10QSB/A 1 form10qsba_12187.txt FORM 10-QSB/A FOR PERIOD DATED JUNE, 30, 2003 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A AMENDMENT NO. 1 (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to __________ Commission file number: 0-17363 LIFEWAY FOODS, INC. ----------------------------------------------- (Exact name of small business issuer as specified in it charter) ILLINOIS 36-3442829 ------------------------------- ------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 6431 WEST OAKTON, MORTON GROVE, ILLINOIS 60053 ---------------------------------------------- (Address of principal executive offices) (847) 967-1010 ------------------------- (issuer's telephone number) -------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 14, 2002, the issuer had 4,218,444 shares of common stock, no par value, outstanding. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] ================================================================================ EXPLANATION FOR FILING OF FORM 10-QSB/A AMENDMENT NO. 1 The purpose of this Form 10-QSB/A Amendment No. 1 is to amend the previously filed Form 10-QSB of Lifeway Foods, Inc. (the "Company" or "Lifeway") for the quarter ended June 30, 2003 to correct several errors in the income statement and notes to financial statements. The changes set forth in this Amendment No. 1 are merely to correct errors that are transpositional or typographical in nature and do not materially affect the financial statements of the Company for the quarter ended June 30, 2003, as provided in the Form 10-QSB filed on August 14, 2003. On Lifeway's income statement, the line item for unrealized gains on marketable securities (net of tax benefit) in the three months ended June 30, 2003 column is being corrected to $790,315 from $220,572. The previous figure of $220,572, as mistakenly set forth, is the net difference between $790,315 and $569,743, which is the subtracted reclassification adjustment for losses included in net income (the line item immediately below). Likewise, the same line item in the column for the six months ended June 30, 2003 is being corrected to $821,040 from $455,040. The previous figure of $455,040, as mistakenly set forth, is the net difference between $821,040 and $366,000, which is the subtracted reclassification adjustment for losses included in net income (the line item immediately below). In Note 7 ("Provision for Income Taxes") to Lifeway's Notes to Consolidated Financial Statements, three changes are set forth in this Amendment No. 1 to correct the three transposition or typographical errors set forth in the Form 10-QSB filed on August 14, 2003 in the table regarding the reconciliation of the provision for income taxes and the income tax computed at the statutory rate. The depreciation line item in the column for the six months ended June 30, 2003 is being corrected to $14,653 from ($14,653), the "other" line item for the same column is being corrected to ($9,915) from ($8,784) and the "other" line item in the column for the six months ended June 30, 2002 is being corrected to ($14,791) from ($12,143). ITEM 1. FINANCIAL STATEMENTS
LIFEWAY FOODS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 AND THE YEAR ENDED DECEMBER 31, 2002 (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, December 31, 2003 2002 2003 2002 2002 Sales $ 3,775,853 $ 3,002,583 $ 7,084,410 $ 5,890,436 $ 12,212,236 Cost of goods sold 1,733,935 1,760,500 3,559,891 3,283,781 6,744,086 Gross profit 2,041,918 1,242,083 3,524,519 2,606,655 5,468,150 Operating expenses 938,160 734,171 1,782,776 1,382,711 2,890,504 Income from operations 1,103,758 507,912 1,741,743 1,223,944 2,577,646 Other income (expense): Interest and dividend income 36,730 53,363 70,174 90,637 187,358 Interest expense (7,777) (19,241) (15,421) (39,332) (74,675) Gain (loss) on sale of marketable securities, net 15,848 3,319 (330,709) 39,339 17,554 Gain on sale of assets --- --- 1,246,287 --- --- Other than temporary reductions of marketable securities --- --- (235,861) --- --- Total other income 44,801 37,441 970,331 90,644 (105,624) Income before provision for income taxes 1,148,559 545,353 2,712,074 1,314,588 2,472,022 Provision for income taxes 457,477 193,697 1,027,718 515,374 943,338 Net income $691,082 $351,656 $1,684,356 $799,214 $ 1,528,684 Earnings per share common share 0.16 0.08 0.40 0.19 0.37 Weighted average shares outstanding 4,218,444 4,269,137 4,218,444 4,269,137 4,265,761 COMPREHENSIVE INCOME (LOSS) --------------------------- Net income $691,082 $351,656 $1,684,356 $799,214 $ 1,528,684 Other comprehensive income (loss), net of tax: Unrealized gains (losses) on marketable securities (net of tax benefits) 790,315 (461,598) 821,040 (697,190) (716,160) Less reclassification adjustment for gains (losses) included in net income (569,743) (3,790) (366,000) 1,985 110,038 Comprehensive income (loss) $911,654 $(113,732) $2,139,396 $104,009 $ 922,562
LIFEWAY FOODS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2003 AND 2002 Note 7 - PROVISION FOR INCOME TAXES A reconciliation of the provision for income taxes and the income tax computed at the statutory rate are as follows: (Unaudited) For the For the Six Months Ended Year Ended June 30, December 31, ------------ ------------ ------------ 2003 2002 2002 ------------ ------------ ------------ Federal income tax expense $ 788,283 $ 421,034 $ 840,487 computed at the statutory rate State taxes, expense 181,967 95,390 177,986 Temporary book/tax differences --- --- --- Depreciation 14,653 14,533 15,893 Other than temporary reductions on marketable securities --- --- 97,175 Other (9,915) (14,791) (15,538) Permanent book/tax differences 52,730 (792) (172,665) ------------ ------------ ------------ Provision for income taxes $ 1,027,718 $ 515,374 $ 943,338 ============ ============ ============ ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description ------ ----------- 3.4 Amended and Restated By-laws (Incorporated by reference to Exhibit No. 3.5 of Lifeway's Current Report on Form 8-K dated and filed on December 10, 2002). 3.5 Articles of Incorporation, as amended and currently in effect (Incorporated by reference to Exhibit 3.5 of Lifeway's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000 and filed on August 8, 2000). 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. 33-93306). 10.10 Stock Purchase Agreement with Danone Foods, Inc., dated October 1, 1999 (Incorporated by reference to Exhibit 10.10 of the Registrant's Current Report on Form 8-K dated October 1, 1999, and filed October 12, 1999). 10.11 Stockholders' Agreement with Danone Foods, Inc. dated October 1, 1999 (Incorporated by reference to Exhibit 10.11 of the Registrant's Current Report on Form 8-K dated October 1, 1999, and filed October 12, 1999). 10.12 Letter Agreement dated December 24, 1999 amending the Stockholders' Agreement with Danone Foods, Inc. dated October 1, 1999. (Incorporated by reference to Exhibit 10.12 of the Registrant's Current Report on Form 8-K dated December 24, 1999 and filed January 11, 2000). 10.13 Support Agreement with The Dannon Company, Inc. dated December 24, 1999 (Incorporated by reference to Exhibit 10.13 of the Registrant's Current Report on Form 8-K dated December 24, 1999 and filed January 11, 2000). 10.14 First Amendment to Support Agreement with The Dannon Company, Inc., dated February 11, 2003 (Incorporated by reference to Exhibit 10.14 of the Registrant's Quarterly Report for the quarter ended March 31, 2003 on Form 10-QSB dated and filed May 15, 2003). 10.15 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). 11 Statement re: computation of per share earnings. (Incorporated by reference to Note 2 of the Consolidated Financial Statements included in the Form 10-QSB for the quarter ended June 30, 2003, filed on August 14, 2003). 21.2 List of Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21.2 of Lifeway's Annual Report on Form 10-KSB for the year ended December 31, 1998 and filed on March 31, 1999). 31.1 Rule 13a-14(a)/15d-14(a) Certification. 32.1 Section 1350 Certification. (b) Reports on Form 8-K. None. SIGNATURE In accordance with the requirements of the Exchange Act, the Company caused this Amendment to be signed on its behalf by the undersigned, thereunto duly authorized. Date: August 21, 2003 LIFEWAY FOODS, INC. By: /s/ Julie Smolyansky ------------------------------------- Julie Smolyansky Chief Executive Officer, Chief Financial and Accounting Officer, President, Treasurer and Director