide a work environment that is not hostile or offensive and that is free from illegal discrimination or intimidation or harassment of any person for any reason.
|
●
|
Unwelcome sex-based conduct that is so severe and pervasive that it creates an intimidating, hostile or offensive work environment (for example, unwelcome sexual advances, requests for sexual favors, unsolicited physical contact, propositions, unwelcome flirtations, or offensive verbal, visual or physical conduct of a sexual nature such as suggestive or lewd remarks, unwanted hugs, touches or kisses, or graphic or visual displays such as posters, pin-ups, or electronic pictures, video clips, or e-mail messages).
|
●
|
Sex-based conduct by someone’s supervisor or manager that tangibly affects the employee’s job (for example, affects discipline, rejection for promotion, or loss of pay or benefits).
|
●
|
Aspire to develop a winning strategy, build a great management team, inspire the best from others, create a flexible and responsive enterprise, and act and live with the utmost integrity and professional dignity.
|
●
|
Report to work in condition to perform our duties, free from the influence of illegal drugs or alcohol.
|
●
|
Adhere to all laws and Company policies and practices related to workplace safety.
|
●
|
Use of illegal drugs or alcohol in the workplace.
|
●
|
Violence or threatening or intimidating behavior.
|
●
|
Use of Company-provided email and Internet access for pornographic, harassing, abusive or offensive purposes, or for personal purposes that are substantial.
|
●
|
Harassment or intentional insult of any form.
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Illegal discrimination, including discrimination as to race, color, religion, gender, national origin, age, sexual orientation, veteran status or physical or mental disability.
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Each of us must safeguard all passwords and identification codes to prevent unauthorized access to Company computerized data.
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The reproduction of software licensed to or developed by the Company for personal use is prohibited.
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We must not use Company information, or our position with the Company, for improper gain by us or our related parties, or take for ourselves personally or our related parties opportunities that are discovered through the use of Company property or information because of our position with the Company.
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Whenever we cease to be employed by or associated with Company for any reason, we must not copy or take with us any Company confidential or proprietary information and we must provide the Company with any passwords necessary to access computer files.
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Company equipment must not be used for non-Company activities (not including incidental personal use that does not interfere with use by the Company and does not impact the Company or its business).
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Each of us must seek to ensure that Company financial, accounting and other books, reports and records accurately and fairly reflect the transactions of the Company in reasonable detail and in accordance with the law and the Company’s system of internal controls.
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The taking of any action to fraudulently influence, coerce, manipulate or mislead an auditor during an audit for the purpose of rendering the financial statements materially misleading is prohibited.
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The execution of Company transactions must only be undertaken in accordance with management’s general or specific authorizations and administrative and accounting controls.
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The taking of any action to circumvent the Company’s system of internal controls is prohibited.
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The authorization of payment knowing that any part of the payment will be used for any purpose other than that described in documents supporting the payment is prohibited. Of course if we incur legitimate expenses in connection with Company business, we will be reimbursed upon the filing of completed and accurately documented expense reports.
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The destruction, alteration or concealment of a document with the intent to impede an investigation, or the tampering with or destruction of a document with the intent to impair its availability in an official proceeding, is prohibited.
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The establishment or maintenance of unrecorded or “off the books” funds or assets for any purpose is prohibited.
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Report only the true and actual number of hours worked.
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Record all Company funds and assets on the books of the Company at all times.
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Retain Company records according to Company record retention policies and procedures.
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Respect the privacy of each of us.
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Encourage employees to have interests outside of the workplace.
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Not interfere in employees’ personal lives off the job unless their conduct impairs their work performance or adversely affects the Company.
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Bribes, kickbacks and every other form of improper payment, direct or indirect, to any representative of any government, labor union, customer or supplier in order to obtain a contract, commercial benefit or government action.
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Acceptance of any such payment from anyone.
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Taking unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other intentional unfair-dealing practice.
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Offering existing or potential commercial customers gifts of more than nominal value ($100 or less), unless the gift has been previously approved by Lifeway’s Audit Committee after review with counsel for the Company. Gifts of less than $100 in value may also be improper under some circumstances, and the Company expects employees to use their good judgment in deciding whether and when to offer or accept such gifts. Gifts or entertainment in any form that would likely result in a feeling or expectation of personal obligation should not be extended or accepted. Marketing-sponsored and similar events are permitted up to expenditure limits pre-approved by the Chief Executive Officer.
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Theft of proprietary information, possession of proprietary information (including trade secrets) obtained without the owner’s consent, or inducement of disclosure of any of such information by past or present employees of other companies.
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Strive to build long-term relationships with Company suppliers and award business based on their ability to meet Company requirements for cost, quality and delivery.
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Provide the same information and instructions to each competing supplier for a proposed purchase.
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Protect all proprietary data that our actual or potential suppliers provide to the Company as reflected in agreements with them.
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Avoid, and not permit our related parties to have, any significant outside business or financial interests in any Company supplier, unless we have the prior express written approval of appropriate Company authority.
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Items of nominal value ($100 or less), or if the gift has been previously approved by Lifeway’s Audit Committee after review with counsel for the Company.
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Unsolicited promotional materials of a general advertising nature, such as imprinted pencils, memo pads and calendars.
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Presentations of a ceremonial nature in keeping with national custom, or an occasional meal, promotional event or entertainment (such as theatrical performances or sporting or cultural events) in the normal course of business relations, so long as what is accepted is not illegal, is consistent with usual and customary business practices, does not compromise or appear to compromise the recipient’s impartiality, places the recipient under no obligation for a “quid pro quo” or agreement to do anything in return, is not a cash gift, is not unsavory or sexually oriented and does not otherwise violate our commitment to mutual respect, and will not embarrass the Company or any of us if disclosed publicly. For example, an occasional meal with a business partner, or tickets to ordinary theater, sports or other cultural events are generally acceptable. If you have any doubts about the appropriateness of a gift or entertainment, check with counsel for the Company.
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Use of Company funds or assets for any unlawful purpose or to influence others through bribes.
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Rewards, gifts or favors bestowed or promised with the view of perverting the judgment or corrupting the conduct of a person in a position of trust.
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Offering or accepting properly recorded business meals, entertainment or token gifts intended and understood as simple courtesies meant to foster understanding and communication with suppliers, customers and public officials.
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Token tips or minor payments to governmental, institutional, vendor or customer service personnel that:
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Conduct its activities responsibly and in a manner designed to prevent accidents and pollution, and to protect the health and safety of our employees, vendors, customers and the public.
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Continually improve health, safety and environmental protection, to integrate applicable health, safety and environmental considerations into business decisions and planning activities and to design and implement policies and procedures that provide reasonable assurance that these principles are implemented.
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Disclose any inside information to any outside person or group until the information has been released to the public.
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Disclose inside information to any other employee except on a need to know basis.
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Take any economic or personal advantage of any inside information, such as buying or selling stock or other securities of the Company or of any other company to which the inside information may pertain.
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Use non-public information for personal financial benefit or to “tip” others who might make an investment decision on the basis of inside information.
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Has direct oversight responsibility with respect to the adoption, improvement and implementation of this Code, and its duties include monitoring activities of the Company with respect to:
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Ø
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distributing and periodically updating this Code;
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Ø
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educating employees about their responsibilities under this Code;
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Ø
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establishing and periodically updating procedures for reporting violations and responding to suggested changes and inquiries;
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Ø
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identifying managers and supervisors who will have the responsibility for ongoing compliance training for employees; and
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Ø
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monitoring the training conducted by such managers and supervisors.
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Is comprised of “outside” directors who are not associated with management of the Company and who are “independent” within the meaning of applicable laws and rules.
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Has established procedures for the confidential, anonymous submission of reports of actual or potential violations of this Code or other Company policies or procedures, including confidential anonymous submission by employees of concerns regarding questionable accounting or auditing matters, and confidential anonymous submission of suggested changes to this Code or other Company policies or procedures. Those procedures are described under “ – Reporting Procedures” below.
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Demonstrate their personal commitment to this Code and to act and manage their direct reports accordingly.
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Maintain a workplace environment that complies with this Code.
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Use diligence and discretion, and consider such employee’s ethics and integrity, before appointing any employee to any position of authority and responsibility.
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They have read and understand this Code.
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They have personally complied with this Code.
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They have monitored the acts or omissions of their direct reports for compliance with this Code.
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They have brought this Code to the attention of everyone under their supervision whose act or omission could reasonably be expected to contribute to a violation of this Code.
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They know of no violations of the Code (or have described any known violations).
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They have created and maintained a record as to compliance training.
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To any one of the following individuals at counsel for the Company:
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To any one of the following individuals on the Audit Committee:
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To provide information, cause information to be provided or otherwise assist in an investigation regarding any conduct that the employee reasonably and in good faith believes constitutes a violation of law, or any provision of law relating to fraud against stockholders, when the information or assistance is provided to or the investigation is conducted by (i) a regulatory or law enforcement agency, (ii) any member of Congress or any committee of Congress or (iii) a person with supervisory authority over the employee (or such other person working for the Company who has the authority to investigate, discover or terminate misconduct).
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To file, cause to be filed, testify, participate in or otherwise assist in a proceeding filed or about to be filed (with any knowledge of the Company) relating thereto.
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To report in good faith any actual or potential violation of this Code or Company policies or procedures.
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Forfeiture (including a requirement to return or pay over to the Company) of previously vested or paid equity, bonus or incentive compensation or realized gains on such equity compensation.
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Forfeiture or loss of unvested, unearned or earned but unpaid equity, bonus or incentive compensation.
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Non-receipt of or exclusion from future salary or wage increases or future awards of equity, bonus or incentive compensation.
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Elimination of or reduction in duties, responsibilities and authority, and concomitant reduction in salary or wages.
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Receipt of a letter of reprimand or censure, with a copy filed in the personnel file.
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Reassignment to a different work location, in the same or a different facility.
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Reimbursement of the Company and third parties for all losses, damages, expenses or penalties incurred by the Company or third parties.
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Suspension or termination of employment.
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Any other action that the Company deems necessary or appropriate.
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Commencement of a lawsuit or other proceeding to recover damages or enjoin acts or omissions.
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Referral of any matter to governmental or regulatory authorities, in the case of violations of the Code that involve illegal behavior.
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For executive officers or directors, only by Lifeway’s Board of Directors or Audit Committee. Each such waiver will be disclosed as required by law or stock exchange rules (including, to the degree required by the Listing Market’s rules, in an SEC Form 8-K within four (4) business days after the occurrence of the event (and if the event occurs on a Saturday, Sunday or holiday on which the SEC is not open for business, then the four (4) business day period shall begin to run on, and include, the first business day thereafter)).
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For other employees, only by the Chief Executive Officer. Each such waiver shall be promptly reported to the Audit Committee.
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full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company with the SEC, so that the CEO and each senior financial officer must promptly bring to the attention of the Board any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings and to otherwise assist the Company in fulfilling its disclosure responsibilities;
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acting with honesty and integrity, and avoiding actual or apparent conflicts of interest involving personal and professional relationships, as described in the Code of Conduct and Ethics;
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disclosing to the Audit Committee or counsel for the Company any material transaction or relationship that could reasonably be expected to give rise to such a conflict;
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ensuring that the Company's disclosure controls and procedures function properly and providing other employees of the Company with information that is full, fair, accurate, complete, objective, timely, and understandable for inclusion in filings with the SEC and in other public communications;
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complying with applicable laws, rules and regulations of all U.S. and non-U.S. governmental entities, as well as other private and public regulatory agencies to which the Company is subject; and
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promptly reporting to the
Audit Committee or counsel for the Company any violations of the Code of Conduct and Ethics of which he or she is aware.
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1.
|
I have reviewed this annual report on Form 10-K of Lifeway Foods, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
April 1, 2014
|
By:
|
/s/ Julie Smolyansky
|
||
Julie Smolyansky
Chief Executive Officer, President and Director
|
1.
|
I have reviewed this annual report on Form 10-K of Lifeway Foods, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
April 1, 2014
|
By:
|
/s/ Edward P. Smolyansky
|
||
Edward P. Smolyansky
Chief Financial and Accounting Officer, Treasurer,
Chief Operating Officer and Secretary
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
|
Date:
|
April 1, 2014
|
By:
|
/s/ Julie Smolyansky
|
||
Julie Smolyansky
Chief Executive Officer, President and Director
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
|
Date:
|
April 1, 2014
|
By:
|
/s/ Edward P. Smolyansky
|
||
Edward P. Smolyansky
Chief Financial and Accounting Officer, Treasurer, Chief Operating Officer and Secretary
|