Form SC 13D/A - General Statement of Acquisition of Beneficial Ownership: [Amend]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 19)*

 

LIFEWAY FOODS, INC.

 

(Name of Issuer)

 

Common Stock

 

(Title of Class of Securities)

 

531914109

 

(CUSIP Number)

 

Edward Smolyansky
1219 N Wells St

Chicago, IL 60610

[phone]

 

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

 

 

July 18, 2024

 

(Date of Event Which Requires Filing of this Statement)

 

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ☐

 

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See 240.13d-7(b) for other parties to whom copies are to be sent.

 

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.

 

The information required in the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

 

 

 

SCHEDULE 13D

 

CUSIP No. 531914109
	1.	Names of reporting persons   Ludmila Smolyansky
	2.	Check the appropriate box if a member of a group (see instructions)
		(a)			☒
		(b)			☐
	3.	SEC use only
	4.	Source of funds (see instructions)   OO
	5.	Check if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e)   ☐
	6.	Citizenship of place of organization   United States
Number of shares beneficially owned by each reporting person with			7.	Sole voting power                       1,167,096
			8.	Shared voting power                  75,000
			9.	Sole dispositive power               1,167,096
			10.	Shared dispositive power          75,000
	11.	Aggregate amount beneficially owned by each reporting person   1,242,096
	12.	Check if the aggregate amount in Row (11) excludes certain shares (See Instructions)   ☐
	13.	Percent of class represented by amount in Row (11)   8.4%
	14.	Type of reporting person (see instructions)   IN

 

 

2

 

 

SCHEDULE 13D

 

CUSIP No. 531914109
	1.	Names of reporting persons   Edward Smolyansky
	2.	Check the appropriate box if a member of a group (see instructions)
		(a)			☒
		(b)			☐
	3.	SEC use only
	4.	Source of funds (see instructions)   OO
	5.	Check if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e)   ☐
	6.	Citizenship of place of organization   United States
Number of shares beneficially owned by each reporting person with			7.	Sole voting power                     2,604,975
			8.	Shared voting power                575,000
			9.	Sole dispositive power             2,604,975
			10.	Shared dispositive power        575,000
	11.	Aggregate amount beneficially owned by each reporting person   3,179,975
	12.	Check if the aggregate amount in Row (11) excludes certain shares (see instructions)   ☐
	13.	Percent of class represented by amount in Row (11)   21.6%
	14.	Type of reporting person (see instructions)   IN

 

 

3

 

 

SCHEDULE 13D

 

CUSIP No. 531914109
	1.	Names of reporting persons   The Edward Smolyansky Trust 2/2/16
	2.	Check the appropriate box if a member of a group (see instructions)
		(a)			☒
		(b)			☐
	3.	SEC use only
	4.	Source of funds (see instructions)   OO
	5.	Check if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e)   ☐
	6.	Citizenship of place of organization   United States
Number of shares beneficially owned by each reporting person with			7.	Sole voting power                  1,233,333
			8.	Shared voting power             0
			9.	Sole dispositive power          1,233,333
			10.	Shared dispositive power     0
	11.	Aggregate amount beneficially owned by each reporting person   1,233,333
	12.	Check if the aggregate amount in Row (11) excludes certain shares (see instructions)   ☐
	13.	Percent of class represented by amount in Row (11)   8.4%
	14.	Type of reporting person (see instructions)   OO

 

 

4

 

 

AMENDMENT NO. 19 to SCHEDULE 13D

 

This Amendment No. 19 (this “Amendment”) further amends and supplements the Schedule 13D filed by Ludmila Smolyansky, Edward Smolyansky and The Edward Smolyansky Trust 2/2/16 (the “Edward Smolyansky Trust” and, together with Ludmila Smolyansky and Edward Smolyansky, the “Filing Persons”). This Amendment is being filed by the Filing Persons for the purpose of providing the additional information set forth below.

 

ITEM 4. Purpose of Transaction

 

Item 4 is hereby amended and supplemented by the addition of the following:

 

On July 18, 2024, the Filing Persons issued a press release demanding (i) the resignation of Julie Smolyansky, the chief executive officer and chairperson of Lifeway Foods, Inc. (the “Company”), (ii) the resignation of certain of the Company’s directors, including Jason Scher, Pol Sikar, Jody Levy, Dorri McWhorter and Perfecto Sanchez, (iii) the termination of Jason Burdeen, the Company’s chief of staff, (iv) the adoption of an anti-nepotism policy and (v) an operational and strategic review of the Company. A copy of the press release is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

 

ITEM 5. Interest in Securities of the Issuer

 

Item 5 is hereby amended and supplemented by the addition of the following:

 

(a)

As of July 19, 2024, for purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (i) Ludmila Smolyansky may be deemed to be the beneficial owner of 1,242,096 shares of Common Stock, representing approximately 8.4% of the outstanding shares of Common Stock, (ii) Edward Smolyansky may be deemed to be the beneficial owner of 3,179,975 shares of Common Stock, representing approximately 21.6% of the outstanding shares of Common Stock, (iii) the Edward Smolyansky Trust may be deemed to be the beneficial owner of 1,233,333 shares of Common Stock, representing approximately 8.4% of the outstanding shares of Common Stock, and (iv) the Filing Persons together may be deemed to be the beneficial owners of an aggregate of 4,347,071 shares of Common Stock, representing approximately 29.6% of the outstanding shares of Common Stock. The foregoing percentage calculations were based on 14,707,392 shares outstanding as of May 6, 2024, as reported by the Company on its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023, as filed with the SEC.

 

(b)

Ludmila Smolyansky has sole power to vote or direct the vote of, and sole power to dispose or direct the disposition of, 1,167,096 shares of Common Stock, and shared power to vote or direct the vote of, and shared power to dispose or direct the disposition of, 75,000 shares of Common Stock held by the Ludmila and Edward Smolyansky Family Foundation, of which Ludmila Smolyansky is a director. Edward Smolyansky has sole power to vote or direct the vote of, and sole power to dispose or direct the disposition of, 3,104,975 shares of Common Stock, which includes the 1,233,333 shares beneficially owned by the Edward Smolyansky Trust and 100,000 shares held by his son, and shared power to vote or direct the vote of, and shared power to dispose or direct the disposition of, 500,000 shares of Common Stock held by Smolyansky Family Holdings LLC, over which Edward Smolyansky and Julie Smolyansky share voting power and dispositive power, and 75,000 shares of Common Stock held by the Ludmila and Edward Smolyansky Family Foundation, of which Edward Smolyansky is a director. Julie Smolyansky is a United States citizen and the Chief Executive Officer of the Company, with a business address at 6431 Oakton Street, Morton Grove, IL 60053. Each of Ludmila Smolyansky and Edward Smolyansky disclaims beneficial ownership of the 75,000 shares held by the Ludmila and Edward Smolyansky Family Foundation. Edward Smolyansky disclaims beneficial ownership of shares held by Smolyansky Family Holdings LLC, except to the extent of any pecuniary interest therein, and disclaims beneficial ownership of the shares held by his son. The Edward Smolyansky Trust has sole power to vote or direct the vote of, and sole power to dispose or direct the disposition of, 1,233,333 shares of Common Stock.

 

(c)

There have been no transactions in the shares of Common Stock by any of the Filing Persons during the past sixty days.

 

ITEM 7.	Material to be Filed as Exhibits
99.1	Press Release issued July 18, 2024

 

 

 

5

 

 

SIGNATURES

 

After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certify that the information set forth in this statement is true, complete and correct.

 

 

Date:  July 22, 2024	/s/ Ludmila Smolyansky
	Ludmila Smolyansky
Date:  July 22, 2024	/s/ Edward Smolyansky
	Edward Smolyansky
	THE EDWARD SMOLYANSKY TRUST 2/2/16
Date:  July 22, 2024	By: /s/ Edward Smolyansky
	Name:	Edward Smolyansky
	Title:	Trustee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Exhibit 99.1

 

Lifeway Foods, Inc. (NASDAQ: LWAY) Largest Shareholders, Ludmila and Edward Smolyansky, Demand Resignations of the Company’s CEO and Certain Directors

 

·

Seek Resignation of Lead Director Jason Scher, Directors Pol Sikar, Jody Levy, Dorri McWhorter and Perfecto Sanchez and CEO/Chairperson Julie Smolyansky

·

Seek Immediate Termination of Julie Smolyansky’s “Chief of Staff” and Spouse, Jason Burdeen, a Former Jeweler

·

Call for the Adoption of an Anti-Nepotism Policy

·

Call for Operational and Strategic Review of Business

·

Related Presentation Available www.lifebacktolifeway.com

 

CHICAGO, Ill., July 18, 2024 /PRNewswire/ -- Ludmila and Edward Smolyansky (the "Smolyanskys"), who beneficially own approximately 29% of the outstanding common stock of Lifeway Foods, Inc. (“Lifeway” or the “Company”), today announced their demand that the Company’s Chief Executive Officer, Julie Smolyansky, and certain of the Company’s other directors, resign from their positions. The Smolyanskys believe these actions are necessary to avoid further underperformance and mismanagement of Company assets, and that new leadership can deliver swift and significant changes to shareholders.

 

The Smolyanskys’ previous campaign, which began in February 2022, called for replacing the Company’s CEO and commencing an exploration of the Company’s strategic alternatives. Lifeway’s shares rose approximately 50% following that disclosure. The Smolyanskys subsequently agreed to terminate their campaign in exchange for a commitment by the Company to, among other things, engage a nationally recognized financial advisor to assist it with the exploration of strategic alternatives. Edward Smolyansky stated, “Lifeway did not make a good faith effort to honor its obligations under our settlement agreement, and by February 2023 it was apparent that it had breached the agreement. In light of the board’s failures, we believe that even significant changes are needed, and are calling for resignations of each of the board’s directors, other than Juan Carlos Dalto, who we believe is the only qualified independent director.”

 

After Ludmila Smolyansky refused to agree to Julie Smolyansky’s demand for a “gift” of one million Lifeway shares, the Company spent over one million dollars trying to silence the Smolyanskys with two lawsuits, both of which the Company voluntarily dismissed when forced to prove its claims. Before the dismissals, the lawsuits revealed that the CEO’s spouse, Jason Burdeen, has been exercising significant managerial control of the Company’s affairs despite not being an officer of the Company, with his only apparent qualification being his relationship with the CEO. As part of these lawsuits, a federal judge ruled that Mr. Burdeen had submitted multiple affidavits under oath that were not true.

 

Last spring, Kanen Wealth Management (KWM) became the fourth largest stockholder in Lifeway and launched an activist campaign on June 8, 2023, issuing a scathing letter critical of Julie and her Board. Lifeways' share price again rallied 15% on the news. The Smolyanskys believe the board was never fully informed of this activist campaign by the CEO and her husband. Director Dorri McWhorter testified to this under oath in December 2023.

 

Meanwhile, Lifeway shares have continued to underperform. Since Lifeway’s recent intraday high of $28.61 recorded on May 10, 2024, its stock price has lost approximately 54% of its value based on the closing price on July 17, 2024. Lifeway’s stock price is also well below several recent public valuation estimates. In June 2023, KWM estimated the value at about twice sales or about $20 per share, and currently Lake St. and Noble Capital have a combined average target of $24 per share, or nearly double today’s price.

 

Lifeway’s CEO also has a credibility issue when discussing historical results, such as when she recently touted “17 consecutive quarters of revenue growth” and other “monumental results” mostly driven by volume growth. The reality is very different.

 

Since 2016, Lifeway has posted a revenue CAGR of approximately 3.1%, excluding an unauthorized and ill-advised 2021 acquisition of Glen Oaks Yogurt, as well as heavy post-Covid inflationary related price increases since 2020. Recently, in the second quarter of 2024, Lifeway secured a limited-time rotation of its flagship 32-ounce kefir in Sam’s Club outlets through June. Edward Smolyansky stated, “While it would not surprise me that after gloating about this ‘monumental’ achievement, my sister will demand a raise to her already bloated compensation package. The reality is the Company will likely compensate her spouse to avoid bad optics for herself, a common theme.”

 

 

 

1

 

 

However, Lifeway’s marketing strategy and budget are totally disconnected from reality. It has completely failed to capitalize on the Covid 19 stay at home environment in 2020 and 2021. For example, Lifeway’s advertising expense as a percentage of revenue stagnated around 2.5% from 2020 through 2023, an unacceptable strategy for any consumer packaged goods company in America, let alone one on the cusp of becoming the “next Tropicana or Hersheys,” as was recently proclaimed by the CEO.

 

Edward Smolyansky stated, “After the CEO decided to spend over $55,000 on a personal trip to the Hamptons NY, during a 4^th of July weekend claiming it was a business expense for a purported book signing, influencer breakfast, and a few yoga events, days after Lifeway’s 3^rd CFO of 2018 was named, then attempted to conceal it, my mother and I knew we had a larger problem on our hands. That CFO only lasted a few more months at Lifeway.”

 

Edward Smolyansky further stated, "Lifeway suffers from a pattern of retrenching and silence when faced with criticism, and mediocre results, often doubling down on past failures. The CEO’s narcissistically driven inability to self-reflect makes it impossible for the brand to achieve its full potential and value in the short and long term, and for Lifeway to move forward, she must get out of the way.”

 

Smolyansky added, “The Company’s Board has enabled Julie to create a toxic culture of greed and narcissism, quid pro quos, and cronyism. This has emboldened her and her husband to weaponize the Company and consolidate power through deception and intimidation, ruling like tyrants.” During the period from 2018 to 2020, Lifeway wrongfully terminated the Controller, saw its VP of Operations quit, went through two public accounting firms, three different CFOs in 2018 alone, and had two Directors resign, and on New Years Eve 2019, the termination of its General Counsel.

 

Lifeway Foods Co-Founder Ludmila Smolyansky stated “Of course, no dismantling of all corporate oversight can be complete without Edward’s and my terminations in 2022, effectively putting Julie’s spouse, Jason Burdeen, in de facto control over operations, Board activities and acting as Chief Legal Officer. My daughter has publicly demanded I “gift” her one million shares of Lifeway common stock recently as well. Unfortunately, we think Julie and Jason’s desire for total control and my shares has been a driving reason for using the Company’s resources to file multiple lawsuits against us.”

 

Mr. Smolyansky continued, “She has created a cult of personality dictated by the goal: Brand Julie IS Brand Lifeway.” Smolyansky added, “My full presentation outlines a multitude of selfish, self-promoting campaigns or spectacles devised by Julie and her marketing and PR team, which diverted millions of dollars of shareholder funds to foster this personal ambition.

 

“Lifeway’s pattern of retrenching, doubling down on past failures, and management’s ego-driven inability to self-reflect make it impossible for the brand to achieve its full potential and value. For Lifeway to move forward, it must get out of its own way. Decades old, entrenched leadership must also get out of the way.”

 

CONTACT INFO:

www.purecultureorganics.com

email: [e-mail]

ph: 847-915-0118

 

About:

 

Ludmila Smolyansky, 74, served as a director of the Company from 2002 until May 16, 2023, and unanimously elected as the Chairperson of the Board in November 2002. She has been the operator of several independent delicatessen and gourmet food distributorship businesses, and imported food distributorships, and been a leading force in the health food market for over 40 years. Ludmila Smolyansky and Michael Smolyansky founded Lifeway and she served as the Company’s General Manager. In 2010, she retired as a Company employee. She continued to serve the Company as its Chairperson of the Board until August 2022 and served as a consultant to the Company from 2011 until January 2022.

 

Mr. Smolyansky, 44, served as a director of the Company from 2017 until the 2022 annual meeting of shareholders of the Company. Prior to January 2022, he also served as the Company’s Chief Operating Officer. He was appointed as Chief Financial and Accounting Officer and Treasurer of the Company in November 2004 and appointed as the Chief Operating Officer and Secretary in 2012. He resigned his titles as Chief Financial Officer on January 1, 2016 and as Chief Accounting Officer on August 8, 2016. He retained his title of Chief Operating Officer when the Board appointed Eric Hanson as Treasurer and as Secretary on October 4, 2019. Mr. Smolyansky also served as Lifeway’s Controller from June 2002 until 2004. Mr. Smolyansky received a bachelor’s degree in finance from Loyola University of Chicago in December 2001.

 

Mr. Smolyansky has over fifteen years of extensive financial and operations experience in the dairy and consumer packaged goods industries. Under his operational leadership, the Company successfully integrated several strategic acquisitions and he successfully led the development of both manufacturing processes and products.

---