10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(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, 2013

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 000-17363

LIFEWAY FOODS, INC.

(Exact Name of Registrant as Specified in its Charter)

Illinois	36-3442829
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

 6431 West Oakton, Morton Grove, IL 60053

(Address of Principal Executive Offices, Zip Code)

(847) 967-1010

(Registrant’s Telephone Number, Including Area Code) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  x   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  x   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o	Accelerated filer o	Non-accelerated filer  o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  o   No  x

As of August 8, 2013, 16,386,017 shares of the registrant’s common stock, no par value, were outstanding.

LIFEWAY FOODS, INC.

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	20
Item 4.	Controls and Procedures.	20
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	22
Item 1 A.	Risk Factors.	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 3.	Defaults Upon Senior Securities.	22
Item 4.	Mine Safety Disclosure.	22
Item 5.	Other Information.	22
Item 6.	Exhibits.	22
	Signatures.	23
	Index of Exhibits.	24

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PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

June 30, 2013 and 2012 (Unaudited) and December 31, 2012

	(Unaudited) June 30,						December 31,
	2013			2012			2012
ASSETS
Current assets
Cash and cash equivalents	$	4,939,948		$	2,000,325		$	2,286,226
Investments		2,483,673			1,867,234			1,869,888
Certificates of deposits in financial institutions		115,373			300,000			450,000
Inventories		7,807,150			5,426,715			5,939,186
Accounts receivable, net of allowance for doubtful
accounts and discounts		9,911,305			9,486,141			8,723,737
Prepaid expenses and other current assets		31,797			96,860			97,138
Other receivables		5,400			104,009			8,825
Deposits		580,974
Deferred income taxes		391,139			512,260			234,687
Refundable income taxes		28,123			0			84,828
Total current assets	$	26,294,882		$	19,793,544		$	19,694,515
Property and equipment, net		14,718,760			14,865,789			14,986,776
Intangible assets
Goodwill and other non-amortizable brand assets		14,068,091			14,068,091			14,068,091
Other intangible assets, net of accumulated amortization of $4,198,439 and $3,465,349 at June 30, 2013 and 2012 and $3,842,756 at
December 31, 2012, respectively		4,107,561			4,840,652			4,463,242
Total intangible assets		18,175,652			18,908,743			18,531,333
Other Assets
Long-term accounts receivable net of current portion		280,000			191,590			294,000
Total assets	$	59,469,294		$	53,759,666		$	53,506,624
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Checks written in excess of bank balances	$	0		$	711,597		$	0
Current maturities of notes payable		545,494			540,478			542,981
Accounts payable		7,166,377			4,769,851			4,256,725
Accrued expenses		1,094,820			593,412			1,155,677
Accrued income taxes		1,224,115			1,639,515			254,311
Total current liabilities		10,030,806			8,254,853			6,209,694
Notes payable		4,726,472			5,228,395			4,955,945
Deferred income taxes		3,018,629			3,240,826			3,028,518
Total liabilities		17,775,907			16,724,074			14,194,157
Stockholders' equity
Common stock, no par value; 40,000,000 shares authorized; 17,273,776 shares issued; 16,346,017 shares outstanding at June 30, 2013; 17,273,776 shares issued; 16,372,217 shares outstanding at June 30, 2012; 17,273,776 shares issued; 16,346,017 shares outstanding at December 31, 2012		6,509,267			6,509,267			6,509,267
Paid-in-capital		2,032,516			2,032,516			2,032,516
Treasury stock, at cost		(8,187,682	)		(7,947,418	)		(8,187,682	)
Retained earnings		41,366,495			36,429,095			38,904,777
Accumulated other comprehensive income (loss), net of taxes		(27,209	)		12,132			53,591
Total stockholders' equity		41,693,387			37,035,592			39,312,469
Total liabilities and stockholders' equity	$	59,469,294		$	53,759,666		$	53,506,626

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

June 30, 2013 and 2012 (Unaudited)

	(Unaudited) Three Months Ended June 30,												(Unaudited) Six Months Ended June 30,
	2013						2012						2013						2012
Sales	$	25,838,058					$	22,713,958					$	53,428,680					$	44,259,854
Less: discounts and allowances		(2,760,174	)					(2,160,578	)					(5,963,765	)					(4,309,276	)
Net Sales		23,077,884			23,077,884			20,553,380			20,553,380			47,464,915			47,464,915			39,950,578			39,950,578
Cost of goods sold					15,058,461						12,522,609						30,607,446						25,429,331
Depreciation expense					421,707						413,109						815,832						812,154
Total cost of goods sold					15,480,168						12,935,718						31,423,278						26,241,485
Gross profit					7,597,716						7,617,662						16,041,637						13,709,093
Selling expenses					2,876,635						2,622,275						5,514,354						5,326,515
General and administrative					2,057,581						1,679,931						3,955,425						3,005,886
Amortization expense					177,842						188,705						355,683						377,409
Total Operating Expenses					5,112,058						4,490,911						9,825,462						8,709,810
Income from operations					2,485,658						3,126,751						6,216,175						4,999,283
Other income (expense):
Interest and dividend income					30,622						24,478						45,631						36,049
Rental income					3,389						3,018						6,658						6,017
Interest expense					(37,424	)					(43,918	)					(73,723	)					(94,103	)
Gain (loss) on sale of investments, net, reclassified from OCI					56,944						4,406						121,280						22,390
Other income					10,229						0						10,229						0
Total other income (expense)					63,760						(12,016	)					110,075						(29,647	)
Income before provision for income taxes					2,549,418						3,114,735						6,326,250						4,969,636
Provision for income taxes					1,145,478						1,065,607						2,556,671						1,825,520
Net income				$	1,403,940					$	2,049,128					$	3,769,579					$	3,144,116
Basic and diluted earnings per common share					0.09						0.13						0.23						0.19
Weighted average number of shares outstanding					16,346,017						16,376,601						16,346,017						16,389,674
COMPREHENSIVE INCOME
Net income				$	1,403,940					$	2,049,128						3,769,579					$	3,144,116
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investments (net of tax)					(63,811	)					(15,593	)					(12,277	)					33,730
Less reclassification adjustment for (gains) losses included in net income (net of taxes)					(32,174	)					(2,489	)					(68,523	)					(12,650	)
Comprehensive income				$	1,307,955					$	2,031,046					$	3,688,779					$	3,165,196

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

For the Six Months Ended June 30, 2013 and 2012 (Unaudited)

and For the Year Ended December 31, 2012

	Common Stock, No Par Value 40,000,000 Shares Authorized			# of Shares of												Accumulated Other Comprehensive
	# of Shares Issued	# of Shares Outstanding		Treasury Stock		Common Stock		Paid In Capital		Treasury Stock			Retained Earnings			Income (Loss), 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	0	(63,300	)	63,300		0		0		(580,708	)		0			0			(580,708	)
Other comprehensive income (loss):
Unrealized gains on securities, net of taxes	0	0		0		0		0		0			0			62,539			62,539
Net income for the year ended December 31, 2012	0	0		0		0		0		0			5,619,798			0			5,619,798
Dividends ($.07) per share	0	0		0		0		0		0			(1,146,317	)		0			(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
Balances at January 1, 2012	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	0	(37,100	)	37,100		0		0		(340,444	)		0			0			(340,444	)
Other comprehensive income (loss):
Unrealized gains on securities, net of taxes	0	0		0		0		0		0			0			21,080			21,080
Net income for the six months ended June 30, 2012	0	0		0		0		0		0			3,144,116			0			3,144,116
Dividends ($.07) per share	0	0		0		0		0		0			(1,146,317	)		0			(1,146,317	)
Balances at June 30, 2012	17,273,776	16,372,217		901,559	$	6,509,267	$	2,032,516	$	(7,947,418)		$	36,429,095		$	12,132		$	37,035,592
Balances at January 1, 2013	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
Other comprehensive income (loss):
Unrealized gains on securities, net of taxes	0	0		0		0		0		0			0			(80,800	)		(80,800	)
Net income for the six months ended June 30, 2013	0	0		0		0		0		0			3,769,579			0			3,769,579
Dividends ($.08) per share	0	0		0		0		0		0			(1,307,861	)		0			(1,307,861	)
Balances at June 30, 2013	17,273,776	16,346,017		927,759	$	6,509,267	$	2,032,516	$	(8,187,682	)	$	41,366,495		$	(27,209	)	$	41,693,387

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2013 and 2012 (Unaudited)

	(Unaudited)
	June 30,
	2013			2012
Cash flows from operating activities:
Net income	$	3,769,579		$	3,144,116
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization		1,171,515			1,189,563
Loss (gain) on sale of investments, net		(121,280	)		(22,390	)
Deferred income taxes		(104,133	)		(480,311	)
Bad Debt Expense		26,819			172,303
(Increase) decrease in operating assets:
Accounts receivable		(1,211,015	)		(1,610,208	)
Other receivables		3,425			120,195
Inventories		(1,867,964	)		(472,240	)
Refundable income taxes		56,705			41,316
Prepaid expenses and other current assets		(515,633	)		(17,230	)
Increase (decrease) in operating liabilities:
Accounts payable		2,909,652			383,612
Accrued expenses		(60,857	)		39,687
Income taxes payable		969,804			1,639,515
Net cash provided by operating activities		5,026,617			4,127,928
Cash flows from investing activities:
Purchases of investments		(2,573,721	)		(743,675	)
Proceeds from sale of investments		1,948,839			658,233
Redemption of certificates of deposits		334,627			0
Purchases of property and equipment		(547,819	)		(478,428	)
Net cash used in investing activities		(838,074	)		(563,870	)
Cash flows from financing activities:
Checks written in excess of bank balances		---			119,557
Purchases of treasury stock		---			(340,444	)
Dividends paid		(1,307,861	)		(1,146,317	)
Repayment of notes payable		(226,960	)		(1,311,679	)
Net cash used in financing activities		(1,534,821	)		(2,678,883	)
Net (decrease) increase in cash and cash equivalents		2,653,722			885,175
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	$	4,939,948		$	2,000,325

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 1 – NATURE OF BUSINESS

Lifeway Foods, Inc. (the “Company” or “Lifeway”) commenced operations in February 1986 and incorporated under the laws of the state of Illinois on May 19, 1986. The Company’s principal business activity is the production of dairy products. Specifically, the Company produces Kefir, a drinkable product which is similar to but distinct from yogurt, in several flavors sold under the name “Lifeway’s Kefir;” a plain farmer’s cheese sold under the name “Lifeway’s Farmer’s Cheese;” a fruit sugar-flavored product similar in consistency to cream cheese sold under the name of “Sweet Kiss;” and a dairy beverage, similar to Kefir, with increased protein and calcium, sold under the name “Basics Plus.” The Company also produces a vegetable-based seasoning under the name “Golden Zesta.” The Company currently distributes its products throughout the Chicago Metropolitan area and various cities on the East Coast through local food stores. In addition, products are sold throughout the United States and Ontario, Canada by distributors. The Company also distributes some of its products to Eastern Europe.

Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows:

Basis of presentation

The accompanying unaudited financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by general accepted accounting principles for complete financial statements. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of Management, necessary for fair statement of results for the interim periods.  The unaudited Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with the Consolidated Financial Statements contained in our 2012 Annual Report on Form 10-K.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Helios Nutrition, Ltd., Pride of Main Street, L.L.C., Starfruit, L.L.C., Fresh Made, Inc. and Starfruit Franchisor, L.L.C., Lifeway First Juice, Inc., First Juice, Inc. and Lifeway Wisconsin, Inc.  All significant intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the consolidated financial statements include the allowance for doubtful accounts, the valuation of investment securities, the valuation of goodwill, intangible assets, and deferred taxes.

Revenue Recognition

Sales of Company produced dairy products are recorded at the time of shipment and the following four criteria have been met: (i) The product has been shipped and the Company has no significant remaining obligations; (ii) Persuasive evidence of an agreement exists; (iii) The price to the buyer is fixed or determinable and (iv) Collection is probable. In addition, shipping costs invoiced to the customers are included in net sales and the related cost in cost of sales. Discounts and allowances are reported as a reduction of gross sales unless the allowance is attributable to an identifiable benefit separable from the purchase of the product, the value of which can be reasonably estimated, which would be charged to the appropriate expense account.

Customer Concentration

Sales are predominately to companies in the retail food industry, located within the United States of America. Two major customers accounted for approximately 35 percent and 36 percent of gross sales for the six months ended June 30, 2013 and 2012, respectively. These customers accounted for approximately 25 percent, 30 percent, and 33 percent of accounts receivable as of June 30, 2013,  June 30, 2012, and December 31, 2012, respectively.

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Cash and cash equivalents

All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents.

The Company maintains cash deposits at several institutions located in the greater Chicago, Illinois and Philadelphia, Pennsylvania metropolitan areas.

Investments

All investment securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders’ equity. Amortization, accretion, interest and dividends, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are recorded in other income. All of the Company's securities are subject to a periodic impairment evaluation. This evaluation depends on the specific facts and circumstances. Factors that we consider in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for possible recovery in the market value of the investment.

Accounts receivable

Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral. Balances expected to be paid beyond one year are classified as long-term.

Accounts receivable are recorded at invoice amounts, and reduced to their estimated net realizable value by recognition of an allowance for doubtful accounts and anticipated discounts. The Company’s estimate of the allowances for doubtful accounts and anticipated discounts are based upon historical experience, its evaluation of the current status and contract terms of specific receivables, and unusual circumstances, if any. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company’s credit terms. Accounts considered uncollectible are charged against the allowance.

Inventories

Inventories are stated at the lower of cost or market, cost being determined by the first-in, first-out method.

Property and equipment

Property and equipment is stated at depreciated cost or fair value where depreciated cost is not recoverable. Depreciation is computed using the straight-line method. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized.

Property and equipment is being depreciated over the following useful lives:

Category	Years
Buildings and improvements	31 and 39
Machinery and equipment	5 – 12
Office equipment	5 – 7
Vehicles	5

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Intangible assets acquired in business combinations

The Company accounts for intangible assets at historical cost. Intangible assets acquired in a business combination are recorded under the purchase method of accounting at their estimated fair values at the date of acquisition. Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment at least annually. Brand assets represent the fair value of brands acquired. Brand assets have an indefinite life and therefore are not amortized, rather are reviewed periodically for impairment. The Company amortizes other intangible assets over their estimated useful lives, as disclosed in the table below.

The Company reviews intangible assets and their related useful lives at least once per year to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. The Company conducts more frequent impairment assessments if certain conditions exist, including: a change in the competitive landscape, any internal decisions to pursue new or different strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for the Company’s products or changes in the size of the market for the Company’s products.

If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life.

Intangible assets are being amortized over the following useful lives:

Category	Years
Recipes	4
Customer lists and other customer related intangibles	7-10
Lease agreement	7
Trade names	15
Formula	10
Customer relationships	12

Income taxes

Deferred income taxes are the result of temporary differences that arise from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The principal sources of temporary differences are different depreciation and amortization methods for financial statement and tax purposes, unrealized gains or losses related to investments, capitalization of indirect costs for tax purposes, purchase price adjustments, and the recognition of an allowance for doubtful accounts for financial statement purposes.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The only periods subject to examination for the Company’s federal returns are the 2010 and 2011 tax years. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Treasury stock

Treasury stock is recorded using the cost method.

Advertising and promotional costs

The Company expenses advertising costs as incurred. For the six months ended June 30, 2013 and 2012 total advertising expenses were $1,308,306 and $1,320,326,  respectively.

Earnings per common share

Earnings per common share were computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. For the six months ended June 30, 2013 and 2012, diluted and basic earnings per share were the same, as the effect of dilutive securities options outstanding was not significant.

Correction of Prior Year Amounts

Management has restated the unaudited statements of income and comprehensive income for interim period ending June 30, 2012. During the period ending June 30, 2012, amounts related to costs of production of inventory were not presented as part of cost of goods sold and were erroneously included as general and administrative operation expenses in our previously issued financial statements (see Note 14).

There was no impact on previously reported income, consolidated balance sheets or consolidated statement of cash flows.

Note 3 – INTANGIBLE ASSETS

Intangible assets, and the related accumulated amortization, consist of the following:

	June 30, 2013				June 30, 2012				December 31, 2012
	Cost		Accumulated Amortization		Cost		Accumulated Amortization		Cost		Accumulated Amortization
Recipes	$	43,600	$	43,600	$	43,600	$	43,600	$	43,600	$	43,600
Customer lists and other customer related intangibles		4,504,200		2,249,544		4,504,200		1,786,212		4,504,200		2,025,736
Lease acquisition		87,200		87,200		87,200		87,200		87,200		87,200
Customer relationship		985,000		561,743		985,000		485,652		985,000		526,701
Trade names		2,248,000		953,402		2,248,000		803,535		2,248,000		878,469
Formula		438,000		302,950		438,000		259,150		438,000		281,050
	$	8,306,000	$	4,198,439	$	8,306,000	$	3,465,349	$	8,306,000	$	3,842,756

Amortization expense is expected to be approximately the following for the 12 months ending June 30:

2014	$	711,367
2015		711,367
2016		711,367
2017		671,217
2018		657,567
Thereafter		644,676
	$	4,107,561

Amortization expense during the six months ended June 30, 2013 and 2012 was $355,683 and $377,409, respectively.

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 4 – INVESTMENTS

The cost and fair value of investments classified as available for sale are as follows:

June 30, 2013	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Equities	$	893,998	$	83,082	$	(39,910	)	$	937,170
Mutual Funds		17,803		0		(209	)		17,594
Preferred Securities		403,300		40		(26,030	)		377,310
Corporate Bonds		1,216,728		5,100		(70,230	)		1,151,598
Total	$	2,531,829	$	88,222	$	(136,379	)	$	2,483,672

June 30, 2012	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Equities	$	642,977	$	74,414	$	(10,644	)	$	706,747
Mutual Funds		56,872		2,097		(237	)		58,732
Preferred Securities		0		0		0			0
Corporate Bonds		1,118,173		9,483		(25,901	)		1,101,755
Total	$	1,818,022	$	85,994	$	(36,782	)	$	1,867,234

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

Proceeds from the sale of investments were $1,948,839 and $658,233 for the six months ended June 30, 2013 and 2012, respectively.

Gross gains of $151,472 and $37,405 and gross losses of $30,192 and $15,014 were realized on these sales during the six months ended June 30, 2013 and 2012, respectively.

The following table shows the gross unrealized losses and fair value of the Company's investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2013 and 2012 and at December 31, 2012:

	Less Than 12 Months					12 Months or Greater					Total
June 30, 2013	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equities	$	455,403	$	(39,910	)	$	0	$	0		$	455,403	$	(39,910	)
Mutual Funds		17,594		(209	)		0		0			17,594		(209	)
Preferred Securities		302,265		(26,030	)		0		0			302,265		(26,030	)
Corporate Bonds		876,607		(60,701	)		115,691		(9,529	)		992,298		(70,230	)
	$	1,651,869	$	126,850		$	115,691	$	(9,529	)	$	1,767,560	$	(136,379	)

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 4 – INVESTMENTS - Continued

	Less Than 12 Months					12 Months or Greater					Total
June 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equities
Equities	$	57,963	$	(6,972	)	$	76,496	$	(3,673	)	$	134,459	$	(10,645	)
Mutual Funds		0		0			2,952		(237	)		2,952		(237	)
Preferred Securities		0		0			0		0			0		0
Corporate Bonds		547,884		(22,864	)		49,090		(3,037	)		596,974		(25,901	)
	$	605,847	$	(29,836	)	$	128,538	$	(6,647	)	$	734,385	$	(36,783	)

	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            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	)

Equities, Mutual Funds, Preferred Securities, and Corporate Bonds -The Company's investments in equity securities, mutual funds, preferred securities, and corporate bonds consist of investments in common stock, preferred stock and debt securities of companies in various industries. As of June 30, 2013, three corporate bond securities that had unrealized losses. The Company evaluated the near-term prospects of the issuer in relation to the severity and duration of the impairment. Based on that evaluation and the Company's ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company did not consider any material investments to be other-than-temporarily impaired at June 30, 2013.

Note 5 – INVENTORIES

Inventories consist of the following:

	June 30,				December 31,
	2013		2012		2012
Finished goods	$	2,977,298	$	2,264,409	$	2,462,548
Production supplies		3,321,484		2,014,097		2,599,668
Raw materials		1,508,368		1,148,209		876,970
Total inventories	$	7,807,150	$	5,426,715	$	5,939,186

Note 6 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

	June 30,				December 31,
	2013		2012		2012
Land	$	1,178,160	$	1,178,160	$	1,178,160
Buildings and improvements		12,220,693		11,684,498		11,904,919
Machinery and equipment		16,007,943		15,070,709		15,185,204
Vehicles		1,350,608		1,379,590		1,346,078
Office equipment		429,013		409,561		411,773
Construction in process		0		0		612,468
		31,186,417		29,722,518		30,638,602
Less accumulated depreciation		16,467,657		14,856,729		15,651,826
Total property and equipment	$	14,718,760	$	14,865,789	$	14,986,776

Depreciation expense during the three months ended June 30, 2013 and 2012 was $815,832 and $812,154, respectively.

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 7 – ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30,				December 31,
	2013		2012		2012
Accrued payroll and payroll taxes	$	235,918	$	265,488	$	356,280
Accrued property tax		311,376		311,543		302,573
Other		547,526		16,381		496,824
	$	1,094,820	$	593,412	$	1,155,677

Note 8 – NOTES PAYABLE

Notes payable consist of the following:

	June 30,				December 31
	2013		2012		2012
Note payable to Private Bank in monthly installments of $42,222, plus variable interest rate, currently at 2.709%, 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.	$	5,154,445	$	5,618,889	$	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 $2.0 million. Collateralized by substantially all assets of the Company. In May 2013, the Company refinanced this Line of Credit. The agreement has been extended with terms allowing borrowings up to $5.0 million and matures on May 31, 2014.		0		0		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.		41,641		59,825		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.		75,880		90,159		82,499
Total notes payable		5,271,966		5,768,873		5,498,926
Less current maturities		545,494		540,478		542,981
Total long-term portion	$	4,726,472	$	5,228,395	$	4,955,945

In accordance with the Private Bank agreements referenced above, the Company is subject to minimum fixed charged ratio and tangible net worth thresholds.

Maturities of notes payables are as follows:

For the Period Ended June 30,
2014	$	545,494
2015		545,185
2016		527,653
2017		525,856
2018		3,127,778
Total	$	5,271,966

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LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 9 – COMMITMENTS AND CONTINGENCIES

The Company leases four stores for its Starfruit subsidiary. Total expense for these leases was approximately $175,209, $106,708 and $379,348 for the three months ended June 30, 2013 and 2012 and for the year ended December 31, 2012, respectively. The Company is also responsible for additional rent equal to real estate taxes and other operating expenses. Future annual minimum base rental payments for the leases as of June 30, 2013 are approximately as follows:

2014	$	66,614
2015		44,799
2016		46,143
2017		47,527
2018		48,953
Thereafter		24,838
Total	$	278,874

Note 10 – PROVISION FOR INCOME TAXES

The provision for income taxes consists of the following:

	For the Six Months Ended
	June 30,
	2013			2012
Current:
Federal	$	1,937,370		$	1,680,072
State and local		723,434			625,759
Total current		2,660,804			2,305,831
Deferred		(104,133	)		(480,311	)
Provision for income taxes	$	2,556,671		$	1,825,520

A reconciliation of the provision for income taxes and the income tax computed at the statutory rate is as follows:

	For the Six Months Ended
	June 30,
	2013						2012
	Amount			Percentage			Amount			Percentage
Federal income tax expense computed at the statutory rate	$	2,150,925			34.0	%	$	1,689,676			34.0	%
State and local tax expense, net		766,896			12.1	%		413,001			8.3	%
U.S. domestic manufacturers’ deduction & other permanent differences		(361,150	)		(5.7)	%		(277,157	)		(5.6)	%
Provision for income taxes	$	2,556,671			40.4	%	$	1,825,520			36.7	%

- 14 -

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 10 – PROVISION FOR INCOME TAXES - Continued

Amounts for deferred tax assets and liabilities are as follows:

	June 30,						December 31,
	2013			2012			2012
Non-current deferred tax assets (liabilities) arising from: Temporary differences -
Accumulated depreciation and amortization
from purchase accounting adjustments	$	(3,102,071	)	$	(3,408,516	)	$	(3,164,716	)
Capital loss carry-forwards		83,442			167,690			136,198
Total non-current net deferred tax liabilities		(3,018,629	)		(3,240,826	)		(3,028,518	)
Current deferred tax assets arising from:
Unrealized losses (gain) on investments		20,948			(21,407	)		(41,260	)
Inventory		348,441			242,200			265,072
Allowance for doubtful accounts and discounts		21,750			200,098			10,875
Allowance for promotions		0			0			0
Capital loss carry-back		0			91,369			0
Total current deferred tax assets		391,139			512,260			234,687
Net deferred tax liability	$	(2,627,490	)	$	(2,728,566	)	$	(2,793,831	)

Note 11 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest and income taxes are as follows:

	For the Six Months Ended
	June 30,
	2013		2012
Interest	$	61,333	$	108,594
Income taxes	$	1,691,093	$	625,055

Note 12 – STOCK AWARD AND STOCK OPTION PLANS

The Company has a registration statement filed with the Securities and Exchange Commission in connection with a Consulting Service Compensation Plan covering up to 1,200,000 of the Company’s common stock shares. Pursuant to such Plan, the Company may issue common stock or options to purchase common stock to certain consultants, service providers, and employees of the Company. The option price, number of shares, grant date, and vesting terms are determined at the discretion of the Company’s Board of Directors.

As of December 31, 2012 and at June 30, 2013 and 2012, there were no stock options outstanding or exercisable. There were approximately 940,000 shares available for issuance under the Plan at June 30, 2013.

- 15 -

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 13 – FAIR VALUE MEASUREMENTS

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

Level 1. Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2. Inputs to the valuation methodology include the following:

●   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.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used as of June 30, 2013 and 2012, and December 31, 2012.

The majority of the Company’s short-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company’s valuation of its Level 1 investments, which include mutual funds, is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments, which include certificates of deposits, is based on other observable inputs, specifically a valuation model which utilized vendor pricing for similar securities.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

- 16 -

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 13 – FAIR VALUE MEASUREMENTS – Continued

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets at fair value as of June 30, 2013 and 2012 and for the year ended December 31, 2012. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

	Assets and Liabilities at Fair Value as of June 30, 2013
	Level 1		Level 2		Level 3		Total
Cash	$	4,939,948	$	0	$	0	$	4,939,948
Certificate of Deposits		0		115,373		0		115,373
Stocks		954,765		0		0		954,765
Preferred Securities		377,310		0		0		377,310
Corporate Bonds		0		1,151,598		0		1,151,598
Notes Payable		0		4,726,472		0		4,726,472

	Assets and Liabilities at Fair Value as of June 30, 2012
	Level 1		Level 2		Level 3		Total
Cash	$	532,107	$	0	$	0	$	532,107
Mutual Funds:
Growth		6,849		0		0		6,849
Equity Income		51,974		0		0		51,974
Bonds		12,582		0		0		12,582
Certificate of Deposits		0		280,621		0		280,621
Stocks		700,835		0		0		700,835
Preferred Stock		(6,760)		0		0		(6,760	)
Corporate Bonds		0		1,101,754		0		1,101,754

	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

The Company’s financial assets and liabilities also include accounts receivable, other receivables and, accounts payable for which carrying value approximates fair value. All such assets are valued using level 2 inputs.

- 17 -

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

and December 31, 2012

Note 14 – RESTATEMENT OF 2012 QUARTERLY CONSOLIDATED FINANCIAL STATEMENT

The consolidated statements of income for the year-to-date period ended June 30, 2012, that were previously included in our Quarterly Reports on Forms 10-Q filed in 2012, were restated as a result of erroneous presentation of production activity within general and administrative operating expenses.

These restatements result in increases in cost of goods sold and corresponding decreases in general and administrative operating expenses. These restatements had no impact on our previously reported net income, condensed consolidated balance sheets or consolidated statements of cash flows.

As detailed in the table below, these restatements impact the following consolidated statement of income line items:

	(Unaudited) Six Months Ended June 30, 2012
	As Previously Reported		Adjustment			As Restated
Income Statement
Net Sales	$	39,950,578	$	0		$	39,950,578
COGS	$	25,153,336	$	1,088,149		$	26,241,485
Gross Profit	$	14,797,242	$	(1,088,149	)	$	13,709,093
Operating Expenses	$	9,797,959	$	(1,088,149	)	$	8,709,810
Income from Operations	$	4,999,283	$	0		$	4,999,283

	(Unaudited) Three Months Ended June 30, 2012
	As Previously Reported		Adjustment			As Restated
Income Statement
Net Sales	$	20,553,380	$	0		$	20,553,380
COGS	$	12,515,950	$	419,768		$	12,935,718
Gross Profit	$	8,037,430	$	(419,768	)	$	7,617,662
Operating Expenses	$	4,910,678	$	(419,768	)	$	4,490,911
Income from Operations	$	3,126,752	$	0		$	3,126,751

Note 15 – LITIGATION

The Company is named a party to lawsuits in the normal course of business. In the opinion of management, the resolution of these lawsuits will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

Note 16 – RECENT ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 became effective for the Company on January 1, 2012. Management adopted this statement effective January 1, 2012.

In February 2013, the Financial Accounting Standards Board (“FASB”) amended the disclosure requirements regarding the reporting of amounts reclassified out of accumulated other comprehensive income.   The amendment does not change the current requirement for reporting net income or other comprehensive income, but requires additional disclosures about items reclassified out of accumulated other comprehensive income, and the income statement line items impacted by the reclassifications.  We adopted this standard effective January 1, 2013.  Other than the additional disclosure requirements, the adoption of this standard did not have a material impact on our unaudited Consolidated Financial Statements.

Note 17 – SUBSEQUENT EVENT

On May 15, 2013, the Company entered into an agreement to acquire the Golden Guernsey dairy plant in Waukesha, WI. The acquisition will increase the production capacity of Lifeway by approximately 170,000 square feet. The purchase price is approximately $7.4 million and the acquisition closed July 2, 2013.

- 18 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following analysis should be read in conjunction with the unaudited financial statements of the Company and related notes included elsewhere in this quarterly report and the audited financial statements and Management’s Discussion and Analysis contained in our Form 10-K for the fiscal year ended December 31, 2012 and our Form 10-Q for the fiscal quarter ended March 31, 2013.

This report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,“ and similar words. Forward-looking statements represent, as of the date of this report, our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us.  These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

Results of Operations

Comparison of Quarter Ended June 30, 2013 to Quarter Ended June 30, 2012

Total consolidated gross sales increased by $3,124,100 (approximately 14%) to $25,838,058 during the three-month period ended June 30, 2013 from $22,713,958 during the same three-month period in 2012.  This increase is primarily attributable to increased sales and awareness of the Company’s flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir™.

Total consolidated net sales increased by $2,524,504 (approximately 12%) to $23,077,884 during the three-month period ended June 30, 2013 from $20,553,380 during the same three-month period in 2012.  Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 65% during the second quarter of 2013, compared to approximately 61% during the same period in 2012. The increase was primarily attributable to a 20% increase in the cost of milk, the Company’s largest raw material, compared to the same period last year.

Total operating expenses increased $621,147 (approximately 14%) to $5,112,058 during the second quarter of 2013, from $4,490,911 during the same period in 2012. This increase was primarily attributable to an increase in general and administrative expenses. The company incurred  $300,000 in professional fees related to the acquisition of the Golden Guernsey Dairy Plant, acquired on July 2, 2013, the Company’s  new manufacturing  facility, and views this as a non-recurring expense.

Total operating income decreased by $641,093 (approximately 21%) to $2,485,658 during the second quarter of 2013, from $3,126,751 during the same period in 2012.

Income tax expense was $1,145,478,  or a 45% effective tax rate for the second quarter of 2013 compared to an income tax expense of $1,065,607, or a 34% effective tax rate during the same period in 2012.

Total net income was $1,403,940 or $0.09 per diluted share for the three-month period ended June 30, 2013 compared to $2,049,128 or $0.13 per diluted share in the same period in 2012.

Comparison of Six-Month Period Ended June 30, 2013 to Quarter Ended June 31, 2012

Total consolidated gross sales increased by $9,168,826 (approximately 21%) to $53,428,680 during the six-month period ended June 30, 2013 from $44,259,854 during the same six-month period in 2012.  This increase is primarily attributable to increased sales and awareness of flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir™.

Total consolidated net sales increased by $7,514,337 (approximately 19%) to $47,464,915 during the six-month period ended June 30, 2013 from $39,950,578 during the same six-month period in 2012.  Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 64% during the six- month period ended June 30, 2013 and during the six-month period ended June 30, 2012.

Operating expenses as a percentage of net sales were approximately 21% during the six-month period ended June 30, 2013 compared to approximately 22% during the same period in 2012.  General and administrative  related expenses increased by $949,539 (approximately 32%) to $3,955,425 during the six-month period ended June 30, 2013, from $3,005,886 during the same period in 2012.

Total operating income increased by $1,216,892 (approximately 24%) to $6,216,175 during the six-month period ended June 30, 2013, from $4,999,283 during the same period in 2012.

Provision for income taxes was $2,556,671, or a 40% effective tax rate, for the six-month period ended June 30, 2013 compared with $1,825,520, or a 37% tax rate, during the same period in 2012.

Total net income was $3,769,579 or $0.23 per share for the six-month period ended June 30, 2013 compared to $3,144,116 or $0.19 per share in the same period in 2012.

- 19 -

Liquidity and Capital Resources

Sources and Uses of Cash

Net cash provided by operating activities was $5,026,617 during the six-months ended June 30, 2013 compared to $4,127,928 during the same period in 2012.  This increase is primarily attributable to the increase in accounts payable of $2,526,040.

Net cash used in investing activities was $838,074 during the six-months ended June 30, 2013 compared to net cash used in operating activities of $563,870 during the same period in 2012.  This decrease is primarily attributable to the decrease in purchases of investments of $1,830,046.

The Company had a net increase in cash and cash equivalents of $2,653,721 during the six month period ended June 30, 2013 compared to the same period in 2012.  The Company had cash and cash equivalents of $4,939,947 as of June 30, 2013 compared to cash and cash equivalents of $2,000,325 as of June 30, 2012.

Assets and Liabilities

Total assets were $59,469,294 as of June 30, 2013, which is an increase of $5,709,628 when compared to June 30, 2012.  This is primarily due to an increase in cash and cash equivalents of $2,939,623 as of June 30, 2013 when compared to June 30, 2012.

Total current liabilities were $10,030,806 as of June 30, 2013, which is an increase of $1,775,953 when compared to June 30, 2012. This is primarily due to a $2,396,526 increase in accounts payable.

Notes payable decreased by $501,923 as of June 30, 2013, when compared to June 30, 2012.  The balance of the notes payable as of June 30, 2013 was $4,726,472

Total stockholder’s equity was $41,693,387 as of June 30, 2013, which is an increase of $4,657,795 when compared to June 30, 2012.  This is primarily due to an increase in retained earnings of $4,937,400 when compared to June 30, 2012.

All of our marketable securities are classified as available-for-sale on our balance sheet.  All of these securities are stated thereon at market value as of the end of the applicable period. Gains and losses on the portfolio are determined by the specific identification method.

We anticipate being able to fund the Company’s foreseeable liquidity requirements internally.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure material information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, we recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2013 in ensuring that information required to be disclosed by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the Exchange Act rules and forms due to the material weakness described below. As a result, we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, management believes the consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

- 20 -

Material Weaknesses

Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2012. In making the assessment, management used the framework in “Internal Control –Integrated Framework” promulgated by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria. Based on that assessment, our principal executive officer and principal financial and accounting officer concluded that our internal control over financial reporting was not effective as of December 31, 2012 because a material weakness existed in our internal control over financial reporting related to the classification of certain costs and expenses.

As a result, we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, management believes the consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented. This quarterly report on Form 10-Q does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Description of Material Weaknesses at December 31, 2012

In 2012 the Company did not maintain effective monitoring controls over financial reporting relating to the classification of certain costs and expenses. Specifically, the Company and its auditors determined during the audit of our financial statements that, in connection with the preparation of the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2012, certain post-closing adjustments were required with respect to our classification of certain direct manufacturing costs from general and administrative to cost of goods sold, primarily consisting of utilities, wage related expenses and overhead.

Remediation of Material Weakness

In light of the material weakness described above, we took steps to remediate our material weakness. Management enhanced the review process by improving real time general ledger monitoring and wage detail in the financial statement functionality of our accounting software, allowing for improved internal review of the source information which goes in to the completion of the financial statements. More specifically, management has focused on improving specific coding of direct expenses as compared to general and administrative expenses.

Management is committed to continuous improvement of the Company’s internal control processes. Under the direction of the Audit Committee, management will continue to review and make changes it deems necessary to the overall design of the Company’s internal control over financial reporting, including implementing further improvements in policies and procedures and taking additional measures to address any control deficiencies.

Conclusion

We believe the measures described above will remediate the material weaknesses we have identified and will continue to strengthen our internal controls over financial reporting.  We are committed to continually improving our internal control processes and will diligently and vigorously review our financial reporting controls and procedures.  As we continue to evaluate and work to improve our internal controls over financial reporting, we may determine that additional measures are necessary to address control deficiencies.  Moreover, we may decide to modify certain of the remediation measures described above.

Changes in Internal Control over Financial Reporting

Except as discussed above there were no changes in our internal control over financial reporting that occurred during the second quarter of 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

- 21 -

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

Lifeway is not party to any material pending legal proceedings. Lifeway is from time to time engaged in litigation matters arising in the ordinary course of business none of which presently is expected to have a material adverse effect on its business results or operations.

ITEM 1A.  RISK FACTORS.

Not applicable.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.  MINE SAFETY DISCLOSURE.

None.

ITEM 5.  OTHER INFORMATION.

None.

ITEM 6.  EXHIBITS.

31.1	Officer’s Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Officer’s Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Press Release dated August 14, 2013.
101	Interactive Data Files.

- 22 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LIFEWAY FOODS, INC.
Date: August 14, 2013	By:	/s/ Julie Smolyansky
		Julie Smolyansky
		Chief Executive Officer, President, and Director
Date: August 14, 2013	By:	/s/ Edward P. Smolyansky
		Edward P. Smolyansky
		Chief Financial and Accounting Officer, Treasurer, Chief Operating Officer and Secretary

- 23 -

INDEX OF EXHIBITS

31.1	Officer’s Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Officer’s Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Press Release dated August 14, 2013.
101	Interactive Data Files.

- 24 -

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION OF C.E.O.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Julie Smolyansky, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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:   August 14, 2013                                                 By:  /s/ Julie Smolyansky                          

Julie Smolyansky

Chief Executive Officer, President and Director

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION OF C.F.O.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Edward P. Smolyansky, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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: August 14, 2013                                                    By:  /s/ Edward P. Smolyansky                                       

Edward P. Smolyansky

Chief Financial and Accounting  Officer,

Treasurer, Chief Operating Officer and Secretary

EX-32.1

EXHIBIT 32.1

SECTION 906 CERTIFICATION OF C.E.O.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Lifeway Foods, Inc. (the “Company”) for the period ended June 30, 2013 as filed with the SEC (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to her knowledge:

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:   August 14, 2013                                                 By:     /s/ Julie Smolyansky                                        

Julie Smolyansky

Chief Executive Officer, President and Director

EX-32.2

EXHIBIT 32.2

SECTION 906 CERTIFICATION OF C.F.O.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Lifeway Foods, Inc. (the “Company”) for the period ended June 30, 2013 as filed with the SEC (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

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:   August 14, 2013                                                  By:     /s/ Edward P. Smolyansky                     

Edward P. Smolyansky

Chief Financial and Accounting Officer,

Treasurer, Chief Operating Officer and Secretary

EX-99.1

EXHIBIT 99.1

Lifeway Foods Announces Results for the Second Quarter of 2013

Morton Grove, IL — August 14, 2013—Lifeway Foods, Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, today announced results for the second quarter ended June 30, 2013.

“We are pleased with our second quarter results as we continued to execute on our plan to increase distribution in new and existing retailers and strengthen awareness of our nutritious probiotic kefir products among health conscious consumers,” said Julie Smolyansky, CEO of Lifeway Foods, Inc.  “In the quarter, we also focused on the integration of our new dairy manufacturing facility and we believe this will help expand our margins and support our future growth opportunities long-term. We look forward to this facility being fully operational at the end of the year.”

Second Quarter Results

Second quarter of 2013 gross sales increased 14% to $25.8 million compared to $22.7 million for the second quarter of 2012.  This increase is primarily attributable to increased sales and awareness of the Company’s flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir™.

Total consolidated net sales increased 12% or $2.5 million to $23.1 million during the three-month period ended June 30, 2013 from $20.6 million during the same three-month period in 2012. Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers.

Gross profit for the second quarter of 2013  was $7.6 million, unchanged compared to the second quarter of the prior year. The Company's gross profit margin decreased to 33% in the second quarter versus 37% in the second quarter of 2012. The decrease was primarily attributable to a 20% increase in the cost of milk, the Company’s largest raw material, compared to the same period last year.

Total operating expenses increased 14% or $0.6 million to $5.1 million during the second quarter of 2013, from $4.5 million during the same period in 2012. This increase was primarily attributable to an increase in general and administrative and selling expenses, partially offset by a decrease in amortization expense. The Company incurred $0.3 million in professional fees related to the acquisition of the Golden Guernsey Dairy Plant, the Company’s new manufacturing facility, and views this as a non-recurring expense.

Total operating income decreased $0.6 million to $2.5 million during the second quarter of 2013, from $3.1 million during the same period in 2012.  The decrease in operating income is related to the decrease in gross profit and increased operating expenses.

The Company’s second quarter 2013 effective tax rate was 45% compared to 34% in the same period last year.

Total net income was $1.4 million or $0.09 per diluted share for the three-month period ended June 30, 2013 compared to $2.1 million or $0.13 per diluted share in the same period in 2012.

Six Month Results

Total consolidated gross sales increased by $9.2 million, or approximately 21%, to $53.4  million during the six-month period ended June 30, 2013 from $44.3 million during the same six-month period in 2012. 

Total consolidated net sales increased by $7.5 million, or approximately 19%, to $47.5 million during the six-month period ended June 30, 2013 from $40.0 million during the same six-month period in 2012. 

Gross profit for the first six-months of 2013 increased 17% to $16.0 million, compared to $13.7 million in the same period in the prior year. The Company's gross profit margin was 34% in the first six-months of 2013, unchanged compared to the same period last year.

Total net income was $3.8 million or $0.23 per share for the six-month period ended June 30, 2013 compared to $3.1 million or $0.19 per share in the same period in 2012.

Balance Sheet/Cash Flow Highlights

The Company had $4.9 million in cash and cash equivalents as of June 30, 2013 compared to $2.0 million at June 30, 2012.   Total stockholder’s equity was $41.7 million as of June 30, 2013, which is an increase of $4.7 million when compared to June 30, 2012.

Net cash provided by operating activities increased $0.9 million to $5.0 million for the first six months of 2013. This increase reflects the Company’s improvement in operating efficiencies.

Net cash used in investing activities was $0.8 million during the six-months ended June 30, 2013 compared to net cash used in operating activities of $0.6 million during the same period in 2012.

Conference Call

The Company will host a conference call to discuss these results with additional comments and details. The conference call is scheduled to begin at 4:30 p.m. ET today, Tuesday, August 14, 2013. The call will be broadcast live over the Internet hosted at the Investor Relations section of Lifeway Foods’ website at www.lifeway.net, and will be archived online through August 28, 2013. In addition, listeners may dial 877-407-3982 in North America, and international listeners may dial 201-493-6780. Participants from the Company will be Julie Smolyansky, President and Chief Executive Officer, and Edward Smolyansky, Chief Financial Officer and Chief Operating Officer.

About Lifeway Foods

Lifeway Foods, Inc. (LWAY), recently named one of Fortune Small Business' Fastest Growing Companies for the fifth consecutive year, is America’s leading supplier of the cultured dairy products known as kefir and organic kefir. Lifeway Kefir is a dairy beverage that contains 10 exclusive live and active probiotic cultures plus ProBoost™. In addition to its line of Kefir products, the company produces a variety of Frozen Kefir and probiotic cheese products. Lifeway also sells frozen kefir, kefir smoothies and kefir parfaits through its Starfruit™ retail stores. Find Lifeway Foods, Inc. on Facebook: www.facebook.com/lifewaykefir Follow Lifeway Foods on Twitter: http://twitter.com/lifeway_kefir YouTube: http://www.youtube.com/user/lifewaykefir

Forward Looking Statements

This news release contains forward-looking statements. Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, competitive pressures and other important factors detailed in the Company's reports filed with the Securities and Exchange Commission.

Contact:

Lifeway Foods, Inc.

Phone: 877.281.3874

Email: info@Lifeway.net

Investor Relations:

ICR

Katie Turner

John Mills

646.277.1228

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

June 30, 2013 and 2012 (Unaudited) and December 31, 2012

	(Unaudited) June 30,						December 31,
	2013			2012			2012
ASSETS
Current assets
Cash and cash equivalents	$	4,939,948		$	2,000,325		$	2,286,226
Investments		2,483,673			1,867,234			1,869,888
Certificates of deposits in financial institutions		115,373			300,000			450,000
Inventories		7,807,150			5,426,715			5,939,186
Accounts receivable, net of allowance for doubtful
accounts and discounts		9,911,305			9,486,141			8,723,737
Prepaid expenses and other current assets		31,797			96,860			97,138
Other receivables		5,400			104,009			8,825
Deposits		580,974
Deferred income taxes		391,139			512,260			234,687
Refundable income taxes		28,123			0			84,828
Total current assets	$	26,294,882		$	19,793,544		$	19,694,515
Property and equipment, net		14,718,760			14,865,789			14,986,776
Intangible assets
Goodwill and other non-amortizable brand assets		14,068,091			14,068,091			14,068,091
Other intangible assets, net of accumulated amortization of $4,198,439 and $3,465,349 at June 30, 2013 and 2012 and $3,842,756 at
December 31, 2012, respectively		4,107,561			4,840,652			4,463,242
Total intangible assets		18,175,652			18,908,743			18,531,333
Other Assets
Long-term accounts receivable net of current portion		280,000			191,590			294,000
Total assets	$	59,469,294		$	53,759,666		$	53,506,624
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Checks written in excess of bank balances	$	0		$	711,597		$	0
Current maturities of notes payable		545,494			540,478			542,981
Accounts payable		7,166,377			4,769,851			4,256,725
Accrued expenses		1,094,820			593,412			1,155,677
Accrued income taxes		1,224,115			1,639,515			254,311
Total current liabilities		10,030,806			8,254,853			6,209,694
Notes payable		4,726,472			5,228,395			4,955,945
Deferred income taxes		3,018,629			3,240,826			3,028,518
Total liabilities		17,775,907			16,724,074			14,194,157
Stockholders' equity
Common stock, no par value; 40,000,000 shares authorized; 17,273,776 shares issued; 16,346,017 shares outstanding at June 30, 2013; 17,273,776 shares issued; 16,372,217 shares outstanding at June 30, 2012; 17,273,776 shares issued; 16,346,017 shares outstanding at December 31, 2012		6,509,267			6,509,267			6,509,267
Paid-in-capital		2,032,516			2,032,516			2,032,516
Treasury stock, at cost		(8,187,682	)		(7,947,418	)		(8,187,682	)
Retained earnings		41,366,495			36,429,095			38,904,777
Accumulated other comprehensive income (loss), net of taxes		(27,209	)		12,132			53,591
Total stockholders' equity		41,693,387			37,035,592			39,312,469
Total liabilities and stockholders' equity	$	59,469,294		$	53,759,666		$	53,506,626

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Three and Six Months Ended June 30, 2013 and 2012 (unaudited)

	(Unaudited) Three Months Ended June 30,												(Unaudited) Six Months Ended June 30,
	2013						2012						2013						2012
Sales	$	25,838,058					$	22,713,958					$	53,428,680					$	44,259,854
Less: discounts and allowances		(2,760,174	)					(2,160,578	)					(5,963,765	)					(4,309,276	)
Net Sales		23,077,884			23,077,884			20,553,380			20,553,380			47,464,915			47,464,915			39,950,578			39,950,578
Cost of goods sold					15,058,461						12,522,609						30,607,446						25,429,331
Depreciation expense					421,707						413,109						815,832						812,154
Total cost of goods sold					15,480,168						12,935,718						31,423,278						26,241,485
Gross profit					7,597,716						7,617,662						16,041,637						13,709,093
Selling expenses					2,876,635						2,622,275						5,514,354						5,326,515
General and administrative					2,057,581						1,679,931						3,955,425						3,005,886
Amortization expense					177,842						188,705						355,683						377,409
Total Operating Expenses					5,112,058						4,490,911						9,825,462						8,709,810
Income from operations					2,485,658						3,126,751						6,216,175						4,999,283
Other income (expense):
Interest and dividend income					30,622						24,478						45,631						36,049
Rental income					3,389						3,018						6,658						6,017
Interest expense					(37,424	)					(43,918	)					(73,723	)					(94,103	)
Gain (loss) on sale of investments, net, reclassified from OCI					56,944						4,406						121,280						22,390
Other income					10,229						0						10,229						0
Total other income (expense)					63,760						(12,016	)					110,075						(29,647	)
Income before provision for income taxes					2,549,418						3,114,735						6,326,250						4,969,636
Provision for income taxes					1,145,478						1,065,607						2,556,671						1,825,520
Net income				$	1,403,940					$	2,049,128					$	3,769,579					$	3,144,116
Basic and diluted earnings per common share					0.09						0.13						0.23						0.19
Weighted average number of shares outstanding					16,346,017						16,376,601						16,346,017						16,389,674
COMPREHENSIVE INCOME
Net income				$	1,403,940					$	2,049,128						3,769,579					$	3,144,116
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investments (net of tax)					(63,811	)					(15,593	)					(12,277	)					33,730
Less reclassification adjustment for (gains) losses included in net income (net of taxes)					(32,174	)					(2,489	)					(68,523	)					(12,650	)
Comprehensive income				$	1,307,955					$	2,031,046					$	3,688,779					$	3,165,196

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2013 and 2012 (Unaudited)

	(Unaudited)
	June 30,
	2013			2012
Cash flows from operating activities:
Net income	$	3,769,579		$	3,144,116
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization		1,171,515			1,189,563
Loss (gain) on sale of investments, net		(121,280	)		(22,390	)
Deferred income taxes		(104,133	)		(480,311	)
Bad Debt Expense		26,819			172,303
(Increase) decrease in operating assets:
Accounts receivable		(1,211,015	)		(1,610,208	)
Other receivables		3,425			120,195
Inventories		(1,867,964	)		(472,240	)
Refundable income taxes		56,705			41,316
Prepaid expenses and other current assets		(515,633	)		(17,230	)
Increase (decrease) in operating liabilities:
Accounts payable		2,909,652			383,612
Accrued expenses		(60,857	)		39,687
Income taxes payable		969,804			1,639,515
Net cash provided by operating activities		5,026,617			4,127,928
Cash flows from investing activities:
Purchases of investments		(2,573,721	)		(743,675	)
Proceeds from sale of investments		1,948,839			658,233
Redemption of certificates of deposits		334,627			0
Purchases of property and equipment		(547,819	)		(478,428	)
Net cash used in investing activities		(838,074	)		(563,870	)
Cash flows from financing activities:
Checks written in excess of bank balances		—			119,557
Purchases of treasury stock		—			(340,444	)
Dividends paid		(1,307,861	)		(1,146,317	)
Repayment of notes payable		(226,960	)		(1,311,679	)
Net cash used in financing activities		(1,534,821	)		(2,678,883	)
Net (decrease) increase in cash and cash equivalents		2,653,722			885,175
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	$	4,939,948		$	2,000,325

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Provision For Income Taxes

6 Months Ended

Jun. 30, 2013

Provision For Income Taxes [Abstract]

Provision For Income Taxes

Note 10 – PROVISION FOR INCOME TAXES

The provision for income taxes consists of the following:

	For the Six Months Ended
	June 30,
	2013			2012
Current:
Federal	$	1,937,370		$	1,680,072
State and local		723,434			625,759
Total current		2,660,804			2,305,831
Deferred		(104,133	)		(480,311	)
Provision for income taxes	$	2,556,671		$	1,825,520

A reconciliation of the provision for income taxes and the income tax computed at the statutory rate is as follows:

	For the Six Months Ended
	June 30,
	2013						2012
	Amount			Percentage			Amount			Percentage
Federal income tax expense computed at the statutory rate	$	2,150,925			34.0	%	$	1,689,676			34.0	%
State and local tax expense, net		766,896			12.1	%		413,001			8.3	%
U.S. domestic manufacturers' deduction & other permanent differences		(361,150	)		(5.7)	%		(277,157	)		(5.6)	%
Provision for income taxes	$	2,556,671			40.4	%	$	1,825,520			36.7	%

Amounts for deferred tax assets and liabilities are as follows:

	June 30,						December 31,
	2013			2012			2012
Non-current deferred tax assets (liabilities) arising from: Temporary differences -
Accumulated depreciation and amortization
from purchase accounting adjustments	$	(3,102,071	)	$	(3,408,516	)	$	(3,164,716	)
Capital loss carry-forwards		83,442			167,690			136,198
Total non-current net deferred tax liabilities		(3,018,629	)		(3,240,826	)		(3,028,518	)
Current deferred tax assets arising from:
Unrealized losses (gain) on investments		20,948			(21,407	)		(41,260	)
Inventory		348,441			242,200			265,072
Allowance for doubtful accounts and discounts		21,750			200,098			10,875
Allowance for promotions		0			0			0
Capital loss carry-back		0			91,369			0
Total current deferred tax assets		391,139			512,260			234,687
Net deferred tax liability	$	(2,627,490	)	$	(2,728,566	)	$	(2,793,831	)

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Provision For Income Taxes (Summary Of The Provision For Income Taxes) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Provision For Income Taxes [Abstract]
Federal			$ 1,937,370	$ 1,680,072
State and local			723,434	625,759
Total current			2,660,804	2,305,831
Deferred			(104,133)	(480,311)
Provision for income taxes	$ 1,145,478	$ 1,065,607	$ 2,556,671	$ 1,825,520

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Consolidated Statements Of Income And Comprehensive Income (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Consolidated Statements Of Income And Comprehensive Income [Abstract]
Sales	$ 25,838,058	$ 22,713,958	$ 53,428,680	$ 44,259,854
Less: discounts and allowances	(2,760,174)	(2,160,578)	(5,963,765)	(4,309,276)
Net sales	23,077,884	20,553,380	47,464,915	39,950,578
Cost of goods sold	15,058,461	12,522,609	30,607,446	25,429,331
Depreciation expense	421,707	413,109	815,832	812,154
Total cost of goods sold	15,480,168	12,935,718	31,423,278	26,241,485
Gross profit	7,597,716	7,617,662	16,041,637	13,709,093
Selling expenses	2,876,635	2,622,275	5,514,354	5,326,515
General and administrative	2,057,581	1,679,931	3,955,425	3,005,886
Amortization expense	177,842	188,705	355,683	377,409
Total operating expenses	5,112,058	4,490,911	9,825,462	8,709,810
Income from operations	2,485,658	3,126,751	6,216,175	4,999,283
Other income (expense):
Interest and dividend income	30,622	24,478	45,631	36,049
Rental income	3,389	3,018	6,658	6,017
Interest expense	(37,424)	(43,918)	(73,723)	(94,103)
Gain (loss) on sale of investments, net, reclassified from OCI	56,944	4,406	121,280	22,390
Other income	10,229	0	10,229	0
Total other income (expense)	63,760	(12,016)	110,075	(29,647)
Income before provision for income taxes	2,549,418	3,114,735	6,326,250	4,969,636
Provision for income taxes	1,145,478	1,065,607	2,556,671	1,825,520
Net income	1,403,940	2,049,128	3,769,579	3,144,116
Basic and diluted earnings per common share	$ 0.09	$ 0.13	$ 0.23	$ 0.19
Weighted average number of shares outstanding	16,346,017	16,376,601	16,346,017	16,389,674
COMPREHENSIVE INCOME
Net income	1,403,940	2,049,128	3,769,579	3,144,116
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investments (net of tax)	(63,811)	(15,593)	(12,277)	33,730
Less reclassification adjustment for (gains) losses included in net income (net of taxes)	(32,174)	(2,489)	(68,523)	(12,650)
Comprehensive income	$ 1,307,955	$ 2,031,046	$ 3,688,779	$ 3,165,196

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Intangible Assets

6 Months Ended

Jun. 30, 2013

Intangible Assets [Abstract]

Intangible Assets

Note 3 – INTANGIBLE ASSETS

Intangible assets, and the related accumulated amortization, consist of the following:

	June 30, 2013				June 30, 2012				December 31, 2012
	Cost		Accumulated Amortization		Cost		Accumulated Amortization		Cost		Accumulated Amortization
Recipes	$	43,600	$	43,600	$	43,600	$	43,600	$	43,600	$	43,600
Customer lists and other customer related intangibles		4,504,200		2,249,544		4,504,200		1,786,212		4,504,200		2,025,736
Lease acquisition		87,200		87,200		87,200		87,200		87,200		87,200
Customer relationship		985,000		561,743		985,000		485,652		985,000		526,701
Trade names		2,248,000		953,402		2,248,000		803,535		2,248,000		878,469
Formula		438,000		302,950		438,000		259,150		438,000		281,050
	$	8,306,000	$	4,198,439	$	8,306,000	$	3,465,349	$	8,306,000	$	3,842,756

Amortization expense is expected to be approximately the following for the 12 months ending June 30:

2014	$	711,367
2015		711,367
2016		711,367
2017		671,217
2018		657,567
Thereafter		644,676
	$	4,107,561

Amortization expense during the six months ended June 30, 2013 and 2012 was $355,683 and $377,409, respectively.

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Subsequent Event

6 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Event

Note 17 – SUBSEQUENT EVENT

On May 15, 2013, the Company entered into an agreement to acquire the Golden Guernsey dairy plant in Waukesha, WI. The acquisition will increase the production capacity of Lifeway by approximately 170,000 square feet. The purchase price is approximately $7.4 million and the acquisition closed July 2, 2013.

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Supplemental Cash Flow Information (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Supplemental Cash Flow Information [Abstract]
Interest	$ 61,333	$ 108,594
Income taxes	$ 1,691,093	$ 625,055

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Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2013

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Note 11 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest and income taxes are as follows:

	For the Six Months Ended
	June 30,
	2013		2012
Interest	$	61,333	$	108,594
Income taxes	$	1,691,093	$	625,055

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Accrued Expenses (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Accrued Expenses [Abstract]
Accrued payroll and payroll taxes	$ 235,918	$ 356,280	$ 265,488
Accrued property tax	311,376	302,573	311,543
Other	547,526	496,824	16,381
Total accrued expenses	$ 1,094,820	$ 1,155,677	$ 593,412

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Stock Award And Stock Option Plans (Narrative) (Details)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Stock Award And Stock Option Plans [Abstract]
Common stock shares under the Consulting Service Compensation Plan	1,200,000
Number of shares available for issuance	940,000
Stock options outstanding	0	0	0
Stock options exercisable	0	0	0

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Summary Of Significant Accounting Policies (Narrative) (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Summary Of Significant Accounting Policies [Abstract]
Percentage of gross sales	35.00%	36.00%
Percentage of accounts receivable	25.00%	30.00%	33.00%
Total advertising expenses	$ 1,308,306	$ 1,320,326

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2013

Intangible Assets [Abstract]

Schedule Of Accumulated Amortization Of Intangible Assets

	June 30, 2013				June 30, 2012				December 31, 2012
	Cost		Accumulated Amortization		Cost		Accumulated Amortization		Cost		Accumulated Amortization
Recipes	$	43,600	$	43,600	$	43,600	$	43,600	$	43,600	$	43,600
Customer lists and other customer related intangibles		4,504,200		2,249,544		4,504,200		1,786,212		4,504,200		2,025,736
Lease acquisition		87,200		87,200		87,200		87,200		87,200		87,200
Customer relationship		985,000		561,743		985,000		485,652		985,000		526,701
Trade names		2,248,000		953,402		2,248,000		803,535		2,248,000		878,469
Formula		438,000		302,950		438,000		259,150		438,000		281,050
	$	8,306,000	$	4,198,439	$	8,306,000	$	3,465,349	$	8,306,000	$	3,842,756

Amortization Expense On Future Intangible Assets

2014	$	711,367
2015		711,367
2016		711,367
2017		671,217
2018		657,567
Thereafter		644,676
	$	4,107,561

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Summary Of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2013

Summary Of Significant Accounting Policies [Abstract]

Schedule Of Property And Equipment, Estimated Useful Lives

Category	Years
Buildings and improvements	31 and 39
Machinery and equipment	5 – 12
Office equipment	5 – 7
Vehicles	5

Schedule Of Intangible Assets Useful Lives

Category	Years
Recipes	4
Customer lists and other customer related intangibles	7-10
Lease agreement	7
Trade names	15
Formula	10
Customer relationships	12

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Inventories (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Inventories [Abstract]
Finished goods	$ 2,977,298	$ 2,462,548	$ 2,264,409
Production supplies	3,321,484	2,599,668	2,014,097
Raw materials	1,508,368	876,970	1,148,209
Total inventories	$ 7,807,150	$ 5,939,186	$ 5,426,715

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Provision For Income Taxes (Tables)

6 Months Ended

Jun. 30, 2013

Provision For Income Taxes [Abstract]

Summary Of The Provision For Income Taxes

	For the Six Months Ended
	June 30,
	2013			2012
Current:
Federal	$	1,937,370		$	1,680,072
State and local		723,434			625,759
Total current		2,660,804			2,305,831
Deferred		(104,133	)		(480,311	)
Provision for income taxes	$	2,556,671		$	1,825,520

Reconciliation Of The Provision For Income Taxes At Statutory Rate

	For the Six Months Ended
	June 30,
	2013						2012
	Amount			Percentage			Amount			Percentage
Federal income tax expense computed at the statutory rate	$	2,150,925			34.0	%	$	1,689,676			34.0	%
State and local tax expense, net		766,896			12.1	%		413,001			8.3	%
U.S. domestic manufacturers' deduction & other permanent differences		(361,150	)		(5.7)	%		(277,157	)		(5.6)	%
Provision for income taxes	$	2,556,671			40.4	%	$	1,825,520			36.7	%

Schedule Of Deferred Tax Assets And Liabilities

	June 30,						December 31,
	2013			2012			2012
Non-current deferred tax assets (liabilities) arising from: Temporary differences -
Accumulated depreciation and amortization
from purchase accounting adjustments	$	(3,102,071	)	$	(3,408,516	)	$	(3,164,716	)
Capital loss carry-forwards		83,442			167,690			136,198
Total non-current net deferred tax liabilities		(3,018,629	)		(3,240,826	)		(3,028,518	)
Current deferred tax assets arising from:
Unrealized losses (gain) on investments		20,948			(21,407	)		(41,260	)
Inventory		348,441			242,200			265,072
Allowance for doubtful accounts and discounts		21,750			200,098			10,875
Allowance for promotions		0			0			0
Capital loss carry-back		0			91,369			0
Total current deferred tax assets		391,139			512,260			234,687
Net deferred tax liability	$	(2,627,490	)	$	(2,728,566	)	$	(2,793,831	)

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Summary Of Significant Accounting Policies (Schedule Of Intangible Assets Useful Lives) (Details)	6 Months Ended
	Jun. 30, 2013
Recipes [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful lives	4 years
Lease Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful lives	7 years
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful lives	15 years
Formula [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful lives	10 years
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful lives	12 years
Maximum [Member] | Customer Lists And Other Customer Related Intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful lives	10 years
Minimum [Member] | Customer Lists And Other Customer Related Intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful lives	7 years

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Notes Payable (Schedule Of Notes Payable) (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Debt Instrument [Line Items]
Total notes payable	$ 5,271,966	$ 5,498,926	$ 5,768,873
Less current maturities	545,494	542,981	540,478
Total long-term portion	4,726,472	4,955,945	5,228,395
Note Payable to Private Bank [Member]
Debt Instrument [Line Items]
Total notes payable	5,154,445	5,365,556	5,618,889
Debt instrument, monthly installments	42,222
Variable interest rate	2.709%
Maturity date	May 31, 2018
Line Of Credit With Private Bank [Member]
Debt Instrument [Line Items]
Total notes payable	0	0	0
Variable interest rate	3.25%
Maturity date	May 31, 2014
Line of credit, maximum borrowing capacity	5,000,000	2,000,000
Notes Payable To Ford Credit Corp. [Member]
Debt Instrument [Line Items]
Total notes payable	41,641	50,871	59,825
Debt instrument, monthly installments	1,778.23
Variable interest rate	5.99%
Note Payable To Fletcher Jones Of Chicago, Ltd LLC [Member]
Debt Instrument [Line Items]
Total notes payable	75,880	82,499	90,159
Debt instrument, monthly installments	$ 1,768.57
Variable interest rate	6.653%
Maturity date	May 24, 2017

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2013

Accrued Expenses [Abstract]

Schedule Of Accrued Expenses

	June 30,				December 31,
	2013		2012		2012
Accrued payroll and payroll taxes	$	235,918	$	265,488	$	356,280
Accrued property tax		311,376		311,543		302,573
Other		547,526		16,381		496,824
	$	1,094,820	$	593,412	$	1,155,677

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Investments (Narrative) (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Schedule of Available-for-sale Securities [Line Items]
Proceeds from sale of investments	$ 1,948,839	$ 658,233
Gross realized gains	151,472	37,405
Gross realized losses	$ 30,192	$ 15,014
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Number Of Investment Securities	3

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Summary Of Significant Accounting Policies (Policy)

6 Months Ended

Jun. 30, 2013

Summary Of Significant Accounting Policies [Abstract]

Basis Of Presentation

Basis of presentation

The accompanying unaudited financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by general accepted accounting principles for complete financial statements.  However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of Management, necessary for fair statement of results for the interim periods. The unaudited Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with the Consolidated Financial Statements contained in our 2012 Annual Report on Form 10-K.

Principles Of Consolidation

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Helios Nutrition, Ltd., Pride of Main Street, L.L.C., Starfruit, L.L.C., Fresh Made, Inc. and Starfruit Franchisor, L.L.C., Lifeway First Juice, Inc., First Juice, Inc. and Lifeway Wisconsin, Inc. All significant intercompany accounts and transactions have been eliminated.

Use Of Estimates

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the consolidated financial statements include the allowance for doubtful accounts, the valuation of investment securities, the valuation of goodwill, intangible assets, and deferred taxes.

Revenue Recognition

Revenue Recognition

Sales of Company produced dairy products are recorded at the time of shipment and the following four criteria have been met: (i) The product has been shipped and the Company has no significant remaining obligations; (ii) Persuasive evidence of an agreement exists; (iii) The price to the buyer is fixed or determinable and (iv) Collection is probable. In addition, shipping costs invoiced to the customers are included in net sales and the related cost in cost of sales. Discounts and allowances are reported as a reduction of gross sales unless the allowance is attributable to an identifiable benefit separable from the purchase of the product, the value of which can be reasonably estimated, which would be charged to the appropriate expense account.

Customer Concentration

Customer Concentration

Sales are predominately to companies in the retail food industry, located within the United States of America. Two major customers accounted for approximately 35 percent and 36 percent of gross sales for the six months ended June 30, 2013 and 2012, respectively. These customers accounted for approximately 25 percent, 30 percent, and 33 percent of accounts receivable as of June 30, 2013, June 30, 2012, and December 31, 2012, respectively.

Cash And Cash Equivalents

Cash and cash equivalents

All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents.

The Company maintains cash deposits at several institutions located in the greater Chicago, Illinois and Philadelphia, Pennsylvania metropolitan areas.

Investments

Investments

All investment securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders' equity. Amortization, accretion, interest and dividends, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are recorded in other income. All of the Company's securities are subject to a periodic impairment evaluation. This evaluation depends on the specific facts and circumstances. Factors that we consider in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for possible recovery in the market value of the investment.

Accounts Receivable

Accounts receivable

Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral. Balances expected to be paid beyond one year are classified as long-term.

Accounts receivable are recorded at invoice amounts, and reduced to their estimated net realizable value by recognition of an allowance for doubtful accounts and anticipated discounts. The Company's estimate of the allowances for doubtful accounts and anticipated discounts are based upon historical experience, its evaluation of the current status and contract terms of specific receivables, and unusual circumstances, if any. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company's credit terms. Accounts considered uncollectible are charged against the allowance.

Inventories

Inventories

Inventories are stated at the lower of cost or market, cost being determined by the first-in, first-out method.

Property And Equipment

Property and equipment

Property and equipment is stated at depreciated cost or fair value where depreciated cost is not recoverable. Depreciation is computed using the straight-line method. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized.

Property and equipment is being depreciated over the following useful lives:

Category	Years
Buildings and improvements	31 and 39
Machinery and equipment	5 – 12
Office equipment	5 – 7
Vehicles	5

Intangible Assets Acquired In Business Combinations

Intangible assets acquired in business combinations

The Company accounts for intangible assets at historical cost. Intangible assets acquired in a business combination are recorded under the purchase method of accounting at their estimated fair values at the date of acquisition. Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment at least annually. Brand assets represent the fair value of brands acquired. Brand assets have an indefinite life and therefore are not amortized, rather are reviewed periodically for impairment. The Company amortizes other intangible assets over their estimated useful lives, as disclosed in the table below.

The Company reviews intangible assets and their related useful lives at least once per year to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. The Company conducts more frequent impairment assessments if certain conditions exist, including: a change in the competitive landscape, any internal decisions to pursue new or different strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for the Company's products or changes in the size of the market for the Company's products.

If the estimate of an intangible asset's remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life.

Intangible assets are being amortized over the following useful lives:

Category	Years
Recipes	4
Customer lists and other customer related intangibles	7-10
Lease agreement	7
Trade names	15
Formula	10
Customer relationships	12

Income Taxes

Income taxes

Deferred income taxes are the result of temporary differences that arise from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The principal sources of temporary differences are different depreciation and amortization methods for financial statement and tax purposes, unrealized gains or losses related to investments, capitalization of indirect costs for tax purposes, purchase price adjustments, and the recognition of an allowance for doubtful accounts for financial statement purposes.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The only periods subject to examination for the Company's federal returns are the 2010 and 2011 tax years. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.

Treasury Stock

Treasury stock

Treasury stock is recorded using the cost method.

Advertising And Promotional Costs

Advertising and promotional costs

The Company expenses advertising costs as incurred. For the six months ended June 30, 2013 and 2012 total advertising expenses were $1,308,306 and $1,320,326, respectively.

Earnings Per Common Share

Earnings per common share

Earnings per common share were computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. For the six months ended June 30, 2013 and 2012, diluted and basic earnings per share were the same, as the effect of dilutive securities options outstanding was not significant.

Correction of Prior Year Amounts

Correction of Prior Year Amounts

Management has restated the unaudited statements of income and comprehensive income for interim period ending June 30, 2012. During the period ending June 30, 2012, amounts related to cost of production of inventory were not presented as part of cost of goods sold and were erroneously included as general and administrative operation expenses in our previously issued financial statements (see Note 14).

There was no impact on previously reported income, consolidated balance sheets or consolidated statement of cash flows.

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Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Consolidated Statements Of Changes In Stockholders' Equity [Abstract]
Dividends paid per share	$ 0.08	$ 0.07	$ 0.07

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Nature Of Business

6 Months Ended

Jun. 30, 2013

Nature Of Business [Abstract]

Nature Of Business

Note 1 – NATURE OF BUSINESS

Lifeway Foods, Inc. (the "Company" or "Lifeway") commenced operations in February 1986 and incorporated under the laws of the state of Illinois on May 19, 1986. The Company's principal business activity is the production of dairy products. Specifically, the Company produces Kefir, a drinkable product which is similar to but distinct from yogurt, in several flavors sold under the name "Lifeway's Kefir;" a plain farmer's cheese sold under the name "Lifeway's Farmer's Cheese;" a fruit sugar-flavored product similar in consistency to cream cheese sold under the name of "Sweet Kiss;" and a dairy beverage, similar to Kefir, with increased protein and calcium, sold under the name "Basics Plus." The Company also produces a vegetable-based seasoning under the name "Golden Zesta." The Company currently distributes its products throughout the Chicago Metropolitan area and various cities on the East Coast through local food stores. In addition, products are sold throughout the United States and Ontario, Canada by distributors. The Company also distributes some of its products to Eastern Europe.

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Investments

6 Months Ended

Jun. 30, 2013

Investments [Abstract]

Investments

Note 4 – INVESTMENTS

The cost and fair value of investments classified as available for sale are as follows:

June 30, 2013	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Equities	$	893,998	$	83,082	$	(39,910	)	$	937,170
Mutual Funds		17,803		0		(209	)		17,594
Preferred Securities		403,300		40		(26,030	)		377,310
Corporate Bonds		1,216,728		5,100		(70,230	)		1,151,598
Total	$	2,531,829	$	88,222	$	(136,379	)	$	2,483,672

June 30, 2012	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Equities	$	642,977	$	74,414	$	(10,644	)	$	706,747
Mutual Funds		56,872		2,097		(237	)		58,732
Preferred Securities		0		0		0			0
Corporate Bonds		1,118,173		9,483		(25,901	)		1,101,755
Total	$	1,818,022	$	85,994	$	(36,782	)	$	1,867,234
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

Proceeds from the sale of investments were $1,948,839 and $658,233 for the six months ended June 30, 2013 and 2012, respectively.

Gross gains of $151,472 and $37,405 and gross losses of $30,192 and $15,014 were realized on these sales during the six months ended June 30, 2013 and 2012, respectively.

The following table shows the gross unrealized losses and fair value of the Company's investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2013 and 2012 and at December 31, 2012:

	Less Than 12 Months					12 Months or Greater					Total
June 30, 2013	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equities	$	455,403	$	(39,910	)	$	0	$	0		$	455,403	$	(39,910	)
Mutual Funds		17,594		(209	)		0		0			17,594		(209	)
Preferred Securities		302,265		(26,030	)		0		0			302,265		(26,030	)
Corporate Bonds		876,607		(60,701	)		115,691		(9,529	)		992,298		(70,230	)
	$	1,651,869	$	126,850		$	115,691	$	(9,529	)	$	1,767,560	$	(136,379	)

	Less Than 12 Months					12 Months or Greater					Total
June 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equities	$	57,963	$	(6,972	)	$	76,496	$	(3,673	)	$	134,459	$	(10,645	)
Mutual Funds		0		0			2,952		(237	)		2,952		(237	)
Preferred Securities		0		0			0		0			0		0
Corporate Bonds		547,884		(22,864	)		49,090		(3,037	)		596,974		(25,901	)
	$	605,847	$	(29,836	)	$	128,538	$	(6,647	)	$	734,385	$	(36,783	)
	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	)

Equities, Mutual Funds, Preferred Securities, and Corporate Bonds -The Company's investments in equity securities, mutual funds, preferred securities, and corporate bonds consist of investments in common stock, preferred stock and debt securities of companies in various industries. As of June 30, 2013, three corporate bond securities that had unrealized losses. The Company evaluated the near-term prospects of the issuer in relation to the severity and duration of the impairment. Based on that evaluation and the Company's ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company did not consider any material investments to be other-than-temporarily impaired at June 30, 2013.

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Summary Of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows:

Basis of presentation

The accompanying unaudited financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by general accepted accounting principles for complete financial statements.  However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of Management, necessary for fair statement of results for the interim periods. The unaudited Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with the Consolidated Financial Statements contained in our 2012 Annual Report on Form 10-K.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Helios Nutrition, Ltd., Pride of Main Street, L.L.C., Starfruit, L.L.C., Fresh Made, Inc. and Starfruit Franchisor, L.L.C., Lifeway First Juice, Inc., First Juice, Inc. and Lifeway Wisconsin, Inc. All significant intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the consolidated financial statements include the allowance for doubtful accounts, the valuation of investment securities, the valuation of goodwill, intangible assets, and deferred taxes.

Revenue Recognition

Sales of Company produced dairy products are recorded at the time of shipment and the following four criteria have been met: (i) The product has been shipped and the Company has no significant remaining obligations; (ii) Persuasive evidence of an agreement exists; (iii) The price to the buyer is fixed or determinable and (iv) Collection is probable. In addition, shipping costs invoiced to the customers are included in net sales and the related cost in cost of sales. Discounts and allowances are reported as a reduction of gross sales unless the allowance is attributable to an identifiable benefit separable from the purchase of the product, the value of which can be reasonably estimated, which would be charged to the appropriate expense account.

Customer Concentration

Sales are predominately to companies in the retail food industry, located within the United States of America. Two major customers accounted for approximately 35 percent and 36 percent of gross sales for the six months ended June 30, 2013 and 2012, respectively. These customers accounted for approximately 25 percent, 30 percent, and 33 percent of accounts receivable as of June 30, 2013, June 30, 2012, and December 31, 2012, respectively.

Cash and cash equivalents

All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents.

The Company maintains cash deposits at several institutions located in the greater Chicago, Illinois and Philadelphia, Pennsylvania metropolitan areas.

Investments

All investment securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders' equity. Amortization, accretion, interest and dividends, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are recorded in other income. All of the Company's securities are subject to a periodic impairment evaluation. This evaluation depends on the specific facts and circumstances. Factors that we consider in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for possible recovery in the market value of the investment.

Accounts receivable

Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral. Balances expected to be paid beyond one year are classified as long-term.

Accounts receivable are recorded at invoice amounts, and reduced to their estimated net realizable value by recognition of an allowance for doubtful accounts and anticipated discounts. The Company's estimate of the allowances for doubtful accounts and anticipated discounts are based upon historical experience, its evaluation of the current status and contract terms of specific receivables, and unusual circumstances, if any. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company's credit terms. Accounts considered uncollectible are charged against the allowance.

Inventories

Inventories are stated at the lower of cost or market, cost being determined by the first-in, first-out method.

Property and equipment

Property and equipment is stated at depreciated cost or fair value where depreciated cost is not recoverable. Depreciation is computed using the straight-line method. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized.

Property and equipment is being depreciated over the following useful lives:

Category	Years
Buildings and improvements	31 and 39
Machinery and equipment	5 – 12
Office equipment	5 – 7
Vehicles	5

Intangible assets acquired in business combinations

The Company accounts for intangible assets at historical cost. Intangible assets acquired in a business combination are recorded under the purchase method of accounting at their estimated fair values at the date of acquisition. Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment at least annually. Brand assets represent the fair value of brands acquired. Brand assets have an indefinite life and therefore are not amortized, rather are reviewed periodically for impairment. The Company amortizes other intangible assets over their estimated useful lives, as disclosed in the table below.

The Company reviews intangible assets and their related useful lives at least once per year to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. The Company conducts more frequent impairment assessments if certain conditions exist, including: a change in the competitive landscape, any internal decisions to pursue new or different strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for the Company's products or changes in the size of the market for the Company's products.

If the estimate of an intangible asset's remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life.

Intangible assets are being amortized over the following useful lives:

Category	Years
Recipes	4
Customer lists and other customer related intangibles	7-10
Lease agreement	7
Trade names	15
Formula	10
Customer relationships	12

Income taxes

Deferred income taxes are the result of temporary differences that arise from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The principal sources of temporary differences are different depreciation and amortization methods for financial statement and tax purposes, unrealized gains or losses related to investments, capitalization of indirect costs for tax purposes, purchase price adjustments, and the recognition of an allowance for doubtful accounts for financial statement purposes.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The only periods subject to examination for the Company's federal returns are the 2010 and 2011 tax years. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.

Treasury stock

Treasury stock is recorded using the cost method.

Advertising and promotional costs

The Company expenses advertising costs as incurred. For the six months ended June 30, 2013 and 2012 total advertising expenses were $1,308,306 and $1,320,326, respectively.

Earnings per common share

Earnings per common share were computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. For the six months ended June 30, 2013 and 2012, diluted and basic earnings per share were the same, as the effect of dilutive securities options outstanding was not significant.

Correction of Prior Year Amounts

Management has restated the unaudited statements of income and comprehensive income for interim period ending June 30, 2012. During the period ending June 30, 2012, amounts related to cost of production of inventory were not presented as part of cost of goods sold and were erroneously included as general and administrative operation expenses in our previously issued financial statements (see Note 14).

There was no impact on previously reported income, consolidated balance sheets or consolidated statement of cash flows.

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Intangible Assets (Schedule Of Accumulated Amortization Of Intangible Assets) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Finite-Lived Intangible Assets [Line Items]
Cost	$ 8,306,000	$ 8,306,000	$ 8,306,000
Accumulated Amortization	4,198,439	3,842,756	3,465,349
Recipes [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	43,600	43,600	43,600
Accumulated Amortization	43,600	43,600	43,600
Customer Lists And Other Customer Related Intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	4,504,200	4,504,200	4,504,200
Accumulated Amortization	2,249,544	2,025,736	1,786,212
Lease Acquisitions [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	87,200	87,200	87,200
Accumulated Amortization	87,200	87,200	87,200
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	985,000	985,000	985,000
Accumulated Amortization	561,743	526,701	485,652
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	2,248,000	2,248,000	2,248,000
Accumulated Amortization	953,402	878,469	803,535
Formula [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	438,000	438,000	438,000
Accumulated Amortization	$ 302,950	$ 281,050	$ 259,150

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Investments (Tables)

6 Months Ended

Jun. 30, 2013

Investments [Abstract]

Schedule Of Cost And Fair Value Of Available For Sale Investments

June 30, 2013	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Equities	$	893,998	$	83,082	$	(39,910	)	$	937,170
Mutual Funds		17,803		0		(209	)		17,594
Preferred Securities		403,300		40		(26,030	)		377,310
Corporate Bonds		1,216,728		5,100		(70,230	)		1,151,598
Total	$	2,531,829	$	88,222	$	(136,379	)	$	2,483,672

June 30, 2012	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Equities	$	642,977	$	74,414	$	(10,644	)	$	706,747
Mutual Funds		56,872		2,097		(237	)		58,732
Preferred Securities		0		0		0			0
Corporate Bonds		1,118,173		9,483		(25,901	)		1,101,755
Total	$	1,818,022	$	85,994	$	(36,782	)	$	1,867,234
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

Schedule Of Gross Unrealized Loss On Investments

	Less Than 12 Months					12 Months or Greater					Total
June 30, 2013	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equities	$	455,403	$	(39,910	)	$	0	$	0		$	455,403	$	(39,910	)
Mutual Funds		17,594		(209	)		0		0			17,594		(209	)
Preferred Securities		302,265		(26,030	)		0		0			302,265		(26,030	)
Corporate Bonds		876,607		(60,701	)		115,691		(9,529	)		992,298		(70,230	)
	$	1,651,869	$	126,850		$	115,691	$	(9,529	)	$	1,767,560	$	(136,379	)

	Less Than 12 Months					12 Months or Greater					Total
June 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equities
Equities	$	57,963	$	(6,972	)	$	76,496	$	(3,673	)	$	134,459	$	(10,645	)
Mutual Funds		0		0			2,952		(237	)		2,952		(237	)
Preferred Securities		0		0			0		0			0		0
Corporate Bonds		547,884		(22,864	)		49,090		(3,037	)		596,974		(25,901	)
	$	605,847	$	(29,836	)	$	128,538	$	(6,647	)	$	734,385	$	(36,783	)
	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            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	)

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Notes Payable (Tables)

6 Months Ended

Jun. 30, 2013

Notes Payable [Abstract]

Schedule Of Notes Payable

	June 30,				December 31
	2013		2012		2012
Note payable to Private Bank in monthly installments of $42,222, plus variable interest rate, currently at 2.709%, 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.	$	5,154,445	$	5,618,889	$	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 $2.0 million. Collateralized by substantially all assets of the Company. In May 2013, the Company refinanced this Line of Credit. The agreement has been extended with terms allowing borrowings up to $5.0 million and matures on May 31, 2014.		0		0		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.		41,641		59,825		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.		75,880		90,159		82,499
Total notes payable		5,271,966		5,768,873		5,498,926
Less current maturities		545,494		540,478		542,981
Total long-term portion	$	4,726,472	$	5,228,395	$	4,955,945

Maturities Of Notes Payable

For the Period Ended June 30,
2014	$	545,494
2015		545,185
2016		527,653
2017		525,856
2018		3,127,778
Total	$	5,271,966

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Restatement Of 2012 Quarterly Consolidated Financial Statement (Tables)

6 Months Ended

Jun. 30, 2013

Restatement Of 2012 Quarterly Consolidated Financial Statement [Abstract]

Schedule of Revisions To Previously Filed Statements

	(Unaudited) Six Months Ended June 30, 2012
	As Previously Reported		Adjustment			As Restated
Income Statement
Net Sales	$	39,950,578	$	0		$	39,950,578
COGS	$	25,153,336	$	1,088,149		$	26,241,485
Gross Profit	$	14,797,242	$	(1,088,149	)	$	13,709,093
Operating Expenses	$	9,797,959	$	(1,088,149	)	$	8,709,810
Income from Operations	$	4,999,283	$	0		$	4,999,283

	(Unaudited) Three Months Ended June 30, 2012
	As Previously Reported		Adjustment			As Restated
Income Statement
Net Sales	$	20,553,380	$	0		$	20,553,380
COGS	$	12,515,950	$	419,768		$	12,935,718
Gross Profit	$	8,037,430	$	(419,768	)	$	7,617,662
Operating Expenses	$	4,910,678	$	(419,768	)	$	4,490,911
Income from Operations	$	3,126,752	$	0		$	3,126,751

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Provision For Income Taxes (Schedule Of Deferred Tax Assets And Liabilities) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Provision For Income Taxes [Abstract]
Accumulated depreciation and amortization from purchase accounting adjustments	$ (3,102,071)	$ (3,164,716)	$ (3,408,516)
Capital loss carry-forwards	83,442	136,198	167,690
Total non-current net deferred tax liabilities	(3,018,629)	(3,028,518)	(3,240,826)
Unrealized losses (gains) on investments	20,948	(41,260)	(21,407)
Inventory	348,441	265,072	242,200
Allowance for doubtful accounts and discounts	21,750	10,875	200,098
Allowance for promotions	0	0	0
Capital loss carry-back	0	0	91,369
Total current deferred tax assets	391,139	234,687	512,260
Net deferred tax liability	$ (2,627,490)	$ (2,793,831)	$ (2,728,566)

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Notes Payable (Maturities Of Notes Payable) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Notes Payable [Abstract]
2014	$ 545,494
2015	545,185
2016	527,653
2017	525,856
2018	3,127,778
Total	$ 5,271,966	$ 5,498,926	$ 5,768,873

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Investments (Schedule Of Gross Unrealized Loss On Investments) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	$ 1,651,869	$ 364,849	$ 605,847
Less Than 12 Months, Unrealized Losses	126,850	(6,466)	(29,836)
12 Months or Greater, Fair Value	115,691	215,840	128,538
12 Months or Greater, Unrealized Losses	(9,529)	(5,771)	(6,647)
Total, Fair Value	1,767,560	580,689	734,385
Total, Unrealized Losses	(136,379)	(12,237)	(36,783)
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	455,403	63,620	57,963
Less Than 12 Months, Unrealized Losses	(39,910)	(3,745)	(6,972)
12 Months or Greater, Fair Value	0	21,910	76,496
12 Months or Greater, Unrealized Losses	0	(1,445)	(3,673)
Total, Fair Value	455,403	85,530	134,459
Total, Unrealized Losses	(39,910)	(5,190)	(10,645)
Mutual Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	17,594		0
Less Than 12 Months, Unrealized Losses	(209)		0
12 Months or Greater, Fair Value	0		2,952
12 Months or Greater, Unrealized Losses	0		(237)
Total, Fair Value	17,594		2,952
Total, Unrealized Losses	(209)		(237)
Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	302,265		0
Less Than 12 Months, Unrealized Losses	(26,030)		0
12 Months or Greater, Fair Value	0		0
12 Months or Greater, Unrealized Losses	0		0
Total, Fair Value	302,265		0
Total, Unrealized Losses	(26,030)		0
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months, Fair Value	876,607	301,229	547,884
Less Than 12 Months, Unrealized Losses	(60,701)	(2,721)	(22,864)
12 Months or Greater, Fair Value	115,691	193,930	49,090
12 Months or Greater, Unrealized Losses	(9,529)	(4,326)	(3,037)
Total, Fair Value	992,298	495,159	596,974
Total, Unrealized Losses	$ (70,230)	$ (7,047)	$ (25,901)

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Consolidated Statements Of Financial Condition (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Consolidated Statements Of Financial Condition [Abstract]
Accumulated Amortization	$ 4,198,439	$ 3,842,756	$ 3,465,349
Common stock, no par value
Common stock, shares authorized	40,000,000	40,000,000	40,000,000
Common stock, shares issued	17,273,776	17,273,776	17,273,776
Common stock, shares outstanding	16,346,017	16,346,017	16,372,217

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Accrued Expenses

6 Months Ended

Jun. 30, 2013

Accrued Expenses [Abstract]

Accrued Expenses

Note 7 – ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30,				December 31,
	2013		2012		2012
Accrued payroll and payroll taxes	$	235,918	$	265,488	$	356,280
Accrued property tax		311,376		311,543		302,573
Other		547,526		16,381		496,824
	$	1,094,820	$	593,412	$	1,155,677

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Consolidated Statements Of Changes In Stockholders' Equity (USD $)	Common Stock [Member]	Paid In Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss), Net Of Tax [Member]	Total
Balance at Dec. 31, 2011	$ 6,509,267	$ 2,032,516	$ (7,606,974)	$ 34,431,296	$ (8,948)	$ 35,357,157
Balance, treasury stock, shares at Dec. 31, 2011			864,459
Balance, shares outstanding at Dec. 31, 2011	16,409,317
Balance, shares issued at Dec. 31, 2011	17,273,776
Redemption of stock, shares	(37,100)		37,100
Redemption of stock	0	0	(340,444)	0	0	(340,444)
Other comprehensive income (loss):
Unrealized gains on securities, net of taxes	0	0	0	0	21,080	21,080
Net income	0	0	0	3,144,116	0	3,144,116
Dividends per share	0	0	0	(1,146,317)	0	(1,146,317)
Balance at Jun. 30, 2012	6,509,267	2,032,516	(7,947,418)	36,429,095	12,132	37,035,592
Balance, treasury stock, shares at Jun. 30, 2012			901,559
Balance, shares issued at Jun. 30, 2012	17,273,776					17,273,776
Balance, shares outstanding at Jun. 30, 2012	16,372,217					16,372,217
Balance at Dec. 31, 2011	6,509,267	2,032,516	(7,606,974)	34,431,296	(8,948)	35,357,157
Balance, treasury stock, shares at Dec. 31, 2011			864,459
Balance, shares outstanding at Dec. 31, 2011	16,409,317
Balance, shares issued at Dec. 31, 2011	17,273,776
Redemption of stock, shares	(63,300)		63,300
Redemption of stock	0	0	(580,708)	0	0	(580,708)
Other comprehensive income (loss):
Unrealized gains on securities, net of taxes	0	0	0	0	62,539	62,539
Net income	0	0	0	5,619,798	0	5,619,798
Dividends per share	0	0	0	(1,146,317)	0	(1,146,317)
Balance at Dec. 31, 2012	6,509,267	2,032,516	(8,187,682)	38,904,777	53,591	39,312,469
Balance, treasury stock, shares at Dec. 31, 2012			927,759
Balance, shares issued at Dec. 31, 2012	17,273,776					17,273,776
Balance, shares outstanding at Dec. 31, 2012	16,346,017					16,346,017
Other comprehensive income (loss):
Unrealized gains on securities, net of taxes	0	0	0	0	(80,800)	(80,800)
Net income	0	0	0	3,769,579	0	3,769,579
Dividends per share	0	0	0	(1,307,861)	0	(1,307,861)
Balance at Jun. 30, 2013	$ 6,509,267	$ 2,032,516	$ (8,187,682)	$ 41,366,495	$ (27,209)	$ 41,693,387
Balance, treasury stock, shares at Jun. 30, 2013			927,759
Balance, shares issued at Jun. 30, 2013	17,273,776					17,273,776
Balance, shares outstanding at Jun. 30, 2013	16,346,017					16,346,017

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Fair Value Measurements (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notes Payable	$ 4,726,472	$ 5,498,926
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notes Payable	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notes Payable	4,726,472	5,498,926
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notes Payable	0	0
Cash [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	4,939,948	2,286,226	532,107
Cash [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	4,939,948	2,286,226	532,107
Cash [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0	0	0
Cash [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0	0	0
Growth [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			6,849
Growth [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			6,849
Growth [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			0
Growth [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			0
Equity Income [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			51,974
Equity Income [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			51,974
Equity Income [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			0
Equity Income [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			0
Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			12,582
Bonds [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			12,582
Bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			0
Bonds [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value			0
Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	115,373	439,982	280,621
Certificates of Deposit [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0	0	0
Certificates of Deposit [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	115,373	439,982	280,621
Certificates of Deposit [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0	0	0
Common Stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	954,765	725,670	700,835
Common Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	954,765	725,670	700,835
Common Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0	0	0
Common Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0	0	0
Preferred Stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	377,310		(6,760)
Preferred Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	377,310		(6,760)
Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0		0
Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0		0
Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	1,151,598	1,144,229	1,101,754
Corporate Bonds [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	0	0	0
Corporate Bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	1,151,598	1,144,229	1,101,754
Corporate Bonds [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	$ 0	$ 0	$ 0

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Consolidated Statements Of Financial Condition (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Current assets
Cash and cash equivalents	$ 4,939,948	$ 2,286,226	$ 2,000,325
Investments	2,483,673	1,869,888	1,867,234
Certificates of deposits in financial institutions	115,373	450,000	300,000
Inventories	7,807,150	5,939,186	5,426,715
Accounts receivable, net of allowance for doubtful accounts and discounts	9,911,305	8,723,737	9,486,141
Prepaid expenses and other current assets	31,797	97,138	96,860
Other receivables	5,400	8,825	104,009
Deposits	580,974
Deferred income taxes	391,139	234,687	512,260
Refundable income taxes	28,123	84,828	0
Total current assets	26,294,882	19,694,515	19,793,544
Property and equipment, net	14,718,760	14,986,776	14,865,789
Intangible assets
Goodwill and other non amortizable brand assets	14,068,091	14,068,091	14,068,091
Other intangible assets, net of accumulated amortization of $4,198,439 and $3,465,349 at June 30, 2013 and 2012 and $3,842,756 At December 31, 2012, respectively	4,107,561	4,463,242	4,840,652
Total intangible assets	18,175,652	18,531,333	18,908,743
Other Assets
Long-term accounts receivable net of current portion	280,000	294,000	191,590
Total assets	59,469,294	53,506,624	53,759,666
Current liabilities
Checks written in excess of bank balances	0	0	711,597
Current maturities of notes payable	545,494	542,981	540,478
Accounts payable	7,166,377	4,256,725	4,769,851
Accrued expenses	1,094,820	1,155,677	593,412
Accrued income taxes	1,224,115	254,311	1,639,515
Total current liabilities	10,030,806	6,209,694	8,254,853
Notes payable	4,726,472	4,955,945	5,228,395
Deferred income taxes	3,018,629	3,028,518	3,240,826
Total liabilities	17,775,907	14,194,157	16,724,074
Stockholders' equity
Common stock, no par value; 40,000,000 shares authorized; 17,273,776 shares issued; 16,346,017 shares outstanding at June 30, 2013; 17,273,776 shares issued; 16,372,217 shares outstanding at June 30, 2012; 17,273,776 shares issued; 16,346,017 shares outstanding at December 31, 2012	6,509,267	6,509,267	6,509,267
Paid-in-capital	2,032,516	2,032,516	2,032,516
Treasury stock, at cost	(8,187,682)	(8,187,682)	(7,947,418)
Retained earnings	41,366,495	38,904,777	36,429,095
Accumulated other comprehensive income (loss), net of taxes	(27,209)	53,591	12,132
Total stockholders' equity	41,693,387	39,312,469	37,035,592
Total liabilities and stockholders' equity	$ 59,469,294	$ 53,506,626	$ 53,759,666

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Commitments And Contingencies (Narrative) (Details) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Commitments And Contingencies [Abstract]
Total expenses on leases	$ 175,209	$ 106,708	$ 379,348

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Inventories (Tables)

6 Months Ended

Jun. 30, 2013

Inventories [Abstract]

Schedule Of Inventories

	June 30,				December 31,
	2013		2012		2012
Finished goods	$	2,977,298	$	2,264,409	$	2,462,548
Production supplies		3,321,484		2,014,097		2,599,668
Raw materials		1,508,368		1,148,209		876,970
Total inventories	$	7,807,150	$	5,426,715	$	5,939,186

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2013

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 16 – RECENT ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued ASU No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS." This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards ("IFRS"). ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 became effective for the Company on January 1, 2012. Management adopted this statement effective January 1, 2012.

In February 2013, the Financial Accounting Standards Board ("FASB") amended the disclosure requirements regarding the reporting of amounts reclassified out of accumulated other comprehensive income.   The amendment does not change the current requirement for reporting net income or other comprehensive income, but requires additional disclosures about items reclassified out of accumulated other comprehensive income, and the income statement line items impacted by the reclassifications.  We adopted this standard effective January 1, 2013.  Other than the additional disclosure requirements, the adoption of this standard did not have a material impact on our unaudited Consolidated Financial Statements.

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Investments (Schedule Of Cost And Fair Value Of Available For Sale Investments) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 2,531,829	$ 1,775,038	$ 1,818,022
Unrealized Gains	88,222	107,087	85,994
Unrealized Losses	(136,379)	(12,237)	(36,782)
Fair Value	2,483,672	1,869,888	1,867,234
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	893,998	639,974	642,977
Unrealized Gains	83,082	90,875	74,414
Unrealized Losses	(39,910)	(5,190)	(10,644)
Fair Value	937,170	725,659	706,747
Mutual Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	17,803		56,872
Unrealized Gains	0		2,097
Unrealized Losses	(209)		(237)
Fair Value	17,594		58,732
Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	403,300		0
Unrealized Gains	40		0
Unrealized Losses	(26,030)		0
Fair Value	377,310		0
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	1,216,728	1,135,064	1,118,173
Unrealized Gains	5,100	16,212	9,483
Unrealized Losses	(70,230)	(7,047)	(25,901)
Fair Value	$ 1,151,598	$ 1,144,229	$ 1,101,755

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Provision For Income Taxes (Reconciliation Of The Provision For Income Taxes At Statutory Rate) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Provision For Income Taxes [Abstract]
Federal income tax expense computed at the statutory rate			$ 2,150,925	$ 1,689,676
Federal income tax expense computed at the statutory rate, percentage			34.00%	34.00%
State and local tax expense, net			766,896	413,001
State and local tax expense, percentage			12.10%	8.30%
U.S. domestic manufacturers' deduction & other permanent differences			(361,150)	(277,157)
U.S. domestic manufacturers' deduction & other permanent differences, percentage			(5.70%)	(5.60%)
Provision for income taxes, percentage			40.40%	36.70%
Provision for income taxes	$ 1,145,478	$ 1,065,607	$ 2,556,671	$ 1,825,520

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Summary Of Significant Accounting Policies (Schedule Of Property And Equipment, Estimated Useful Lives) (Details)	6 Months Ended
	Jun. 30, 2013
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years
Maximum [Member] | Building And Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	39 years
Maximum [Member] | Machinery And Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	12 years
Maximum [Member] | Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	7 years
Minimum [Member] | Building And Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	31 years
Minimum [Member] | Machinery And Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years
Minimum [Member] | Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years

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Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2013

Supplemental Cash Flow Information [Abstract]

Summary Of Cash Paid For Interest And Income Taxes

	For the Six Months Ended
	June 30,
	2013		2012
Interest	$	61,333	$	108,594
Income taxes	$	1,691,093	$	625,055

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Measurements [Abstract]

Schedule Of Fair Value Assets And Liabilities As Classified

	Assets and Liabilities at Fair Value as of June 30, 2013
		Level 1		Level 2		Level 3		Total
Cash		$	4,939,948	$	0	$	0	$	4,939,948
Certificate of Deposits			0		115,373		0		115,373
Stocks			954,765		0		0		954,765
Preferred Securities			377,310		0		0		377,310
Corporate Bonds			0		1,151,598		0		1,151,598
Notes Payable			0		4,726,472		0		4,726,472

	Assets and Liabilities at Fair Value as of June 30, 2012
	Level 1		Level 2		Level 3		Total
Cash	$	532,107	$	0	$	0	$	532,107
Mutual Funds:
Growth		6,849		0		0		6,849
Equity Income		51,974		0		0		51,974
Bonds		12,582		0		0		12,582
Certificate of Deposits		0		280,621		0		280,621
Stocks		700,835		0		0		700,835
Preferred Stock		(6,760)		0		0		(6,760	)
Corporate Bonds		0		1,101,754		0		1,101,754

	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

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Property And Equipment

6 Months Ended

Jun. 30, 2013

Property And Equipment [Abstract]

Property And Equipment

Note 6 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

	June 30,				December 31,
	2013		2012		2012
Land	$	1,178,160	$	1,178,160	$	1,178,160
Buildings and improvements		12,220,693		11,684,498		11,904,919
Machinery and equipment		16,007,943		15,070,709		15,185,204
Vehicles		1,350,608		1,379,590		1,346,078
Office equipment		429,013		409,561		411,773
Construction in process		0		0		612,468
		31,186,417		29,722,518		30,638,602
Less accumulated depreciation		16,467,657		14,856,729		15,651,826
Total property and equipment	$	14,718,760	$	14,865,789	$	14,986,776

Depreciation expense during the three months ended June 30, 2013 and 2012 was $815,832 and $812,154, respectively.

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Property And Equipment (Tables)

6 Months Ended

Jun. 30, 2013

Property And Equipment [Abstract]

Schedule Of Property And Equipment

	June 30,				December 31,
	2013		2012		2012
Land	$	1,178,160	$	1,178,160	$	1,178,160
Buildings and improvements		12,220,693		11,684,498		11,904,919
Machinery and equipment		16,007,943		15,070,709		15,185,204
Vehicles		1,350,608		1,379,590		1,346,078
Office equipment		429,013		409,561		411,773
Construction in process		0		0		612,468
		31,186,417		29,722,518		30,638,602
Less accumulated depreciation		16,467,657		14,856,729		15,651,826
Total property and equipment	$	14,718,760	$	14,865,789	$	14,986,776

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Intangible Assets (Amortization Expense On Future Intangible Assets) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Intangible Assets [Abstract]
2014	$ 711,367		$ 711,367
2015	711,367		711,367
2016	711,367		711,367
2017	671,217		671,217
2018	657,567		657,567
Thereafter	644,676		644,676
Finite-Lived Intangible Assets, Net, Total	4,107,561	4,840,652	4,107,561	4,840,652	4,463,242
Amortization expense	$ 177,842	$ 188,705	$ 355,683	$ 377,409

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Commitments And Contingencies

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies [Abstract]

Commitments And Contingencies

Note 9 – COMMITMENTS AND CONTINGENCIES

The Company leases four stores for its Starfruit subsidiary. Total expense for these leases was approximately $175,209, $106,708 and $379,348 for the three months ended June 30, 2013 and 2012 and for the year ended December 31, 2012, respectively. The Company is also responsible for additional rent equal to real estate taxes and other operating expenses. Future annual minimum base rental payments for the leases as of June 30, 2013 are approximately as follows:

2014	$	66,614
2015		44,799
2016		46,143
2017		47,527
2018		48,953
Thereafter		24,838
Total	$	278,874

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Inventories

6 Months Ended

Jun. 30, 2013

Inventories [Abstract]

Inventories

Note 5 – INVENTORIES

Inventories consist of the following:

	June 30,				December 31,
	2013		2012		2012
Finished goods	$	2,977,298	$	2,264,409	$	2,462,548
Production supplies		3,321,484		2,014,097		2,599,668
Raw materials		1,508,368		1,148,209		876,970
Total inventories	$	7,807,150	$	5,426,715	$	5,939,186

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Consolidated Statements Of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income	$ 3,769,579	$ 3,144,116
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	1,171,515	1,189,563
Loss (gain) on sale of investments, net	(121,280)	(22,390)
Deferred income taxes	(104,133)	(480,311)
Bad Debt Expense	26,819	172,303
(Increase) decrease in operating assets:
Accounts receivable	(1,211,015)	(1,610,208)
Other receivables	3,425	120,195
Inventories	(1,867,964)	(472,240)
Refundable income taxes	56,705	41,316
Prepaid expenses and other current assets	(515,633)	(17,230)
Increase (decrease) in operating liabilities:
Accounts payable	2,909,652	383,612
Accrued expenses	(60,857)	39,687
Income taxes payable	969,804	1,639,515
Net cash provided by operating activities	5,026,617	4,127,928
Cash flows from investing activities:
Purchases of investments	(2,573,721)	(743,675)
Proceeds from sale of investments	1,948,839	658,233
Redemption of certificates of deposits	334,627	0
Purchases of property and equipment	(547,819)	(478,428)
Net cash used in investing activities	(838,074)	(563,870)
Cash flows from financing activities:
Checks written in excess of bank balances		119,557
Purchases of treasury stock		(340,444)
Dividends paid	(1,307,861)	(1,146,317)
Repayment of notes payable	(226,960)	(1,311,679)
Net cash used in financing activities	(1,534,821)	(2,678,883)
Net (decrease) increase in cash and cash equivalents	2,653,722	885,175
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	$ 4,939,948	$ 2,000,325

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Commitments And Contingencies (Schedule Of Annual Minimum Base Rental Payments)(Details) (USD $)	Jun. 30, 2013
Commitments And Contingencies [Abstract]
2014	$ 66,614
2015	44,799
2016	46,143
2017	47,527
2018	48,953
Thereafter	24,838
Total	$ 278,874

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Property And Equipment (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 31,186,417	$ 29,722,518	$ 30,638,602
Less accumulated depreciation	16,467,657	14,856,729	15,651,826
Total property and equipment	14,718,760	14,865,789	14,986,776
Depreciation expense	815,832	812,154
Land [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,178,160	1,178,160	1,178,160
Building And Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	12,220,693	11,684,498	11,904,919
Machinery And Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	16,007,943	15,070,709	15,185,204
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,350,608	1,379,590	1,346,078
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	429,013	409,561	411,773
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 0	$ 0	$ 612,468

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Commitments And Contingencies (Tables)

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies [Abstract]

Schedule Of Annual Minimum Base Rental Payments

2014	$	66,614
2015		44,799
2016		46,143
2017		47,527
2018		48,953
Thereafter		24,838
Total	$	278,874

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Restatement Of 2012 Quarterly Consolidated Financial Statement (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net Sales	$ 23,077,884	$ 20,553,380	$ 47,464,915	$ 39,950,578
COGS	15,480,168	12,935,718	31,423,278	26,241,485
Gross profit	7,597,716	7,617,662	16,041,637	13,709,093
Operating Expenses	5,112,058	4,490,911	9,825,462	8,709,810
Income from operations	2,485,658	3,126,751	6,216,175	4,999,283
As Previously Reported [Member]
Net Sales		20,553,380		39,950,578
COGS		12,515,950		25,153,336
Gross profit		8,037,430		14,797,242
Operating Expenses		4,910,678		9,797,959
Income from operations		3,126,752		4,999,283
Adjustment [Member]
Net Sales		0		0
COGS		419,768		1,088,149
Gross profit		(419,768)		(1,088,149)
Operating Expenses		(419,768)		(1,088,149)
Income from operations		$ 0		$ 0

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Stock Award And Stock Option Plans

6 Months Ended

Jun. 30, 2013

Stock Award And Stock Option Plans [Abstract]

Stock Award And Stock Option Plans

Note 12 – STOCK AWARD AND STOCK OPTION PLANS

The Company has a registration statement filed with the Securities and Exchange Commission in connection with a Consulting Service Compensation Plan covering up to 1,200,000 of the Company's common stock shares. Pursuant to such Plan, the Company may issue common stock or options to purchase common stock to certain consultants, service providers, and employees of the Company. The option price, number of shares, grant date, and vesting terms are determined at the discretion of the Company's Board of Directors.

As of December 31, 2012 and at June 30, 2013 and 2012, there were no stock options outstanding or exercisable. There were approximately 940,000 shares available for issuance under the Plan at June 30, 2013.

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Notes Payable

6 Months Ended

Jun. 30, 2013

Notes Payable [Abstract]

Notes Payable

Note 8 – NOTES PAYABLE

Notes payable consist of the following:

	June 30,				December 31
	2013		2012		2012
Note payable to Private Bank in monthly installments of $42,222, plus variable interest rate, currently at 2.709%, 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.	$	5,154,445	$	5,618,889	$	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 $2.0 million. Collateralized by substantially all assets of the Company. In May 2013, the Company refinanced this Line of Credit. The agreement has been extended with terms allowing borrowings up to $5.0 million and matures on May 31, 2014.		0		0		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.		41,641		59,825		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.		75,880		90,159		82,499
Total notes payable		5,271,966		5,768,873		5,498,926
Less current maturities		545,494		540,478		542,981
Total long-term portion	$	4,726,472	$	5,228,395	$	4,955,945

In accordance with the Private Bank agreements referenced above, the Company is subject to minimum fixed charged ratio and tangible net worth thresholds.

Maturities of notes payables are as follows:

For the Period Ended June 30,
2014	$	545,494
2015		545,185
2016		527,653
2017		525,856
2018		3,127,778
Total	$	5,271,966

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Litigation

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies [Abstract]

Litigation

Note 15 – LITIGATION

The Company is named a party to lawsuits in the normal course of business. In the opinion of management, the resolution of these lawsuits will not have a material adverse effect on the Company's consolidated financial position or results of operations.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 13 – FAIR VALUE MEASUREMENTS

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

Level 1. Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2. Inputs to the valuation methodology include the following:

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.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used as of June 30, 2013 and 2012, and December 31, 2012.

The majority of the Company's short-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company's valuation of its Level 1 investments, which include mutual funds, is based on quoted market prices in active markets for identical securities. The Company's valuation of its Level 2 investments, which include certificates of deposits, is based on other observable inputs, specifically a valuation model which utilized vendor pricing for similar securities.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Company's financial assets at fair value as of June 30, 2013 and 2012 and for the year ended December 31, 2012. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

	Assets and Liabilities at Fair Value as of June 30, 2013
	Level 1		Level 2		Level 3		Total
Cash	$	4,939,948	$	0	$	0	$	4,939,948
Certificate of Deposits		0		115,373		0		115,373
Stocks		954,765		0		0		954,765
Preferred Securities		377,310		0		0		377,310
Corporate Bonds		0		1,151,598		0		1,151,598
Notes Payable		0		4,726,472		0		4,726,472

	Assets and Liabilities at Fair Value as of June 30, 2012
	Level 1		Level 2		Level 3		Total
Cash	$	532,107	$	0	$	0	$	532,107
Mutual Funds:
Growth		6,849		0		0		6,849
Equity Income		51,974		0		0		51,974
Bonds		12,582		0		0		12,582
Certificate of Deposits		0		280,621		0		280,621
Stocks		700,835		0		0		700,835
Preferred Stock		(6,760)		0		0		(6,760	)
Corporate Bonds		0		1,101,754		0		1,101,754

	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

The Company's financial assets and liabilities also include accounts receivable, other receivables and, accounts payable for which carrying value approximates fair value. All such assets are valued using level 2 inputs.

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Document And Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 08, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Entity Registrant Name	LIFEWAY FOODS INC
Entity Central Index Key	0000814586
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		16,386,017

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Restatement Of 2012 Quarterly Consolidated Financial Statement

6 Months Ended

Jun. 30, 2013

Restatement Of 2012 Quarterly Consolidated Financial Statement [Abstract]

Restatement Of 2012 Quarterly Consolidated Financial Statement

Note 14 – RESTATEMENT OF 2012 QUARTERLY CONSOLIDATED FINANCIAL STATEMENT

The consolidated statements of income for the year-to-date period ended June 30, 2012, that were previously included in our Quarterly Reports on Forms 10-Q filed in 2012, were restated as a result of erroneous presentation of production activity within general and administrative operating expenses.

These restatements result in increases in cost of goods sold and corresponding decreases in general and administrative operating expenses. These restatements had no impact on our previously reported net income, condensed consolidated balance sheets or consolidated statements of cash flows.

As detailed in the table below, these restatements impact the following consolidated statement of income line items:

	(Unaudited) Six Months Ended June 30, 2012
	As Previously Reported		Adjustment			As Restated
Income Statement
Net Sales	$	39,950,578	$	0		$	39,950,578
COGS	$	25,153,336	$	1,088,149		$	26,241,485
Gross Profit	$	14,797,242	$	(1,088,149	)	$	13,709,093
Operating Expenses	$	9,797,959	$	(1,088,149	)	$	8,709,810
Income from Operations	$	4,999,283	$	0		$	4,999,283

	(Unaudited) Three Months Ended June 30, 2012
	As Previously Reported		Adjustment			As Restated
Income Statement
Net Sales	$	20,553,380	$	0		$	20,553,380
COGS	$	12,515,950	$	419,768		$	12,935,718
Gross Profit	$	8,037,430	$	(419,768	)	$	7,617,662
Operating Expenses	$	4,910,678	$	(419,768	)	$	4,490,911
Income from Operations	$	3,126,752	$	0		$	3,126,751

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Subsequent Event (Details) (Golden Guernsey [Member], Subsequent Event [Member], USD $) In Millions, unless otherwise specified	0 Months Ended
	May 15, 2013 sqft
Golden Guernsey [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Acquisition agreement date	May 15, 2013
Production capacity space, increase	170,000
Purchase price	$ 7.4
Acquisition agreement close date	Jul. 02, 2013