SecProbe.io

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 December 8, 2025

 VIA EDGAR

 United States Securities and
Exchange Commission
100 F Street, NE
Washington, DC 20549

 Re:
 Lifeway Foods, Inc.

 Registration Statement on Form S-3

 File No. 333-291148
Acceleration Request

 Dear Ladies and Gentlemen:

 Pursuant
to Rule 461 promulgated under the Securities Act of 1933, as amended, Lifeway Foods, Inc., hereby requests that the effectiveness of its
Registration Statement on Form S-3, file No. 33-291148, be accelerated so that it will become effective at 9:00 a.m. (eastern time) on
December 10, 2025, or as soon thereafter as practicable.

 Very truly yours,

 LIFEWAY FOODS, INC.

 /s/ Julie Smolyansky

 Julie Smolyansky Chief
 Executive Officer

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June 2, 2023

Perry Hindin, Special Counsel

Division of Corporation Finance

Office of Mergers & Acquisitions

Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549

 Re: Lifeway Foods, Inc.

    Definitive Proxy Statement on Schedule 14A
                                            filed April 28, 2023

    File No. 000-17363

Dear Mr. Hindin:

In response to your letter
dated May 15, 2023, pursuant to the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), please see below
our responses to your comments in connection therewith. We have included your comments in italics for reference.

Definitive Proxy Statement on Schedule 14A filed April 28, 2023

General

In light of the filing of a
solicitation in opposition, as defined in Note 3 to paragraph (a) of Exchange Act Rule 14a-6, by Mr. Smolyansky on May 9, 2023, please
advise us of the registrant’s plans with respect to filing a revised definitive proxy statement containing the disclosure described
in Items 4(b) and 5(b) of Schedule 14A and disclosing:

 · the existence of the solicitation in opposition;

 · the Company’s position that Mr. Smolyansky’s director nominations are invalid because
he waived his nomination rights pursuant to the Settlement Agreement;

 · the basis for such position;

 · that the registrant initiated litigation against Ludmila Smolyansky and Mr. Smolyansky alleging,
among other claims, that they breached their contractual obligations under the Settlement Agreement by submitting Mr. Smolyansky’s
notice of his intent to nominate the Shareholder Nominees;

 · that the Smolyanskys filed a counterclaim seeking to enjoin any actions to reject Mr. Smolyansky’s
nominations or refusing to count votes in favor of the Shareholder Nominees; and

 · the potential implications (including any risks to the registrant or its shareholders) if Mr. Smolyanky’s
nominations are ultimately deemed to be valid, including the need for the Company to discard non-universal proxy cards previously received
and to instead use a universal proxy card.

RESPONSE: On the date hereof, we
also filed Amendment No. 1 to the Company’s definitive proxy statement on Schedule 14A filed April 28, 2023 (the “Proxy”),
which provides the following update on the litigation under the header “Legal Proceedings” on page 25 as follows:

      1

Securities and Exchange Commission

Lifeway Foods, Inc.

June 2, 2023

Page 2

“Legal Proceedings”

As previously disclosed Company and the Defendants
entered into Proxy Settlement Agreement on July 27, 2022 and amended No. 1 thereto on November 7, 2022. Under the Proxy Settlement the
Defendants terminated their rights, among other things, to solicit proxies, submit alternative slates of directors, call a special meeting
of the shareholders, and make books and records requests until after the annual meeting of the Company’s shareholders in 2024. The
Proxy Settlement requires the Defendants to vote in favor of the Company’s board’s nominees and all other board-recommended
shareholder proposals. The Proxy Settlement also grants the Company’s Chief Executive Officer and Chief Financial Officer the right
to vote Defendants’ shares if Defendants attempt to vote in a manner inconsistent with the Proxy Settlement.

On April 14, 2023, the Company filed a lawsuit
against Ludmila Smolyansky, a current director of the Company (“Ms. L. Smolyansky”), and Edward Smolyansky, a former director
and executive officer of the Company (“Mr. Smolyansky,” and together with Ms. L. Smolyansky, the “Defendants”)
in the Circuit Court of Cook County, Illinois. The Company alleged, among other claims, that the Defendants breached their contractual
obligations under the Proxy Settlement Agreement, the Employment Settlement Agreement between the Company and Mr. Smolyansky and the Endorsement
Termination Agreement between the Company and Ms. L. Smolyansky (collectively, the “Agreements”), as applicable, by publicly
making statements which negatively commented upon the Company, including the Company’s corporate activities, Board and management
and submitting what was purported to be an alternate slate of director nominees for consideration at this Annual Meeting in violation
of the Proxy Settlement Agreement. The Company is seeking damages from each of Ms. L Smolyansky’s and Mr. Smolyansky’s breaches
of their respective Agreements and recovery of at least $100,000 from Mr. Smolyansky and at least $400,000 from Ms. L. Smolyansky.

On May 5, 2023, the Company submitted a Motion
for Leave to File Amended Complaint to remove a request for specific performance as a remedy for Defendants’ breaches.

On May 8, 2023 Ms. L Smolyansky’s and
Mr. Smolyansky filed counterclaims (the “Counterclaim”) alleging that the Company breached the Proxy Settlement Agreement
and filed an Emergency Motions seeking a declaratory judgment that Lifeway breached the terms of the Proxy Settlement Agreement and seeking
permeant injunctive relief ordering Lifeway to honor Mr. Smolyansky’s proposed alternate slate of directors. As described below,
all relief sought by the Defendants in their Emergency Motions were denied and the Defendants have since filed a voluntary Motion to Dismiss
the Counterclaim.

The Company filed a Motion to Dismiss the
Counterclaim on May 11, 2023.

On May 16, 2023, a hearing was held to hear
arguments about the Company’s Motion for Leave to File Amended Complaint and Defendants’ Emergency Motions after which the
Court granted the Company’s Motion for Leave to File Amended Complaint and denied all relief being sought by Defendants. The Court
also directed the Company to schedule its Motion to Dismiss for a hearing date.

      2

Securities and Exchange Commission

Lifeway Foods, Inc.

June 2, 2023

Page 3

On May 25, 2023 Defendants filed a Motion
to Voluntarily Withdraw their Counterclaims which was set for hearing on May 31, 2023, which motion was granted by the Court on May 30,
2023. With the Court’s denial of Defendants’ Emergency Motions for Injunctive Relief, no basis in law or fact that remains
as to the invalidity of Mr. Smolyansky’s nomination of an alternate slate of directors and such nomination is void ab initio and
is not a valid solicitation.

On May 30, 2023, the Company filed a Motion
to Strike Defendants’ Affirmative Defenses which is set for presentment on June 6, 2023.”

If you require any further
information or have additional questions, please contact me at (847) 779-8954 or Tim Lavender at (312) 857-2630.

  Sincerely,

  Eric Hanson, Chief Financial Officer

 cc: Tim Lavender

      3

<DOCUMENT>
<TYPE>TEXT-EXTRACT
<SEQUENCE>2
<FILENAME>filename2.txt
<TEXT>
United States securities and exchange commission logo

                                May 15, 2023

       Eric Hansen
       Chief Financial Officer
       Lifeway Foods, Inc.
       6431 W. Oakton St.
       Morton Grove, IL 60053

                                                        Re: Lifeway Foods, Inc.
                                                            Definitive Proxy
Statement on Schedule 14A filed April 28, 2023
                                                            File No. 000-17363

       Dear Eric Hansen:

              We have reviewed your filing and have the following comment. In
our comment, we may
       ask you to provide us with information so we may better understand your
disclosure.

               Please respond to this comment by providing the requested
information or advise us as
       soon as possible when you will respond. If you do not believe our
comment applies to your facts
       and circumstances, please tell us why in your response.

                                                        After reviewing your
response to this comment, we may have additional comments.

       Definitive Proxy Statement on Schedule 14A filed April 28, 2023

       General

   1.                                                   In light of the filing
of a solicitation in opposition, as defined in Note 3 to paragraph (a) of
                                                        Exchange Act Rule
14a-6, by Mr. Smolyansky on May 9, 2023, please advise us of the
                                                        registrant   s plans
with respect to filing a revised definitive proxy statement containing the
                                                        disclosure described in
Items 4(b) and 5(b) of Schedule 14A and disclosing:

                                                              the existence of
the solicitation in opposition;
                                                              the Company   s
position that Mr. Smolyansky   s director nominations are invalid
                                                            because he waived
his nomination rights pursuant to the Settlement Agreement;
                                                              the basis for
such position;
                                                              that the
registrant initiated litigation against Ludmila Smolyansky and Mr.
                                                            Smolyansky
alleging, among other claims, that they breached their contractual
                                                            obligations under
the Settlement Agreement by submitting Mr. Smolyansky   s notice
                                                            of his intent to
nominate the Shareholder Nominees;
                                                              that the
Smolyanskys filed a counterclaim seeking to enjoin any actions to reject Mr.
                                                            Smolyansky   s
nominations or refusing to count votes in favor of the Shareholder
 Eric Hansen
Lifeway Foods, Inc.
May 15, 2023
Page 2
           Nominees; and
             the potential implications (including any risks to the registrant
or its shareholders) if
           Mr. Smolyanky   s nominations are ultimately deemed to be valid,
including the need
           for the Company to discard non-universal proxy cards previously
received and to
           instead use a universal proxy card.

       Refer to Compliance and Disclosure Interpretations for Proxy Rules and
Schedules
       14A/14C, Question 139.05.
        We remind you that the filing persons are responsible for the accuracy
and adequacy of
their disclosures, notwithstanding any review, comments, action or absence of
action by the staff.

       Please direct any questions to Perry Hindin at 202-551-3444.

                                                              Sincerely,
FirstName LastNameEric Hansen
                                                              Division of
Corporation Finance
Comapany NameLifeway Foods, Inc.
                                                              Office of Mergers
& Acquisitions
May 15, 2023 Page 2
cc:       Tim Lavender
FirstName LastName
</TEXT>
</DOCUMENT>

United States securities and exchange commission logo
November 1, 2022
Eric Hanson
Chief Financial Officer
Lifeway Foods, Inc.
6431 West Oakton
Morton Grove, IL 60053
Re:Lifeway Foods, Inc.
Form 10-K for the Year Ended December 31, 2021
Filed July 21, 2022
File No. 000-17363
Dear Eric Hanson:
            We have completed our review of your filing.  We remind you that the company and its
management are responsible for the accuracy and adequacy of their disclosures, notwithstanding
any review, comments, action or absence of action by the staff.
Sincerely,
Division of Corporation Finance
Office of Manufacturing

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October 26, 2022

VIA EDGAR

United States Securities and Exchange Commission

Division of Corporate Finance

100 F Street, NE

Washington, D.C. 20549

  Attention:
  Heather Clark

  Melissa Gilmore

    Re:
    Lifeway Foods, Inc.

    Form 10-K for Fiscal Year Ended December 31, 2021

    Filed July 21, 2022

    File No. 000-17363

Dear Mses. Clark and Gilmore:

On behalf of Lifeway Foods, Inc.
(“Lifeway” or the “Company”), set forth below is the Company’s response to the comment letter from the
staff of the United States Securities and Exchange Commission (the “Commission” or “SEC”) dated October 18,
2022 regarding the Company’s Form 10-K for the fiscal year ended December 31, 2021 filed July 21, 2022 (the “2021 Form
10-K”).

We understand that you will be reviewing our response and may have
additional comments. We welcome any questions you may have concerning our response and thank you for your attention to our filing. Please
feel free to contact us at the telephone number listed at the end of this letter.

For your convenience, your comment is repeated below in italics followed
by the Company’s response.

Form 10-K for the Fiscal Year Ended December 31, 2021

Item 9A. Controls and Procedures

Evaluation of Disclosures Controls and Procedures, page 28

 1. We note you determined that a material weakness existed in your Internal Control over Financial Reporting due to the lack of controls
over income taxes to identify and correct the impact of a material error in accounting associated with a 2009 acquisition. We also note
you concluded that your Disclosure Controls and Procedures were effective as of December 31, 2021.

Please revise or more fully explain to us how management
was able to conclude that Disclosure Controls and Procedures were effective given that Internal Controls over Financial Reporting are
an integral part of Disclosure Controls and Procedures. Please be reasonably detailed in your response, and explain why the material weakness
you identified did not impact your Disclosure Controls and Procedures, as defined in Exchange Act Rules 13a – 15(e) and 15d-15(c).
Please refer to SEC Release No. 33-8238, Final Rule: Management Report on Internal Control over Financial Reporting and Certification
of disclosure in Exchange Act Periodic Reports, which states that Disclosure Controls and procedures will include those components of
Internal Control over Financial Reporting, that provide reasonable assurances that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles. Your revisions and/or response should similarly address
your 2022 10-Qs.

      1

Response:

As disclosed in Item 9A to the 2021 Form 10-K,
the Company incorrectly evaluated a book to tax basis difference related to the February 2009 purchase price accounting of the Fresh Made,
Inc. stock acquisition. Specifically, the basis difference was incorrectly omitted for the single indefinite-lived intangible asset acquired.
As the difference was material, the Company restated the financial statements for the fiscal year ended December 31, 2020 and the first,
second and third quarters of fiscal 2020 and 2021 within the 2021 Form 10-K (the “restatement”).

As a result of the restatement, management evaluated
the Company’s internal controls over income tax accounting. As the internal controls over income tax accounting did not detect and
prevent a material error from occurring, the Company determined the controls were not designed to identify and correct material errors
in the recording of deferred income taxes related to indefinite-lived intangible assets associated with the 2009 acquisition of Fresh
Made, Inc. Accordingly, the Company evaluated its internal control over financial reporting (“ICFR”) and determined that a
material weakness existed as of December 31, 2021 related to income tax accounting.

Management also evaluated the Company’s
disclosure controls and procedures. The Company’s disclosure controls and procedures consist of review procedures designed to prevent
or detect either:

 · Omissions in required disclosures, such as completion
of the disclosure checklist to confirm that all required disclosures have been included in the financial statements, and

 · Inaccurate or misleading disclosures, such as
review of disclosures by the Company’s Disclosure Committee, Audit and Corporate Governance Committee of the Company’s board
of directors and outside counsel.

With respect to its evaluation of the Company’s
disclosure controls and procedures, in light of the fact that it determined that the Company’s ICFR was not effective as of December
31, 2021, management reviewed SEC Release No. 33-8238, Final Rule: Management’s Report on Internal Control over Financial Reporting
and Certification of Disclosure in Exchange Act Period Reports (the “SEC Release”), including the following excerpt:

Exchange Act Rule 13a-15(d) defines
“disclosure controls and procedures” to mean controls and procedures of a company that are designed to ensure that information
required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The definition further states that disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed
by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,
including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.

While there is substantial overlap
between a company’s disclosure controls and procedures and its internal control over financial reporting, there are both some elements
of disclosure controls and procedures that are not subsumed by internal control over financial reporting and some elements of internal
control that are not subsumed by the definition of disclosure controls and procedures.

With respect to the latter point, clearly, the broad COSO
description of internal control, which includes the efficiency and effectiveness of a company’s operations and the company’s
compliance with laws and regulations (not restricted to the federal securities laws), would not be wholly subsumed within the definition
of disclosure controls and procedures.

* * * * *

      2

We agree that some components of internal control over financial
reporting will be included in disclosure controls and procedures for all companies. In particular, disclosure controls and procedures
will include those components of internal control over financial reporting that provide reasonable assurances that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles. However, in designing
their disclosure controls and procedures, companies can be expected to make judgments regarding the processes on which they will rely
to meet applicable requirements. In doing so, some companies might design their disclosure controls and procedures so that certain
components of internal control over financial reporting pertaining to the accurate recording of transactions and disposition of assets
or to the safeguarding of assets are not included. For example, a company might have developed internal control over financial reporting
that includes as a component of safeguarding of assets dual signature requirements or limitations on signature authority on checks. That
company could nonetheless determine that this component is not part of disclosure controls and procedures. We therefore believe that while
there is substantial overlap between internal control over financial reporting and disclosure controls and procedures, many companies
will design their disclosure controls and procedures so that they do not include all components of internal control over financial reporting.

As discussed above in the example in the SEC Release,
some companies might design their disclosure controls and procedures as Lifeway has, so that certain components of ICFR pertaining to
the accurate recording of transactions, such as deferred taxes related to indefinite-lived intangible asset acquired, are not included
in disclosure controls and procedures. In this instance, the material error that occurred in the deferred tax accounts could have only
been detected by a review of the deferred taxes that included a reconciliation of the tax and book basis of the single indefinite-lived
intangible asset acquired in the 2009 acquisition of Fresh Made, Inc. (i.e., the related ICFR). Because such error was not covered by
any disclosure controls and procedures, management concluded there was no design deficiency related to Lifeway’s disclosure controls
and procedures.

Management tested the disclosure controls and
procedures and found that the controls were operating as designed and, therefore, concluded that disclosure controls and procedures were
effective at December 31, 2021 and also at the end of the first, second and third quarters of fiscal 2020 and 2021.

We hope this addresses the Commission’s comment and concerns.
Please do not hesitate to contact me at (847) 779-8954 with any further questions.

    Very truly yours,

    LIFEWAY FOODS, INC.

    /s/ Eric A. Hanson

    Eric A. Hanson

    Chief Financial and Accounting Officer

      3

United States securities and exchange commission logo
October 18, 2022
Eric Hanson
Chief Financial Officer
Lifeway Foods, Inc.
6431 West Oakton
Morton Grove, IL 60053
Re:Lifeway Foods, Inc.
Form 10-K for the Year Ended December 31, 2021
Filed July 21, 2022
File No. 000-17363
Dear Eric Hanson:
            We have limited our review of your filing to the financial statements and related
disclosures and have the following comment.  In our comment, we may ask you to provide us
with information so we may better understand your disclosure.
            Please respond to this comment within ten business days by providing the requested
information or advise us as soon as possible when you will respond.  If you do not believe our
comment applies to your facts and circumstances, please tell us why in your response.
            After reviewing your response to this comment, we may have additional comments.
Form 10-K for the Year Ended December 31, 2021
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures, page 28
1.We note you determined that a material weakness existed in your Internal Control over
Financial Reporting due to the lack of controls over income taxes to identify and correct
the impact of a material error in accounting associated with a 2009 acquisition.  We also
note you concluded that your Disclosure Controls and Procedures were effective as of
December 31, 2021.  Please revise or more fully explain to us how management was able
to conclude that Disclosure Controls and Procedures were effective given that Internal
Controls over Financial Reporting are an integral part of Disclosure Controls and
Procedures. Please be reasonably detailed in your response, and explain why the material
weakness you identified did not impact your Disclosure Controls and Procedures, as
defined in Exchange Act Rules 13a- 15(e) and 15d-15(e).  Please refer to SEC Release
No. 33- 8238, Final Rule: Management’s Report on Internal Control over Financial

 FirstName LastNameEric Hanson
 Comapany NameLifeway Foods, Inc.
 October 18, 2022 Page 2
 FirstName LastName
Eric Hanson
Lifeway Foods, Inc.
October 18, 2022
Page 2
Reporting and Certification of Disclosure in Exchange Act Periodic Reports, which states
that Disclosure Controls and procedures will include those components of Internal Control
over Financial Reporting that provide reasonable assurances that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles. Your revisions and/or response should similarly address
your 2022 10-Qs.
            In closing, we remind you that the company and its management are responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or
absence of action by the staff.
            You may contact Heather Clark at 202-551-3624 or Melissa Gilmore at 202-551-3777
with any questions.
Sincerely,
Division of Corporation Finance
Office of Manufacturing

Mail Stop 4628
December 12 , 2016

Via E -mail
John P. Waldron
Chief Financial and Accounting Officer
Lifeway Foods Inc.
6431 West Oakton Street
Morton Grove, Illinois 60053

Re: Lifeway  Foods, Inc.
Form 8-K Filed November 8, 2016
File No . 000-17363

Dear Mr. Waldron :

We have completed our review of your filing.  We remind you that the company and its
management are responsible for the accuracy and adequacy of the ir disclosure s, notwithstanding
any review, comments, action or absence of action by the staff .

Sincerely,

 /s/ Ethan Horowitz

Ethan Horowitz
        Branch Chief
        Office of Natural Resources

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Daniel K. Donahue

Tel 949.732.6500

Fax 949.732.6501

donahued@gtlaw.com

November 29, 2016

Via Edgar

Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, DC 20549

Attn: Ethan Horowitz

 Re: Lifeway Foods, Inc.

    Form 8-K Filed November 8, 2016

    File No. 000-17363

Dear Mr. Horowitz:

On behalf of our client,
Lifeway Foods, Inc., an Illinois corporation (the “Company”), we are responding to the comment letter
issued by the staff of the Commission (the “Staff”) to John Waldron, Chief Financial Officer of the Company,
dated November 15, 2016 on the above-referenced Form 8-K (“Form 8-K”). The Staff’s comment has
been incorporated into this response letter for your convenience.

Staff Comment and Company Response

Item 4.02 Form 8-K Filed November 8, 2016

 1. We note you have determined that your financial statements for the periods identified in your Item
4.02 Form 8-K should no longer be relied upon as a result of certain errors described therein. Rather than amend the quarterly
and annual reports on Form 10-Q and 10-K for the periods affected, you intend to include restated financial statements in future
Exchange Act reports. Deferring the filing of corrected financial statements and a revised report from your independent registered
public accounting firm to future filings rather than amending previously filed reports does not appear to be appropriate. Please
amend your filings as soon as practicable. See question 133.01 of the Compliance and Disclosure Interpretations concerning Exchange
Act Rules.

Response: The Company
will be amending and restating its (i) Annual Report on Form 10-K filed with the Commission on March 16, 2016, specifically the
audited financial statements for the 2013, 2014 and 2015 fiscal years and Part II, Item 9A; and (ii) its Quarterly Reports on Form
10-Q filed with the Commission on May 10, 2016 and August 17, 2016, specifically the interim unaudited financial statements and
Part I, Item 4. The Company does not intend to amend any Quarterly Reports on Form 10-Q filed during the 2015 fiscal year. The
impact of the accounting error referred to in the Form 8-K for the three and nine month periods ended September 30, 2015 has been
corrected in the Company’s Quarterly Report on Form 10-Q filed with the Commission on November 10, 2016, and the impact of
the error on the first and second quarters of 2015 will be corrected in the proposed amended and restated Quarterly Reports on
Form 10-Q filed with the Commission on May 10, 2016 and August 17, 2016. In addition, the Company proposes to include appropriate
note disclosure in its amended and restated 2015 Form 10-K of the errors and the corrected amounts for the 2015 quarterly periods.

Securities
and Exchange Commission

Division
of Corporation Finance

November
29, 2016

Page 2

The Company intends to file the
above-referenced amended and restated reports as soon as reasonably possible. The Company believes it will be able to file
the amended and restated Quarterly Reports on Form 10-Q within three to four weeks from the date of this letter. The Company believes
the amended and restated 2015 Form 10-K may require more time due to the higher degree of involvement required on the part of its
current and former auditors and, for this reason, it is unable to estimate the filing time until it has discussed the matter with
its current auditor and each of its two predecessor audit firms. Once the Company has discussed the filing with its current and
former auditors, it will provide the staff with an update on the planned filing of the amended and restated 2015 Form 10-K. In
the meantime, we wish to point out that the Form 8-K sets forth a complete summary of the accounting errors and the corrected figures
for all accounting periods in fiscal 2015 and 2016.

The Company has endeavored
to fully respond to the Staff's comment set forth in its letter dated November 15, 2016. Thank you in advance for your review.
Please contact the undersigned with any questions or comments at (949) 732-6557.

Very truly yours,

/s/ Daniel K. Donahue

Daniel K. Donahue

cc:	Lifeway Foods, Inc.

November 15, 2016

Via E -mail
John P. Waldron
Chief Financial and Accounting Officer
Lifeway Foods , Inc.
6431 West Oakton Street
Morton Grove, Illinois 60053

Re: Lifeway Foods, Inc.
Form 8-K Filed November 8, 2016
File No . 000-17363

Dear Mr. Waldron :

We have reviewed your filing an d have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.

Please respond to these comments  within five busine ss days  by providing the requested
information or advis e us as soon as possible when you will respond.  If you  do not believe our
comments apply to your facts and circumstances , please tell us why in your response.

After reviewing your response to these  comments, we may have  additional comments.

Item 4.02 Form 8 -K Filed November 8, 2016

1. We note you have determined that your financial statements for the periods identified in
your Item 4.02 Form 8 -K should no longer be relied upon as a result of certain errors
described therein.  Rather than amend the quarterly and annual reports on Form 10 -Q and
10-K for the periods affected, you intend to include restated financial statements in future
Exch ange Act reports.  Deferring the filing of corrected financial statements and a revised
report from your independent registered public accounting firm to future filings rather
than amending previously filed reports does not appear to be appropriate.  Pleas e amend
your filings as soon as practicable.   See question  133.01  of the Compliance and
Disclosure Interpretation s concerning Exchange Act Rules .

We remind you that the company and its management are responsible for the accuracy
and adequacy of their disc losures, notwithstanding any review, comments, action or absence of
action by the staff.

John P. Waldron
Lifeway Foods, Inc.
November 15, 2016
Page 2

 You may contact Jennifer O’Brien, Staff Accountant, at (202) 551 -3721  if you have
questions regarding the comments above.   Please contact me at (202) 551 -3311 with any other
questions.

        Sincerely,

        /s/ Ethan Horowitz

        Ethan Horowitz
        Branch Chief
Office of Natural Resources

February 19, 2015

Via E -mail
Edward P. Smolyansky
Chief Financial Officer
Lifeway Foods Inc.
6431 West Oakton Street
Morton Grove, Illinois 60053

Re: Lifeway Foods, Inc.
 Form 10-K for Fis cal Year Ended December 31, 2013
 Filed April 2, 2014
File No . 000-17363

Dear Smolyansky :

We have completed our review of your filing s.  We remind you that our comments or
changes to disclosure in response to our comments do not foreclose the Commission from taking
any action with respect to the company or the filing s and the company may not assert staff
comments as a defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.  We urge all persons who are responsible for the
accuracy and adequacy of the di sclosure in the filing s to be certain that the filing s include the
information the Securities Exchange Act of 1934 and all applicable rules require.

Sincerely,

 /s/H. Roger Schwall

H. Roger Schwall
        Assistant Director

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Lifeway Foods, Inc.

6431 W. Oakton         Morton Grove, IL 60053

    Phone: (847) 967-1010      Fax: (847) 967-6558     E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

February 17, 2015

Via EDGAR

H. Roger Schwall

Assistant Director

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C.  20549

Re:

Lifeway Foods, Inc.

Form 10-K for Fiscal Year ended December 31, 2013

Filed April 2, 2014

Amendment No. 1 to Form 10-K for Fiscal Year Ended December 31, 2013

Filed October 3, 2014

Response Letter Dated December 9, 2014

File No. 000-17363

Dear Mr. Schwall:

On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below are the Company’s responses to your letter of comment dated January 9, 2015 and the Company’s discussion with the SEC Staff on February 2, 2015.  The numbered responses of the Company and related captions contained in this letter correspond to the numbered paragraphs and related captions in the letter of comment.

Form 10-K for Fiscal Year Ended December 31, 2013

Notes to Consolidated Financial Statements, page 24

General

1.   We note from your response to comment 3 in our letter dated November 7, 2014 that you have identified the sale of fermented dairy products as your single reportable segment.  You also state that these products are “produced using the same process and materials, sold to consumer retail food sellers through direct delivery and distributors in the United States.”  Based on this description, it is unclear whether you have identified a single operating segment or whether you have identified more than one operating segment for which aggregation was deemed appropriate in accordance with FASB ASC 280-10-50-11.  If you have aggregated operating segments, please revise your proposed disclosure to also indicate that you have aggregated operating segments, as required by FASB ASC 280-10-50-21.

RESPONSE:

In response to the Staff’s comment, the Company has provided below the revised proposed segment disclosure. The chief operating decision maker of the Company will monitor the results of the retail operations along with the operating results of the production of the fermented dairy products and update the segment disclosures if and when appropriate.

“Segments

The Company has two separate operating segments, the sale of fermented dairy products and three retail locations in Illinois that sell the Company’s fermented dairy products.  The Company has determined reportable segments based on how the Company’s chief operating decision maker manages the business and in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Financial Officer and the board of directors that makes strategic decisions.  Substantially all of the consolidated revenues of the Company relate to the sale of fermented dairy products which are produced using the same processes and materials and are sold to consumer retail food sellers through direct delivery and distributors in the United States. The Company has less than $1 million in annual revenues attributable to its three retail locations.  The Company’s annual revenues attributable to its three retail locations are considered not to be material and accordingly the Company has not presented financial information separately for this segment.”

2.   We note from your response to comment 4 in our letter dated November 7, 2014 that you sell one type of product, “fermented dairy” in two different forms, kefir and cheese.  You also state that your cheese sales were an immaterial portion of the Company’s sales, as were sales in foreign markets.  As explained in FASB ASC 280-10-50-38 and -40, information about products and geographic areas is required if not otherwise disclosed with your reportable operating segment information.  We note that your MD&A discussion of gross sales distinguishes between your “flagship line, Kefir, as well as ProBugs Organic Kefir for kids and BioKefir” on page 15 of your 2013 amended Form 10-K and, as previously noted, you identify other groups of similar products on the Products page on your website and on page 4 of your 2013 amended Form 10-K.  We further note the CEO’s comment in the Q4 2013 earnings call stating that “Frozen yogurt continues to be a strong growth segment.”  Given the foregoing, it appears disclosure of revenues by groups of similar products would be required and consistent with the guidance of FASB ASC 280-10-50-40.   Unless you have additional information to consider that you believe would support an alternate view, please submit the proposed revisions.  If you prefer to limit compliance to future filings rather than amend your prior report, please state your rationale.

RESPONSE:

The Company has considered the staff’s comments relating to the disclosure of revenues by similar products as required by ASC 280-10-50-40. The Company notes that ProBugs, Organic Kefir, BioKefir and frozen Kefir to all be kefir. Their packaging may differ (for instance, ProBugs) or they may use organic milk instead of conventional milk as an ingredient, but they are all kefir created by the same fermented dairy process.  Frozen kefir is kefir in a frozen form and the our product sold in our retail stores is also kefir. However, during each reporting period sales of one or more kefir forms may account for a substantial portion of kefir sales.  Accordingly, the Company has determined that going forward, on a period by period basis,  it will disclose its revenues by product, cheese and kefir, and include disclosure as separate revenue categories for each kefir label that makes up a material amount of revenues.

Going forward, the Company will refine its disclosure in filings and on earnings call to reflect this approach.

2

The Company has also considered the Staff’s comment relating to the disclosure of revenue and certain assets from the United States and all foreign countries as required by ASC 280-10-50-41. The Company will add additional disclosure indicating that substantially all of the consolidated revenues and assets of the Company are within the United States.

The Company plans to include the information above for all periods presented on a prospective basis beginning with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, due on March 16, 2015.

We hope this addresses all of the Commission’s comments and concerns.  Please do not hesitate to contact us with any further questions.

Sincerely,

/s/ Edward Smolyansky

Edward Smolyansky

Chief Financial and Accounting Officer,

Chief Operating Officer, Secretary and Treasurer

3

CORRESP
1
filename1.htm

    corresp_17747.htm

Lifeway Foods, Inc.

6431 W. Oakton         Morton Grove, IL 60053

    Phone: (847) 967-1010      Fax: (847) 967-6558     E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

January 26, 2015

Via EDGAR

H. Roger Schwall

Assistant Director

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C.  20549

Re:

Lifeway Foods, Inc.

Form 10-K for Fiscal Year ended December 31, 2013

Filed April 2, 2014

Amendment No. 1 to Form 10-K for Fiscal Year Ended December 31, 2013 Filed October 3, 2014

Response Letter Dated December 9, 2014

File No. 000-17363

Dear Mr. Schwall:

On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below are the Company’s responses to your letter of comment dated January 9, 2015.  The numbered responses of the Company and related captions contained in this letter correspond to the numbered paragraphs and related captions in the letter of comment.

Amendment No. 1 to Form 10-K for Fiscal Year Ended December 31, 2013

Management’s Discussion and Analysis of Financial Condition and Results of Operation, page 15

Results of Operation, page 15

1.   We have reviewed the supplemental information you provided in response to comment 2 in our letter dated November 7, 2014.  Please confirm to us that your Management’s Discussion and Analysis will separately quantify the dollar impact of each material causal factor of change in your results of operations in future periodic filings in a manner similar to this response, adjusted as necessary for the facts and circumstances of each filing period.

RESPONSE:

The Company confirms that its Management’s Discussion and Analysis will separately quantify the dollar impact of each material causal factor of change in our results of operations in future periodic filings in a manner similar to the response letter dated November 7, 2014, adjusted as necessary for the facts and circumstances of each future filing period.

Form 10-K for Fiscal Year Ended December 31, 2013

Notes to Consolidated Financial Statements, page 24

General

2.   We note from your response to comment 3 in our letter dated November 7, 2014 that you have identified the sale of fermented dairy products as your single reportable segment.  You also state that these products are “produced using the same process and materials, sold to consumer retail food sellers through direct delivery and distributors in the United States.”  Based on this description, it is unclear whether you have identified a single operating segment or whether you have identified more than one operating segment for which aggregation was deemed appropriate in accordance with FASB ASC 280-10-50-11.  If you have aggregated operating segments, please revise your proposed disclosure to also indicate that you have aggregated operating segments, as required by FASB ASC 280-10-50-21.

RESPONSE:

In response to the Staff’s comment, the Company has provided below the revised proposed disclosure indicating that the Company’s operating segments have been aggregated. The chief operating decision maker of the Company will monitor the results of the retail operations along with the operating results of the production of the fermented dairy products and update the segment disclosures if and when appropriate.

“Segments

Substantially all of the consolidated revenues of the Company relate to the sale of fermented dairy products which are produced using the same processes and materials and are sold to consumer retail food sellers through direct delivery and distributors in the United States. The Company has less than $1 million in annual revenues attributable to its four retail locations located in Illinois. The Company considers the retail operations and the fermented dairy products to be separate operating segments, but has aggregated the operating segments due to the immaterial size of the retail operations relative to the overall Company in accordance with ASC 280-10-50-11. The aggregation of the reportable segments has been determined based on how the Company’s chief operating decision maker manages the business and in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Financial Officer and the board of directors that makes strategic decisions.”

2

3.   We note from your response to comment 4 in our letter dated November 7, 2014 that you sell one type of product, “fermented dairy” in two different forms, kefir and cheese.  You also state that your cheese sales were an immaterial portion of the Company’s sales, as were sales in foreign markets.  As explained in FASB ASC 280-10-50-38 and -40, information about products and geographic areas is required if not otherwise disclosed with your reportable operating segment information.  We note that your MD&A discussion of gross sales distinguishes between your “flagship line, Kefir, as well as ProBugs Organic Kefir for kids and BioKefir” on page 15 of your 2013 amended Form 10-K and, as previously noted, you identify other groups of similar products on the Products page on your website and on page 4 of your 2013 amended Form 10-K.  We further note the CEO’s comment in the Q4 2013 earnings call stating that “Frozen yogurt continues to be a strong growth segment.”  Given the foregoing, it appears disclosure of revenues by groups of similar products would be required and consistent with the guidance of FASB ASC 280-10-50-40.   Unless you have additional information to consider that you believe would support an alternate view, please submit the proposed revisions.  If you prefer to limit compliance to future filings rather than amend your prior report, please state your rationale.

RESPONSE:

The Company has considered the staff’s comment relating to the disclosure of revenues by similar products as required by ASC 280-10-50-40. The Company notes that ProBugs, Organic Kefir, BioKefir and frozen Kefir to all be kefir. Their packaging may differ (for instance, ProBugs), but they are all Kefir created by the same fermented dairy process.  Frozen Kefir as well as the retail stores selling frozen kefir, is kefir, in a frozen form. Accordingly, the Company has determined that it will  reflect what the Company has determined to be two distinct revenue categories. The categories the Company has identified are:

Kefir

Cheese products

Going forward, the Company will refine its disclosure in filings and on earnings call to reflect that there are two products that the Company sells.

The Company has also considered the Staff’s comment relating to the disclosure of revenue and certain assets from the United States and all foreign countries as required by ASC 280-10-50-41. The Company will add additional disclosure indicating that substantially all of the consolidated revenues and assets of the Company are within the Unites States.

The Company plans to include the information above for all periods presented on a prospective basis. We believe including the disclosures in future filings is acceptable because the revenue from cheese and other products was less than 7% of consolidated revenue in all previous periods presented.

We hope this addresses all of the Commission’s comments and concerns.  Please do not hesitate to contact us with any further questions.

Sincerely,

/s/ Edward Smolyansky

Edward Smolyansky

Chief Financial and Accounting Officer,

Chief Operating Officer, Secretary and Treasurer

3

January 9, 2015

Via E -mail
Edward P. Smolyansky
Chief Financial Officer
Lifeway Foods Inc.
6431 West Oakton St reet
Morton Grove, Illinois 60053

Re: Lifeway Foods, Inc.
Form 10-K for Fis cal Year Ended  December 31, 2013
Filed April 2, 2014
Amendment No. 1 to Form 10-K for Fis cal Year Ended  December 31, 2013
Filed October 3, 2014
Response Letter Dated December 9 , 2014
File No . 000-17363

Dear Mr. Smolyansky :

We have reviewed your response letter  and have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.

Please respond to this letter within ten business days by amending your filing, by
provid ing the requested information, or by advising us when you will provide the requested
response.   If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.

After reviewing any amendment to your filing and the information you provide in
response to these  comments, we may have  additional comments.

Amendment No. 1 to Form 10 -K for Fis cal Year Ended December 31, 2013

Management’s Discussion and Ana lysis of Financial Condition and Results of Operations ,
page 15

Results of Operations , page 15

1. We have reviewed the supplemental information you provided in response to comment 2
in our letter dated November 7, 2014.  Please confirm to us that your Management’s
Discussion and Analysis will separately quantify the dollar impact of each material causal
factor of change in your results of operations in future periodic filings in a ma nner similar

Edward P. Smolyansky
Lifeway Foods, Inc.
January 9, 2015
Page 2

 to this response , adjusted as necessary for the facts and circumstances of each filing
period .

Form 10 -K for Fis cal Year Ended December 31, 2013

Notes to Consolidated Financial Statements , page 24

General

2. We note from your response to co mment 3 in our letter dated November 7, 2014 that you
have identified the sale of fermented dairy products  as your single reportable segment.
You also state that these products are “produced using the same process and materials,
sold to consumer retail fo od sellers through direct delivery and distributors in the United
States.”  Based on this description, it is unclear whether you have identified a single
operating segment or whether you have identified more than one operating segment for
which aggregation  was deemed appropriate in accordance with FASB ASC 280 -10-50-
11.  If you have aggregated operating segments, please revise your proposed disclosure to
also indicate that you have aggregated operating segments, as required by FASB ASC
280-10-50-21.

3. We not e from your response to comment 4 in our letter dated November 7, 2014 that you
sell one type of product, “fermented dairy” in two different forms, kefir and cheese.  You
also state that your cheese  sales were an immaterial portion of the Company’s sales, as
were sales in foreign markets.  As explained in FASB ASC 280 -10-50-38 and -40,
information about products and geographic areas is required if not otherwise disclosed
with your reportable operating segment information.  We note that your MD&A
discussion of gross sales distinguishes between your “flagship line, Kefir, as well as
ProBugs Organic Kefir for kids and BioKefir” on page 15 of your 2013 amended Form
10-K and, as previously noted, you identify other groups of similar products on the
Products page on your website and on page 4 of your 2013 amended Form 10 -K.  We
further note the C EO’s comment in the Q4 2013 earnings call stating that “Frozen yogurt
continues to be a strong growth segment.”  Given the foregoing, it appears disclosure  of
revenues by g roups of similar products would be required and consistent with the
guidance of FASB ASC 280 -10-50-40.  Unless you have additional information to
consider that you believe would support an alternate view, please submit the proposed
revisions.  If you prefe r to limit compliance to future filings rather than amend your prior
report, please state your rationale.

Edward P. Smolyansky
Lifeway Foods, Inc.
January 9, 2015
Page 3

 You may contact Jennifer O’Brien , Staff Accountant, at (202) 551 -3721  or Kimberly L.
Calder , Assistant Chief Accountant , at (202) 551 -3701  if you have  questions regarding
comments on the financial statements and related matters.  Please contact Parhaum J. Hamidi,
Staff Attorney, at (202) 551 -3421 or, in his absence, the undersigned at  (202) 551 -3745 with any
other questions.

Sincerely,

        /s/H.  Roger Schwall

        H. Roger Schwall
        Assistant Director

CORRESP
1
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    corresp_17732b.htm

Lifeway Foods, Inc.

6431 W. Oakton         Morton Grove, IL 60053

    Phone: (847) 967-1010      Fax: (847) 967-6558     E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

December 9, 2014

Via EDGAR

H. Roger Schwall

Assistant Director

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C.  20549

Re:

Lifeway Foods, Inc.

Amendment No. 1 to Form 10-K for Fiscal Year Ended

December 31, 2013 Filed October 3, 2014

Amendment No. 1 to Form 10-Q for Fiscal Quarter Ended

June 30, 2014 Filed October 3, 2014

Response Letter Dated October 3, 2014

File No. 000-17363

Dear Mr. Schwall:

On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below are the Company’s responses to your letter of comment dated November 7, 2014.  The numbered responses of the Company and related captions contained in this letter correspond to the numbered paragraphs and related captions in the letter of comment.

Amendment No. 1 to Form 10-K for Fiscal Year Ended December 31, 2013

Distribution, page 6

1.   We note your response to comment 2 in our letter dated September 5, 2014 and your disclosure on page 6 that you “do not generally enter into written agreements with (your) distributors.”  Please tell us whether you have entered into a written customer agreement with United Natural Foods, Inc.  If so, please file the written agreement as an exhibit to your amended filing.  See Item 601(b)(10) of Regulation S-K.

RESPONSE:

The Company has not entered into an agreement with United Natural Foods, Inc. pursuant to which United is required to buy or the Company is required to sell. There is an agreement between the two parties governing timing of payment of invoices, if any, and the availability of a discount to United to the price of goods purchased, if any, at the time that goods are purchased. The Company does not believe that this agreement is material.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,  page 15

Results of Operations

2.   We have reviewed the disclosure you revised in your amended Form 10-K and Form 10-Q to address comments 4, 5 and 6 in our letter dated September 5, 2014 regarding the period over period changes in your results of operations.  We continue to believe you should separately quantify the dollar impact of each material causal factor of the change, including any offsetting factors.  In a supplemental response, please provide us with an explanation that quantifies the following:

•           Gross sales – the dollar impact of changes in prices, volumes, introduction of new products, or other, as applicable.

•           Cost of goods sold – the dollar impact of the changes attributable to higher milk prices and increased volume purchased, as applicable

•           Selling expenses – the dollar impact of each material causal factor of the change with greater specificity, as applicable.

•           General and administrative. – the dollar impact of each material causal factor of the change with greater specificity, as applicable.

RESPONSE:

The Company has included below an explanation separately quantifying the above items requested except that there was no material change to general and administrative expenses in the three months ended June 30, 2014 when compared to the three months ended June 30, 2013. Accordingly, there were no material causal factors of change to discuss.

Comparison of Three-Months Ended June 30, 2014 to Three-Months Ended June 30, 2013

Total consolidated net sales increased by $6,487,527 (approximately 28%) to $29,545,411 during the three-month period ended June 30, 2014 from $23,077,884 during the same three-month period in 2013, primarily as a result of a $6,755,990 (approximately 26%) increase in total consolidated gross sales to $32,594,048 during the three-month period ended June 30, 2014 from $25,838,058 during the same three-month period in 2013, offset by an increase in discounts and allowances during the three-month period ended June 30, 2014 as compared to the same three-month period in 2013. The increase in total consolidated gross sales included approximately $5,798,169 from an increase in volume of products sold and approximately $977,821 from an increase in prices of products sold.

2

The following table summarizes our cost of goods sold, excluding depreciation expense:

Three Months Ended

June 30,

2014

2013

Purchases

$

14,714,737

$

10,274,556

Testing

13,145

15,118

Supplies

371,637

166,624

Salaries production

2,221,464

1,652,448

Contract work

77,567

25,536

Freight

2,954,847

2,243,857

Delivery expense

78,229

78,128

Outside services

19,976

--

Uniform

12,783

5,145

Sales and use tax

3,561

18

Labor and overhead

964,678

597,031

Cost of goods sold

$

21,432,624

$

15,058,461

Cost of goods sold, excluding depreciation expense, increased by $6,374,163 (approximately 42%) to $21,423,624 during the three-month period ended June 30, 2014 from $15,058,461 during the same three-month period in 2013. This increase is  primarily a result of increases in purchases, salaries production, freight and labor and overhead.

Purchases increased $4,440,181 (approximately 43%) to $14,714,737 during the three-month period ended June 30, 2014 from $10,274,556 during the same three-month period in 2013. The increase in purchases included approximately $2,363147 from an increase in volume of purchases and $2,077,034 from increases in prices of products purchased.

Salaries production increased $569,016 (approximately 34%) to $2,221,464 during the three months ended June 30, 2014 from $1,652,448 during the same three-month period in 2013 primarily as a result of additional salaries of employees hired at the Wisconsin facility purchased in July 2013.

Freight increased $710,990 (approximately 32%) to $2,954,847 during the three-month period ended June 30, 2013 from $2,243,857 during the same three-month period in 2013 primarily as a result of an increase in the volume of our products sold and shipped.

Labor and overhead increased $367,647 (approximately 62%) to $964,678 during the three-month period ended June 30, 2014 from $597,031 during the same three-month period during 2013 primarily as a result of additional costs incurred in connection with the Wisconsin facility purchased July 2013.

The following table summarizes our selling expenses:

Three Months Ended

June 30,

2014

2013

Salesperson commissions

$

799,104

$

483,219

Advertising

1,006,015

701,977

Salaries

1,334,037

1,185,880

Promotions payable

131,552

81,542

Travel

423,113

407,217

Contract work

--

16,800

     Selling expense

$

3,693,821

2,876,635

Selling expenses increased by $817,186 (approximately 28%) to $3,693,821 during the three-month period ended June 30, 2014 from $2,876,635 during the same period in 2013.  This increase resulted primarily from increases in salesperson commissions, advertising and salaries.

3

Salesperson commissions increased $315,885 (approximately 65%) to $799,104 during the three-month period ended June 30, 2014 from $483,219 during the same three-month period in 2013 primarily as a result of an increase in volume of products sold.

Advertising increased $304,038 (approximately 43%) to $1,006,015 during the three months ended June 30, 2014 from $701,977 during the same three-month period in 2013 primarily as a result of the purchase of a greater volume of advertisements purchased.

Salaries increased $148,157 (approximately 12%) to $1,334,037 during the three-month  period ended June 30, 2014 from $1,185,880 during the same three-month period in 2014 primarily as a result of additional employees hired in connection with the purchase of the Wisconsin facility in July 2013.

Comparison of Six-Month Period Ended June 30, 2014 to Six-Month Period Ended June 30, 2013

Total consolidated net sales increased by $11,232,207 (approximately 24%) to $58,697,122 during the six-month period ended June 30, 2014 from $47,464,915 during the same six-month period in 2013, primarily as a result of a $11,226,515 (approximately 21%) increase in total consolidated gross sales to $64,655,195 during the six-month period ended June 30, 2014 from $53,428,680 during the same six-month period in 2013, and to a lesser extent, fewer discounts and allowances. The increase in total consolidated gross sales included approximately $9,654,803 from an increase in volume of products sold and approximately $1,571,712 from an increase in prices of products sold.

The following table summarizes our cost of goods sold, excluding depreciation expense:

Six Months Ended

June 30,

2014

2013

Purchases

$

30,188,856

$

21,252,221

Testing

21,458

20,993

Supplies

659,845

329,910

Salaries

4,368,422

3,234,118

Contract work

90,556

81,893

Freight

5,781,180

4,322,368

Delivery expense

161,453

148,275

Outside services

35,313

--

Uniform

24,718

15,698

Sales and use tax

5,143

606

Vendor payment discounts

--

(113)

Labor and overhead

1,777,591

1,201,407

     Cost of goods sold

43,114,535

30,607,446

Cost of goods sold, excluding depreciation expense, increased by $12,507,089 (approximately 41%) to $43,114,535 during the six-month period ended June 30, 2014 from $30,607,446 during the same six-month period in 2013. This increase is  primarily a result of increases in purchases, salaries, freight and labor and overhead.

Purchases increased by $8,936,635 (approximately 42%) to $30,118,856 during the six-month period ended June 30, 2014 from $21,252,221 during the same six-month period in 2013 primarily as a result of the increase in volume of goods produced.  The increase in purchases included approximately $4,144,183 from an increase in volume of purchases and $4,792,451 from increases in prices of products purchased.

Salaries increased $1,134,304 (approximately 35%) to $4,368,422 during the six-month period ended June 30, 2014 from $3,234,118 during the same six-month period in 2013 primarily as a result of additional salaries of employees hired at the Wisconsin facility purchased in July 2013.

Freight increased $1,458,812 (approximately 34%) to $5,781,180 during the six-month period ended June 30, 2014 from $4,322,368 during the same six-month period in 2013 primarily as a result of an increase in the volume of our products sold and shipped.

Labor and overhead increased $576,184 (approximately 48%) to $1,777,591 during the six-month period ended June 30, 2014 from $1,201,407 during the same six-month period in 2013 additional costs incurred in connection with the Wisconsin facility purchased July 2013.

4

The following table summarizes our selling expenses:

Six Months Ended

September 30,

2014

2013

Salesperson commissions

$

1,333,796

$

893,852

Advertising

1,818,939

1,308,306

Salaries

2,938,190

2,500,409

Promotions payable

204,433

110,282

Travel

872,058

701,376

Freight out

508

--

Demos

5,585

--

Sponsorship

--

69

     Selling expense

$

7,173,509

$

5,514,354

Selling expenses increased by $1,659,155 (approximately 30%) to $7,173,509 during the six-month period ended June 30, 2014 from $5,514,354 during the same six-month period in 2013.  This increase resulted primarily from increases in salesperson commissions, advertising and salaries.

Salesperson commissions increased $439,944 (approximately 49%) to $1,333,796 during the six-month period ended June 30, 2014 from $839,852 during the same six-month period in 2013 primarily as a result of an increase in volume of products sold.

Advertising increased $510,633 (approximately 39%) to $1,818,939 during the six-month period ended June 30, 2014 from $1,308,306 during the same six-month period in 2013 primarily as a result of the purchase of a greater volume of advertisements purchased.

Salaries increased $437,781 (approximately 18%) to $2,938,190 during the six-month period ended June 30, 2014 from $2,500,409 during the same six-month period in 2013 primarily as a result of additional employees hired in connection with the purchase of the Wisconsin facility in July 2013.

The following table summarizes our general and administrative expenses.

Six Months Ended

June 30,

2014

2013

Employee expenses

$

1,813,087

$

1,572,325

Rent

150,566

175,209

Equipment lease

3,194

2,337

Auto expense

49,277

20,876

Office supplies

141,472

68,358

Professional fees

1,380,029

1,447,630

Permits and licenses

131,662

148,527

Telephone expense

56,892

39,335

Facilities

448,227

275,443

Tax

71,449

57,941

Miscellaneous

241,972

147,444

     General and administrative expense

4,487,827

3,955,425

General and administrative expenses increased $532,402 (approximately 13%) to $4,487,827 during the six-month period ended June 30, 2014 from $3,955,425 during the same six-month period in 2013.  The increase is primarily a result of increases in employee salaries, facilities expenses and miscellaneous.

Employee expenses increased $240,762 (approximately 15%) to $1,813,087 during the six-month period ended June 30, 2014 from $1,572,325 during the same six-month period in 2013 primarily as a result of additional employees hired in connection with the Wisconsin facility purchased in July 2013.

Facilities expenses increased $172,784 (approximately 63%) to $448,227 during the six-months ended June 30, 2014 from $275,443 during the same six-month period in 2013 primarily as a result of additional costs of maintenance of facilities at the Wisconsin facility purchased in July 2013.

5

Miscellaneous increased $94,528 (approximately 64%) to $241,972 during the six-month period ended June 30, 2014 from $147,444 during the same period ended June 30, 2013 primarily as a result of an increase to the bad debt reserve associated with the increase in accounts receivables.

Comparison of Twelve-Months Ended December 31, 2013 to Twelve-Months Ended December 31, 2012

Total consolidated net sales increased by $16,172,877 (approximately 20%) to $97,524,142 during the twelve-month period ended December 31, 2013 from $81,351,265 during the same twelve-month period in 2012, primarily as a result of a $19,212,087 (approximately 21%) increase in total consolidated gross sales to $89,754,007 during the twelve-month period ended December 31, 2013 from $108,966,094 during the same twelve-month period in 2012, offset by an increase in discounts and allowances in fiscal year 2013 as compared to fiscal year 2012. The increase in total consolidated gross sales resulted solely from an increase in volume of products sold.

The following table summarizes our cost of goods sold, excluding depreciation expense:

Fiscal Year Ended

December 31,

2013

2012

Purchases

$

47,144,509

$

37,858,216

Testing

37,363

71,424

Supplies

780,016

626,920

Salaries

7,936,107

5,923,561

Contract work

67,837

4,200

Freight

9,267,530

5,330,508

Delivery expense

292,736

1,104,421

Outside services

20,760

126,505

Uniform

24,515

479

Sales and use tax

29,384

287

Vendor payment discounts

(111)

(554)

Labor and overhead

2,674,028

2,052,224

     Cost of goods sold

68,274,674

53,098,191

Cost of goods sold, excluding depreciation expense, increased by $15,176,483 (approximately 29%) to $68,274,674 during the twelve-month period ended December 31, 2013 from $53,098,191 during the same twelve-month period in 2012. This increase is  primarily a result of increases in purchases, salaries, freight and labor and overhead partially offset by decreases in delivery expense and outside services.

Purchases increased by $9,286,293 (approximately 25%) to $47,144,509 during the twelve-month period ended December 31, 2013 from $37,858,216 during the same twelve-month period in 2012 primarily as a result of the increase in volume of goods produced.  The increase in purchases included approximately $7,950,225 from an increase

CORRESP
1
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    corresp_17732.htm

Lifeway Foods, Inc.

6431 W. Oakton         Morton Grove, IL 60053

    Phone: (847) 967-1010      Fax: (847) 967-6558     E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

November 21, 2014

Via EDGAR

H. Roger Schwall

Assistant Director

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C.  20549

Re:

Lifeway Foods, Inc.

Amendment No. 1 to Form 10-K for Fiscal Year Ended December 31, 2013 Filed October 3, 2014

Amendment No. 1 to Form 10-Q for Fiscal Quarter Ended

June 30, 2014 Filed October 3, 2014

Response Letter Dated October 3, 2014

File No. 000-17363

Dear Mr. Schwall:

Lifeway Foods, Inc. (the “Company”) hereby advises the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) that the Company has received the Staff’s letter dated November 7, 2014 (the “Staff Comment Letter”), regarding the Commission’s review of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014 and the Response Letter from the Company dated October 3, 2014. The Staff Comment Letter requests that the Company respond within ten (10) business days or advise the Staff when the Company would provide a response. During the time period to respond several key employees of the Company and the accounting firm and law firm who are assisting in preparing responses to the comments contained in the Staff Comment Letter were simultaneously working on the Company’s Form 10-Q for the period ended September 30, 2014 which hampered our ability to respond within the time period requested in your letter. As discussed with Parhaum J. Hamidi, the Company respectfully requests an extension until Tuesday, December 9, 2014 to respond to the Staff Comment Letter.

Thank you for your consideration of our request. If you have any questions, or if you require additional information, regarding the foregoing, please contact me at (347) 915-0118.

Sincerely,

/s/ Edward Smolyansky

Edward Smolyansky

Chief Financial and Accounting Officer,

Chief Operating Officer, Secretary and Treasurer

November 7 , 2014

Via E -mail
Edward P. Smolyansky
Chief Financial Officer
Lifeway Foods Inc.
6431 West Oakton St reet
Morton Grove, Illinois 60053

Re: Lifeway Foods, Inc.
 Amendment No. 1 to Form 10-K for Fis cal Year Ended
December 31, 2013
Filed October 3, 2014

Amendment No. 1 to Form 10 -Q for Fiscal Quarter Ended
June 30, 2014
 Filed October 3, 2014

Response Letter Dated October 3, 2014
File No . 000-17363

Dear Mr. Smolyansky :

We have reviewed your amended filings  and have the following comments.  In some of
our comments, we may ask you to provide us with information so we may better understand your
disclosure.

Please respond to this letter within ten business days  by amending your filing, by
providing the requested information, or by advising us when you will provide the requested
response.   If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, pleas e tell us why in your response.

After reviewing any amendment to your filing and the information you provide in
response to these  comments, we may have  additional comments.

Amendment No. 1 to Form 10 -K for Fiscal Year Ended December 31, 20 13

Distribution, page 6

1. We note your response to comment 2 in our letter dated September 5, 2014 and your
disclosure on page 6 that you “do not generally enter into written agreements with (your)
distributors.”  Please tell us whether you have entered into a written customer agreement

Edward P. Smolyansky
Lifeway Foods, Inc.
November 7 , 2014
Page 2

 with United Natural Foods, Inc.  If so, please file the written agreement as an exhibit to
your amended filing.  See Item 601(b)(10) of Regulation S -K.

Management’s Discussion and Analysis of Financial Condition and Resul ts of Operations ,
Page 15

Results of Operations

2. We have reviewed the disclosure you revised in your amended Form 10 -K and Form 10 -
Q to address comment s 4, 5 and 6  in our  letter dated September 5, 2014 regarding the
period over period changes in your results of operations.  We continue to believe you
should separately quantify the dollar impact of each material causal factor of the change,
including any offsetting factors .  In a supplemental response, please provide us with an
explanation that quantifies the following:

 Gross sales - the dollar impact of changes in prices, volumes, introduction of new
products, or other, as applicable.

 Cost of goods sold - the dollar imp act of the changes attributable to higher milk
prices and increased volume purchased, as applicable.

 Selling expenses  - the dollar impact of each material causal factor of the change
with greater specificity, as applicable .

 General and administrative - the dollar impact of each material causal factor of
the change with greater specificity, as applicable .

Response Letter Dated October 3, 2014

3. We have reviewed your response to comment 11  in our letter dated September 5, 2014.
However, it does not appear that you addressed our comment with respect to providing
disclosure to comply with FASB  ASC 280 -10-50-21.  In a supplemental response, please
provide a sample of your intended disclosure that addresses the factors you used to
conclude that you have one reportable segment or clarify why you do not believe such
disclosure is necessary.

4. Additionally, we note from your response to comment 11 in our  letter dated September 5,
2014 regarding product disclosure required by FASB ASC 280 -10-50-40 that you  have
considered the facto rs of this guidance.  However, it remains unclear to us why you do
not believe this disclosure should be provided.  In this regard, we note disclosure on page
4 of your amended Form 10 -K that identifies the differe nt types of products you produce,
including Kefir, cheese, a fruit sugar -flavored product, a dairy beverage, and a vegetable -
based seasoning.   We also note from your Products page on your website,
www.lifeway.net , that you have 13 product categories, with some of those having

Edward P. Smolyansky
Lifeway Foods, Inc.
November 7 , 2014
Page 3

 subcategories.  To assist us in better understand ing how you reached the conclusion that
product disclosure is not necessary, please explain your basis in further detail.  If
providing the required disclosure is impracticable, explain to us the basis for your
determination and disclose your assertion, as required.

You may contact Jennifer O’Brien , Staff Accountant, at (202) 551 -3721  or Kimberly L.
Calder , Assistant Chief Accountant , at (202 ) 551 -3701  if you have  questions regarding
comments on the financial statements and related matters.  Please contact Parhaum J. Hamidi,
Staff Attorney, at (202) 551 -3421 or, in his absence, the undersigned at  (202) 551 -3745 with any
other questions.

Sincerely,

        /s/H. Roger Schwall

        H. Roger Schwall
        Assistant Director

CORRESP
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    corresp_17710.htm

Lifeway Foods, Inc.

6431 W. Oakton         Morton Grove, IL 60053

    Phone: (847) 967-1010      Fax: (847) 967-6558     E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

October 3, 2014

Via EDGAR

Anne Nguyen Parker

Branch Chief

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C.  20549

Re:

Lifeway Foods, Inc.

Form 10-K for Fiscal Year Ended December 31, 2013

Filed April 2, 2014

Form 10-Q for Fiscal Quarter Ended June 30, 2014

Filed August 11, 2014

File No. 000-17363

Dear Ms. Parker:

On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below are the Company’s responses to your letter of comment dated September 5, 2014.  The numbered responses of the Company and related captions contained in this letter correspond to the numbered paragraphs and related captions in the letter of comment.

Form 10-K for Fiscal Year Ended December 31, 2013

Business, page 4

Distribution, page 4

1.   We note you disclose that you have verbal distribution arrangements with various distributors throughout the United States and in London. To the extent material, please add a related risk factor.

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure under the heading “Distribution” on page 4 to clarify the Company’s arrangements with distributors and to add a related risk factor. The revised disclosure is included in Amendment No. 1 to the Form 10-K for the fiscal year ended December 31, 2013, which is being filed with the Securities and Exchange Commission simultaneously with this letter (the “Amendment”).

Major Customers, page 5

2.   Please identify the name of your two major customers as required by Item 101(c)(vii) of Regulation S-K. Also, file the customer agreements as material contracts pursuant to Item 601(b)(10) of Regulation S-K.

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure under the heading “Customers” on page 5 to clarify the Company’s disclosure about major customers. The revised disclosure is included in the Amendment.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,  page 15

General

3.   As a general observation, we note your MD&A does not consistently provide enough detail to separately quantify the effect of each causal factor that results in a material change in your financial statement line items for the periods under comparison. The staff’s observation is applicable to your periodic filings, including your Form 10-K and Forms 10-Q. In future filings, please enhance your discussion to provide the reader with a better understanding of your business results. Refer to Item 303(a) of Regulation S-K and, for further guidance, Section III.D. of SEC Release 33-6835. More specifically, the comments that follow pertain to the filing under review.

RESPONSE:

The Company will comply with your request in future filings, commencing with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, by providing additional detail to separately quantify the effect of each causal factor that results in a material change in the Company’s financial statement line items for the periods under comparison. The Company has amended the filings under review as set forth in response to the comments below.

Comparison of Year Ended December 31, 2013 to Year Ended December 31, 2012

4.   We note your statement that Gross sales increased by $19.2M or approximately 21% during 2013 when compared to 2012 and that such 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.” Please enhance your disclosure to provide additional detail separately quantifying the effect of each causal factor of the increase. Item 303(a)(3)(iii) of Regulation S-K contemplates a discussion of the extent to which such increases are attributable to increases in prices or to increases in the volume or amount of goods being sold or to the introduction of new products.

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure relating to gross sales to clarify the cause of the increase in gross proceeds. The revised disclosure is included in the Amendment.

2

5.   We note your statement that Cost of goods sold was 70% of net sales during 2013 as opposed to 65% of net sales during 2012 and that such increase “was primarily attributable to the cost of conventional and organic milk.” We further note your disclosure that the total cost of milk was approximately 25% higher during the periods under comparison. Please expand your discussion to provide the actual cost figures necessary to put this change in proper context.

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure relating to gross sales to clarify the cause of the increase in gross proceeds. The revised disclosure is included in the Amendment.

6.   Please enhance your discussion surrounding your operating expenses to provide sufficient detail separately quantifying the effect of the material changes in your Selling expenses and General and administrative financial statement line items

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure relating to total operating expenses to correct the disclosure and to expand the disclosure to quantify the effect of material changes in selling expenses and general and administrative expenses line items.

7.   We note from the transcript of your earnings call held on March 31, 2014 that a Starfruit café location was closed permanently and that you view this as a non-recurring event, and other locations continue to exceed your performance expectation. We are unable to locate discussion within your filing of the operation and related results of such café’s other than the disclosure on page two that such entities exist. Please expand your disclosure in a meaningful way to address this portion of your business.

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure under the heading, “Distribution” in Part I, Item 1, “Business” to provide additional disclosure to discuss the Company’s cafes.

Liquidity and Capital Resources, page 16

8.   We note Net cash used in investing activities increased $7M and your explanation that such increase was “primarily due to an increase in purchases of property and equipment of $7,051,169 compared to 2012.” Please expand your discussion to address the material components of this increase in sufficient detail.

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure related to the increase in purchases of property and equipment in connection with the increase in net cash used in investing activities to address the material components of this increase.

3

9.   Please also expand your discussion to address your purchase of the Golden Guernsey dairy plant in Wisconsin. In this regard, we note from the transcript of your earnings call held on March 31, 2014 that this particular purchase was considered by management to be “One of the most exciting highlights this past year ..., which will provide us with an additional manufacturing capacity for our growing business.” Furthermore, it appears that you should discuss, as you did in the earnings call that this purchase was made with the intent of processing your own milk. Refer to Item 303(a)(1) of Regulation S-K, which contemplates the discussion of events that will likely result in the registrant’s liquidity increasing or decreasing in any material way.

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure related liquidity to discuss the intent and expectations of the purchase of Gulden Guernsey.

Consolidated Statements of Financial Condition, page 20

10.   We note the line item “Goodwill and other non-amortizable brand assets” does not appear to comply with FASB ASC 350-20-45-1, which requires that the aggregate amount of goodwill be shown separately on the face of the balance sheet. Please revise your presentation as necessary. Additionally, please expand your footnote disclosure as it relates to your indefinite-lived brand assets to disclose the total carrying amount as required by FASB ASC 350-30-50-2(b).

RESPONSE:

The Company had presented an amount of $14,068,091 under the caption “Goodwill and other non-amortizable brand assets” on the balance sheet at December 31, 2013. Included in that amount is $82,000 that represents a non-amortizable brand asset from an earlier acquisition. The remaining $ 13,986,091 represents Goodwill. The Company considers the $82,000 to be an immaterial disclosure related to a non-amortizable brand asset. The Company acknowledges the Staff’s comment and will modify the caption in subsequent filings to read “Goodwill” and accordingly, will meet the disclosure requirements of ASC 350-30-50-2(b).

Notes to Consolidated Financial Statements, page 24 General

11.   We note your footnotes do not provide the reader with an understanding of how management considered segment reporting in accordance with FASB ASC 280-10-50-21. Please expand your disclosure to address this disclosure requirement. Additionally, please tell us how you considered the need to provide information about products as per FASB ASC 280-10-50-40 and information about geographic areas as per FASB ASC 280-10-50-41.

RESPONSE:

The Company respectfully acknowledges the Staff’s comment and advises the Staff that the Company considered the disclosure requirements of ASC 28010-50-41. The Company’s principal business activity is the manufacturing of probiotic, cultured, functional dairy and non-dairy health food products. The Company sells these products to customers, located in the United States of America through direct delivery and distributors. The Company also has 3 small retail locations that it sells its products. Additionally, the Company has foreign revenues from the United Kingdom only.  The Company has determined that it has one reportable segment. The reportable segment has been determined based on how the Company’s chief operating decision maker manages the business. The revenues attributable to a foreign country and the retail operations were not material. The combined revenue relating to the foreign and retail store revenue was less than 2% of the consolidated revenues for the year ended December 31, 2013.

Accordingly, the Company believes it has considered the factors within ASC 280-10-50-40 and 280-10-50-41.

Management’s Report on Internal Control Over Financial Reporting, page 35

4

12.   We note that you identified material weaknesses in your internal control over financial reporting as of December 31, 2013 and understand that such weaknesses still exist as of June 30, 2014. In your response letter to us dated October 14, 2011, you indicated your expectation that changes made in 2011 would eliminate your material weaknesses. Given your continued conclusion that your internal control over financial reporting is ineffective, please provide us with an update on the status of your efforts to eliminate all material weaknesses.

RESPONSE:

As reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, the Company has

(1) reviewed the accessibility for the accounting and finance department and updated the security clearance to provide for more robust segregation of duties;

(2) updated its policies to require and formalize a more robust and frequent review by the chief financial officer of the entire external financial statement preparation process in order to minimize any fragmentation and ensure accuracy of financial statements; and

(3) updated its policies to include a formal checklist to be adhered to by the controller and accounting department. The chief financial officer will review the final checklist as well as undertake a post period closing internal audit which is used to identify, record and review period end activity.

Additionally, in the quarter ended September 30, 2014, we updated our systems information flow to automate the material pricing component of inventory to replace the manual input of such information. This change in our internal controls and procedures will be disclosed in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.

The Company believes that these measures will remediate the material weaknesses that have been reported in our periodic filings. However, until these remediation measures have been in place for long enough to be tested, we cannot assure or report that the remediation was successful. In light of the Company’s belief that these measures remediated the material weakness, the Company has postponed its hiring of a consultant.

Form 10-Q for Fiscal Quarter Ended June 30, 2014

Legal Proceedings page 22

13.   You indicate that you are not party to material legal proceedings but you also state that you are party to various litigation claims and legal proceedings under the risk factor subheading, “Litigation or legal proceedings could expose us to significant liabilities...” at page 27. Please revise to clarify.

RESPONSE:

In response to the Staff’s comment, the Company has revised the disclosure under the risk factor subheading, “Litigation or legal proceedings could expose us to significant liabilities….”

The Company hereby acknowledges that:

Ÿ

the company is responsible for the adequacy and accuracy of the disclosure in the filing;

Ÿ

staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

Ÿ

the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope this addresses all of the Commission’s comments and concerns.  Please do not hesitate to contact us with any further questions.

Sincerely,

/s/ Edward Smolyansky

Edward Smolyansky

Chief Financial and Accounting Officer,

Chief Operating Officer, Secretary and Treasurer

5

CORRESP
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filename1.htm

    corresp_17704.htm

Lifeway Foods, Inc.

6431 W. Oakton         Morton Grove, IL 60053

    Phone: (847) 967-1010      Fax: (847) 967-6558     E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

September 19, 2014

Via EDGAR

Anne Nguyen Parker

Branch Chief

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C.  20549

Re:

Lifeway Foods, Inc.

Form 10-K for Fiscal Year Ended December 31, 2013

Filed April 2, 2014

Form 10-Q for Fiscal Quarter Ended June 30, 2014

Filed August 11, 2014

File No. 000-17363

Dear Ms. Parker:

Lifeway Foods, Inc. (the “Company”) hereby advises the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) that the Company has received the Staff’s letter dated September 5, 2014 (the “Staff Comment Letter”), regarding the Commission’s review of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014. The Staff Comment Letter requests that the Company respond within ten (10) business days or advise the Staff when the Company would provide a response. As discussed with Ms. Caroline Kim, the Company respectfully requests an extension until Friday, October 3, 2014 to respond to the Staff Comment Letter.

Thank you for your consideration of our request. If you have any questions, or if you require additional information, regarding the foregoing, please contact me at (347) 915-0118.

Sincerely,

/s/ Edward Smolyansky

Edward Smolyansky

Chief Financial and Accounting Officer,

Chief Operating Officer, Secretary and Treasurer

September 5, 2014

Via E -mail
Edward P. Smolyansky
Chief Financial Officer
Lifeway Foods Inc.
6431 West Oakton St reet
Morton Grove, Illinois 60053

Re: Lifeway Foods, Inc.
 Form 10-K for Fis cal Year Ended December 31, 2013
 Filed April 2, 2014

Form 10 -Q for Fiscal Quarter Ended June 30 , 2014
 Filed August 11 , 2014

File No . 000-17363

Dear Mr. Smolyansky :

We have reviewed your filing s and have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.

Please respond to this letter within ten business days by amending your filing s, by
providing the requested information, or by advising us when you wil l provide the requested
response.   If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.

After reviewing any amendment to your filing s and the informat ion you provide in
response to these  comments, we may have  additional comments.

Form 10 -K for Fiscal Year Ended December 31, 2013

Business, page 4

Distribution, page 4

1. We note you disclose that you have verbal distribution arrangements with various
distributors throughout the United States and in London .  To the extent material, please
add a related risk factor.

Edward P. Smolyansky
Lifeway Foods, Inc.
September 5, 2014
Page 2

 Major Customers, page 5

2. Please identify the name of your two major customers as required by Item 101(c)(vii) of
Regulation S-K.  Also, file the customer agreements as material contracts pursuant to
Item 601(b)(10) of Regulation S -K.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,
page 15

General

3. As a general observation, we note your M D&A does not consistently provide enough
detail to separately quantify the effect of each causal factor that results in a material
change in your financial statement line items for the periods under comparison.  The
staff’s observation is applicable to you r periodic filings, including your Form 10 -K and
Forms 10 -Q.  In future filings, please enhance your discussion to provide the reader with
a better understanding of your business results.  Refer to Item 303(a) of Regulation S -K
and, for further guidance, S ection III.D. of SEC Release 33 -6835.  More specifically, the
comments that follow pertain to the filing under review.

Comparison of Year Ended December 31, 2013 to Year Ended December 31, 2012

4. We note your statement that Gross sales increased by $19.2M or approximately 21%
during 2013 when compared to 2012 and that such 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.”  Please enhance your d isclosure to provide
additional detail separately quantifying the effect of each causal factor of the increase.
Item 303(a)(3)(iii) of Regulation S -K contemplates a discussion of the extent to which
such increases are attributable to increases in prices o r to increases in the volume or
amount of goods being sold or to the introduction of new products.

5. We note your statement that Cost of goods sold was 70% of net sales during 2013 as
opposed to 65% of net sales during 2012 and that such increase “was prima rily
attributable to the cost of conventional and organic milk.”  We further note your
disclosure that the total cost of milk was approximately 25% higher during the periods
under comparison.  Please expand your discussion to provide the actual cost figure s
necessary to put this change in proper context.

6. Please enhance your discussion surrounding your operating expenses to provide sufficient
detail separately quantifying the effect of the material changes in your Selling expenses
and General and administra tive financial  statement line items.

7. We note from the transcript of your earnings call held on March 31, 2014 that a Starfruit
café location was closed permanently and that you v iew this as a non -recurring event, and

Edward P. Smolyansky
Lifeway Foods, Inc.
September 5, 2014
Page 3

 other  locations continue to exceed your performance expectation.   We are unable to
locate discussion within your filing of the operation and related results of such café’s
other than the disclosure on page two that such entities exist.  Please expand your
disclosure in a meaningful way to ad dress this portion of your business.

Liquidity and Capital Resources, page 16

8. We note Net cash used in investing activities increased $7M and your explanation that
such increase was “ primarily due to an increase in purchases of property and equipment
of $7,051,169 compared to 2012. ”  Please expand your discussion to address the material
components of this increase in sufficient detail.

9. Please also expand your discussion to address your purchase of the Golden Guernsey
dairy plant in Wisconsin .  In this regard, we note from the transcript of your earnings call
held on March 31, 2014 that this particular purchase was considered by management to
be “One of the most exciting highlights this past year …, which will provide us with an
additional manufacturing capacity for our growing business. ”  Furthermore, it appears
that you should discuss, as you did in the earnings call that this purchase was made with
the intent of processing your own milk.  Refer to Item 303(a)(1) of Regulation S -K,
which contemplates th e discussion of events that will likely result in the registrant’s
liquidity increasing or decreasing in any material way.

Consolidated Statements of Financial Condition, page 20

10. We note the line item “Goodwill and other non amortizable brand assets” doe s not appear
to comply with FASB ASC 350 -20-45-1, which requires that the aggregate amount of
goodwill be shown separately on the face of the balance sheet.  Please revise your
presentation as necessary.  Additionally, please expand your footnote disclosur e as it
relates to your indefinite -lived brand assets to disclose the total carrying amount as
required by FASB ASC 350 -30-50-2(b).

Notes to Consolidated Financial Statements, page 24

General

11. We note your footnotes do not provide the reader with an un derstanding of how
management considered segment reporting in accordance with FASB ASC 280 -10-50-21.
Please expand your disclosure to address this disclosure requirement.  Additionally,
please tell us how you considered the need to provide information abo ut products as per
FASB ASC 280 -10-50-40 and information about geographic areas as per FASB ASC
280-10-50-41.

Edward P. Smolyansky
Lifeway Foods, Inc.
September 5, 2014
Page 4

 Management’s Report on Internal Control Over Financial Reporting, page 35

12. We note that you identified material weaknesses in your internal con trol over financial
reporting as of December 31, 2013 and understand that such weaknesses still exist as of
June 30, 2014.   In your response letter to us dated October 14, 2011, you indicated your
expectation that changes made in 2011 would eliminate your material weaknesses.  Given
your continued conclusion that your internal control over financial reporting is
ineffective, please provide us with an update on the status of your efforts to eliminate all
material weaknesses.

Form 10 -Q for Fiscal Quarter Ended June 30, 2014

Legal Proceedings page 22

13. You indicate that you are not party to material legal proceedings but you also state that
you are party to various litigation  claims and legal proceedings under the risk factor
subheading, “Litigation or lega l proceedings could expose us to significant liabilities…”
at page 27.  Please revise to clarify.

We urge all persons who are responsible for the accuracy and adequacy of the disclosure
in the filing to be certain that the filing includes the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules require.   Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequacy of the disclosure s they have made.

 In responding to our comments, please provide  a written statement from the company
acknowledging that:

 the company is responsible for the adequacy and accuracy of the disclosure in the filing;

 staff comments or changes to disclosure  in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

 the company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal secu rities laws of the United States.

Edward P. Smolyansky
Lifeway Foods, Inc.
September 5, 2014
Page 5

You may contact Jennifer O’Brien , Staff Accountant, at (202) 551 -3721  or Kimberly L.
Calder , Assistant Chief Accountant , at (202) 551 -3701  if you have  questions regarding
comments on the financial statements and related matters.  Please contact Caroline Kim,
Attorney -Advisor, at (202) 551 -3878 or, in her absence, the undersigned at  (202) 551 -3611 with
any other questions.

Sincerely,

/s/ A.N. Parker

        Anne Nguyen Parker
        Branch Chief

May 23, 2013

Via E -mail
Edward P. Smolyansky
Chief Financial and Accounting Officer
Lifeway Foods, Inc.
6431 West Oakton St.
Morton Grove, IL  60053

Re: Lifeway Foods, Inc.
Preliminary Proxy Statement on Schedule 14A
Filed April 30, 2013
File No. 0-17363

Dear Mr. Smolyansky :

We have completed our review of your filing .  We remind you that our comments or
changes to disclosure in response to our comments do not foreclose the  Commission from taking
any action with respect to the company or the filing and the company may not assert staff
comments as a defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.  We urge all persons who are responsible for the
accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the
information the Securities Exchange Act of 1934 and all applicable rules require.

Sincerely,

 /s/H. Roger Schwall

 H. Roger Schwall
Assistant Director

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Lifeway Foods, Inc.

6431 W. Oakton       Morton Grove, IL 60053

    Phone: (847) 967-1010    Fax: (847) 967-6558   E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

May 23, 2013

Via EDGAR

H. Roger Schwall

Assistant Director

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C.  20549-7010

Re:

Lifeway Foods, Inc.

Amendment No. 1 to Preliminary Proxy Statement on Schedule 14A

Filed May 20, 2013

File No. 0-17363

Dear Mr. Schwall:

On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below are the Company’s responses to your letter of comment dated May 22, 2013.  The numbered responses of the Company and related captions contained in this letter correspond to the numbered paragraphs and related captions in the letter of comment.

Amendment No. 1 to Preliminary Proxy Statement on Schedule 14A

1.

We note your discussion on page one of your amended proxy statement concerning the “inadvertent” distribution of preliminary proxy materials on or about May 10, 2013. Please enhance your disclosure to indicate, if true, that this distribution was inconsistent with federal regulatory provisions in the following regards:

●

You distributed proxy cards to shareholders even though shareholders had not received concurrently or previously a definitive proxy statement that had been filed with the Commission; and

●

You did not mark the copies of the preliminary proxy statement as “Preliminary Copies” when you distributed them to shareholders.

Please refer to Rule 14a4(f) and Rule 14a-6(e)(1), respectively.

Also, please confirm to us that you have made appropriate arrangements with your transfer agent, vote tabulator, brokers and other entities collecting proxies and voting instructions so that all voting platforms are disabled until you have filed your definitive proxy statement and have recirculated the revised proxy materials to your shareholders.

H. Roger Schwall

United States Securities and Exchange Commission

May 23, 2013

Page 2

ANSWER:

The Company’s disclosure will be enhanced to read as follows:

On or about May 10, 2013, the Company inadvertently furnished a Notice of Meeting and Proxy Statement (the “Original Proxy Statement”) relating to the Annual Meeting to shareholders. Since that time, the Company has revised the Original Proxy Statement to (i) separate Proposal 2 in the Original Proxy Statement into two separate proposals (Proposal 2 and Proposal 3 in this Proxy Statement)On May 8, 2013, the Company informed its service provider that the filing and distribution of  communications to its shareholders relating to the Meeting would be postponed. However, due to a misunderstanding between the Company and the service provider and certain technical constraints of the service provider’s system, on May 10, 2013 certain of our shareholders received instructions to access our Notice of Meeting and related proxy materials (the “May 10 Proxy Materials”). The Company promptly requested that the service provider remove all documents that were posted online and disable the voting mechanism that had been enabled. The technical constraints of the service provider prohibited disabling the voting mechanism but allowed the Company to remove the May 10 Proxy Materials and replace them with a message stating that new replacement proxy materials would be forthcoming and that any votes cast on in connection with the May 10 Proxy Materials would not be counted. The May 10 Proxy Materials had been intended to be distributed as definitive proxy materials upon filing those materials with the SEC. Accordingly, the May 10 Proxy Materials were not labeled as a preliminary copy and the proxy card accompanying the May 10 Proxy Materials was not accompanied by a definitive proxy statement that was previously or concurrently filed with the SEC.

The Company has revised its proxy materials to among other items (i) separate Proposal 2 in the May 10 Proxy Materials into two separate proposals (Proposal 2 and Proposal 3 in this definitive Proxy Statement (the “Proxy Statement”)) to be submitted to the shareholders at the Meeting and (ii) expand disclosure regarding Proposal 2 and Proposal 3. Proposal 1, Proposal 4, Proposal 5 and Proposal 6 as set forth herein, are substantially unchanged from the Original May 10 Proxy Statement Materials.

The proxy card accompanying, and voting instructions in, this Revised Proxy Statement allows provide new unique control numbers which allow you to vote on all six (6) proposals for which the Company is seeking your approval. ACCORDINGLY, VOTES CAST IN CONNECTION WITH THE ORIGINAL MAY 10 PROXY STATEMENTMATERIALS WILL NOT BE TABULATED OR COUNTED FOR ANY PURPOSE. IN ORDER FOR YOUR VOTE TO BE COUNTED ON ANY OF THE SIX (6) PROPOSALS FOR WHICH THE COMPANY IS SEEKING YOUR APPROVAL, YOU MUST SUBMIT THE REVISED PROXY CARD ACCOMPANYING THIS REVISED PROXY STATEMENT, OR VOTE AS INSTRUCTED IN THIS PROXY STATEMENT.

H. Roger Schwall

United States Securities and Exchange Commission

May 23, 2013

Page 3

The Company believes it has made appropriate arrangements with respect to voting platforms, voting tabulation and counting and disclosure to the shareholders relating thereto as set forth in the enhanced disclosure above.

The Company hereby acknowledges that:

●

the company is responsible for the adequacy and accuracy of the disclosure in the filing;

●

staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

●

the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope this addresses all of the Commission’s comments and concerns.  Please do not hesitate to contact us with any further questions.

Sincerely,

/s/ Edward Smolyansky

Edward Smolyansky

Chief Financial and Accounting Officer,

Chief Operating Officer, Secretary and Treasurer

May 22, 2013

Via E -mail
Edward P. Smolyansky
Chief Financial and Accounting Officer
Lifeway Foods , Inc.
6431 West Oakton St.
Morton Grove, IL  60053

Re: Lifeway Foods , Inc.
 Amendment No. 1 to Preliminary Proxy Statement on Schedule 14A
Filed May 2 0, 2013
File No. 0 -17363

Dear Mr. Smolyansky :

We have reviewed your amended filing an d have the following comments.  In some of
our comments, we may ask you to provide us with information so we may better understand your
disclosure.

Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advising us when you will provide the requested
response.   If you do not  believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.

After reviewing any amendment to your filing and the information you provide in
response to these  comments, w e may have  additional comments.

Amendment No. 1 to Preliminary Proxy Statement on Schedule 14A

1. We note your discussion on page one  of your amended proxy statement concerning the
“inadvertent” distribution of preliminary proxy materials on or about May 10,
2013.   Please enhance your disclosure to indicate, if true, that this distribution was
inconsistent with federal regulatory provisions in the following regards:
 You distributed proxy cards to shareholders even though shareholders had not
received concu rrently or previously a definitive proxy statement that had been filed
with the Commission; and
 You did not mark the copies of the preliminary proxy statement as “Preliminary
Copies” when you distributed them to shareholders.
Please refer to Rule 14a -4(f) and Rule 14a -6(e)(1), respectively.

Also, please confirm to us that you have made appropriate arrangements with your
transfer agent, vote tabulator, brokers and other entities collecting proxies and voting

Edward P. Smolyansky
Lifeway Foods, Inc.
May 22, 2013
Page 2

 instructions so that all voting platforms are  disabled until you have filed your definitive
proxy statement and have recirculated the revised proxy materials to your shareholders.

We urge all persons who are responsible for the accuracy and adequacy of the disclosure
in the filing to be certain that the  filing includes the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules require.   Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accura cy
and adequacy of the disclosures they have made.

 In responding to our comments, please provide  a written statement from the company
acknowledging that:

 the company is responsible for the adequacy and accuracy of the disclosure in the filing;

 staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

 the company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United States.

Please contact Norman von Holtzendorff at (202) 551 -3237  or me at (202) 551 -3740  with
any questions.

Sincerely,

 /s/H. Roger Schwall

 H. Roger Schwall
Assistant Director

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Lifeway Foods, Inc.

6431 W. Oakton       Morton Grove, IL 60053

    Phone: (847) 967-1010    Fax: (847) 967-6558   E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

May 17, 2013

Via EDGAR and FACSIMILE

H. Roger Schwall

Assistant Director

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C.  20549-7010

Re:

Lifeway Foods, Inc.

Preliminary Proxy Statement on Schedule 14A

Filed April 30, 2013

File No. 0-17363

Dear Mr. Schwall:

On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below are the Company’s responses to your letter of comment dated May 10, 2013.  The numbered responses of the Company and related captions contained in this letter correspond to the numbered paragraphs and related captions in the letter of comment.

Preliminary Proxy Statement on Schedule 14A

General

1.

Please file the form of proxy card that will accompany your proxy statement.

ANSWER:

The form of proxy card that will accompany the proxy statement is being filed with the Amendment No. 1 to the Preliminary Proxy Statement (the “Proxy Statement”) simultaneously with the submission of this response letter.

2.

On page 2 of your proxy statement, you combine the say-on-pay vote and the say-on-pay frequency vote as one item “4.” Please separate these out into separately numbered items consistent with the way the two proposals are identified and numbered later in the proxy statement.

ANSWER:

The Proxy Statement has been revised to so that the say-on-pay vote and say-on-pay frequency vote have been separated into separately numbered items consistent with the way the two proposals are identified and numbered later in the Proxy Statement.

H. Roger Schwall

United States Securities and Exchange Commission

May 17, 2013

Page 2

Proposal 2, page 17

3.

You are proposing amendments to your Articles of Incorporation. Please enhance your disclosure to show the changes that the proposed amendments would make to the language of the Articles of Incorporation. We also note that the version of the Articles of Incorporation incorporated by reference as an exhibit to your Form 10-K for the year ended December 31, 2012 (which incorporates the Articles by reference to Exhibit 3.5 to the Form 10-QSB filed August 8, 2000) appears to be an amendment. Please clarify whether this is an amendment or the complete Articles of Incorporation. If the former, please file the complete Articles of Incorporation.

ANSWER:

The Proxy Statement has been revised to enhance disclosure to show the changes that the proposed amendments would make to the language of the Articles of Incorporation.

Additionally, the original Articles of Incorporation of the Company were filed with the SEC prior to the institution of electronic filing. Accordingly, the Company will file the full text of the current Articles of Incorporation of the Company, as amended, as Exhibit No. 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2013, filed on May 15, 2013.

4.

We note your statement in Proposal 2 that certain provisions of your Articles of Incorporation “should be revised and updated to include and revise certain provisions that were previously addressed in the Company’s Amended and Restated Bylaws.” Please clarify whether you will make revisions to your Bylaws if your shareholders approve the proposed amendments to the Articles. If so, please describe the changes to the Bylaws and show how they will affect the current language of the Bylaws.

ANSWER:

The Proxy Statement has been revised to explain that if the Amended and Restated Articles are adopted, the Company’s Bylaws will also be amended and restated. Further the Proxy Statement has been revised to to describe the changes to be made to the Company’s Bylaws and show how they will affect the current language of the Bylaws.

H. Roger Schwall

United States Securities and Exchange Commission

May 17, 2013

Page 3

5.

Rule 14a-4(a)(3) under the Securities Exchange Act of 1934 provides that the form of proxy shall identify clearly and impartially each separate matter intended to be acted upon, whether or not related to or conditioned on the approval of other matters. Furthermore, Rule 14a-4(b)(1) provides that the person solicited by a proxy shall be afforded an opportunity to approve, disapprove or abstain with respect to each separate matter. In this regard, we are concerned that you may have bundled together multiple separate matters in Proposal 2. In adopting its unbundling rules, the Commission stated that the rules served the following purposes: “to permit shareholders to communicate to the board of directors their views on each of the matters put to a vote, and not be forced to approve or disapprove a package of items and thus approve matters they might not if presented independently.” See Exchange Act Release No. 34-30849 (Jun. 23, 1992). Please provide us with your analysis as to whether the matters in Proposal 2 are separate matters that are required to be unbundled.

ANSWER:

The Proxy Statement has been revised to include as (1) Proposal 2 the amendment of the Company’s Articles of Incorporation to increase the number of shares of Common Stock of the Company authorized for issuance and (2) Proposal 3 the amendment and restatement of the Articles of Incorporation.

The Company hereby acknowledges that:

●

the company is responsible for the adequacy and accuracy of the disclosure in the filing;

●

staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

●

the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope this addresses all of the Commission’s comments and concerns.  Please do not hesitate to contact us with any further questions.

Sincerely,

/s/ Edward Smolyansky

Edward Smolyansky

Chief Financial and Accounting Officer,

Chief Operating Officer, Secretary and Treasurer

May 10, 2013

Via E -mail
Edward P. Smolyansky
Chief Financial and Accounting Officer
Lifeway Foods , Inc.
6431 West Oakton St.
Morton Grove, IL  60053

Re: Lifeway Foods , Inc.
 Preliminary Proxy Statement on Schedule 14A
Filed April 30, 2013
File No. 0 -17363

Dear Mr. Smolyansky :

We have reviewed your filing an d have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.

Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advising us when you will provide the requested
response.   If you do not believe our comments apply t o your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.

After reviewing any amendment to your filing and the information you provide in
response to these  comments, we may have  additional comment s.

Preliminary Proxy Statement on Schedule 14A

General

1. Please file the form of proxy card that will accompany your proxy statement.

2. On page 2 of your proxy statement, you combine the say -on-pay vote and the say -on-pay
frequency vote a s one item “4.”  Please separate  these out into separate ly numbered  items
consistent with the way the two proposals are identified and numbered later in the proxy
statement.

Proposal 2, page 17

3. You are proposing amendments to your Articles of Incorporation.  Please enha nce your
disclosure to show the changes that the proposed amendments would make to the

Edward P. Smolyansky
Lifeway Foods, Inc.
May 10, 2013
Page 2

 language of the Articles of Incorporation .  We also note that the version of the Articles of
Incorporation incorporated by reference as an exhibit to your  Form 10 -K for the year
ended December 31, 2012 ( which incorporates the Articles by reference to Exhibit 3.5 to
the Form 10 -QSB filed August 8, 2000) appear s to be an amendment .  Please clarify
whether this is an amendment or the complete Articles of Incorporation.  If t he former,
please file the complete Articles of Incorporation.

4. We note your statement in Proposal 2 that certain  provisions of  your Articles of
Incorporation “should be revised and updated to include and revise certain provisions that
were previously addr essed in the Company’s Amended and Restated Bylaws.”  Please
clarify whether you will make revisions to your Bylaws if your shareholders approve the
proposed amendments to the Articles.  If so, please describ e the changes to the Bylaws
and show how they wi ll affect the current language of the Bylaws .

5. Rule 14a -4(a)(3) under the Securities Exchange Act of 1934 provides that the form of
proxy shall identify clearly and impartially each separate matter  intended to be acted
upon, whether or not related to or conditioned on the approval of other matters.
Furthermore, Rule 14a -4(b)(1)  provides that the person solicited by a proxy shall be
afforded an opportunity to approve, disapprove or abstain with respect to each separate
matter .  In this regar d, we are concerned  that you may have bundled together multiple
separate matters in Proposal 2.  In adopting its unbundling rules, the Commission stated
that the rules served the following purposes:  “to permit shareholders to communicate to
the board of d irectors their views on each of the matters put to a vote, and not be forced
to approve or disapprove a package of items and thus approve matters they might not if
presented independently.”  See Exchange Act Release No. 34 -30849 (Jun. 23, 1992).
Please pr ovide us with your analysis as to whether the matters in Proposal 2 are separate
matters  that are required to  be unbundled .

We urge all persons who are responsible for the accuracy and adequacy of the disclosure
in the filing to be certain that the filing  includes the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules require.   Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.

 In responding to our comments, please provide  a written statement from the company
acknowledging that:

 the company is responsible for the adequacy and accuracy of the disclosure in the filing;

 staff comment s or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

 the company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any per son under the federal securities laws of the United States.

Edward P. Smolyansky
Lifeway Foods, Inc.
May 10, 2013
Page 3

Please contact Norman von Holtzendorff at (202) 551 -3237  or me at (202) 551 -3740  with
any questions.

Sincerely,

 /s/  A.N. Parker for

 H. Roger Schwall
Assistant Director

October 18, 2011
 Via Facsimile

Edward P. Smolyansky, CFO & CAO Lifeway Foods, Inc. 6431 West Oakton Morton Grove, Illinois  60053
Re: Lifeway Foods
  Form 10-K for Fiscal Year Ended December 31, 2010   Filed March 31, 2011   File No.:  0-17363

Dear Mr. Smolyansky:
We have completed our review of your f iling.  We remind you that our comments or
changes to disclosure in res ponse to our comments do not for eclose the Commission from taking
any action with respect to the company or th e filing and the company may not assert staff
comments as a defense in any proceeding ini tiated by the Commission or any person under the
federal securities laws of the United States.  We urge all pers ons who are responsible for the
accuracy and adequacy of the disclosure in the fi ling to be certain that the filing includes the
information the Securities Exchange Act of 1934 and all applicable rules require.
 Sincerely,
         / s /  K a r l  H i l l e r           K a r l  H i l l e r          B r a n c h  C h i e f

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Lifeway Foods, Inc.

6431 W. Oakton       Morton Grove, IL 60053

    Phone: (847) 967-1010    Fax: (847) 967-6558   E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

October 14, 2011

Via EDGAR

Mr. Karl Hiller

Branch Chief

United States Securities and Exchange Commission

Division of Corporation Finance

100 F St., N.E.

Washington, D.C.  20549-7010

Re:

Lifeway Foods, Inc.

Form 10-K for the Fiscal Year Ended December 31, 2010

Filed March 31, 2011

File No. 000-17363

Dear Mr. Hiller:

Thank you for your recent telephone call. On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below for your convenience is a reiteration of the Company’s responses to questions 1-4 of your letter of comment dated September 14, 2011 and an updated response to question number 5 of such letter of comment.  The numbered responses of the Company and related captions contained in this letter correspond to the numbered paragraphs and related captions in the letter of comment.

Form 10-K for the Fiscal Year Ended December 31, 2010

Business, page 1

Competition, page 5

1.

Tell us the status of your discussions with Danone Foods, Inc. related to the non-compete agreement and explain your view regarding the anticipated impact of not being able to extend this agreement.  If the likelihood of material implications is reasonably possible, also submit the disclosure that you propose to comply with Item 303 of Regulation S-K.  The guidance in Instruction 3 to paragraph 303(a) requires that you focus in MD&A on material events and uncertainties that would cause reported financial information not to be necessarily indicative of future operating results or future financial condition.

Mr. Karl Hiller

October 14, 2011

Page Two

ANSWER:

Exceptions to Danone’s non-compete obligations as modified by the extensions of such obligation previously allowed for effective competition of Danone’s products with the Company’s products on what has developed into a similar product category basis (organic and/or probiotic dairy).  Also, Stoneyfield Farms, Inc., a subsidiary of Danone, was previously excluded from any competition restriction vis a vis Lifeway. Therefore, the Company believes that extending the terms of the non-compete agreement with Danone may not afford the Company any additional protection in the marketplace.  They may, in fact, serve only to limit the Company’s ability to expand into new markets
and/or products.  Accordingly, the possibility of not extending the non-compete obligations is not viewed by the Company as a material event or uncertainty. However, the Company continues to negotiate with Danone to determine if the Company could be served by continuing the non-compete obligations.

Employees, page 14

2.

We understand from your disclosures on pages 4, 27 and 30 that you recognize revenue when distributors take custody of your products, although it appears you may have distributors who are also your employees.  Please describe any circumstances under which you recognize revenue when products are placed in the custody of distributors who are your employees or who are utilizing your vehicles.  Tell us the extent to which you consider distributors utilized in your operations to be employees for purposes of your disclosure on page 14 and indicate whether your approach is consistent with that taken in determining federal employment taxes and federal and state income tax withholding.  Please identify the factors you
considered in making these determinations.

ANSWER:

The Company only has relationships with third party distributors.  No distributors are considered to be employees.  Company owned vehicles are used by Company employees for local same day deliveries only and revenue is recognized on the date of delivery to the end retail customers.  Drivers of those vehicles are employees of the Company and all payroll, withholdings, and income taxes are accounted for in the same manner.  Going forward, the Company will include commentary to clarify the distinction between distributors and employees.

Mr. Karl Hiller

October 14, 2011

Page Three

Financial Statements and Supplementary Data, page 20

Revenue Recognition, page 27

3.

We note your disclosure on page four explaining that each distributor must meet certain product handling, service and administrative requirements, which include replacing damaged, old, and substandard packages at retail stores.  Please expand your disclosure to clarify whether your distributors and retailers have a right of return and, if so, also disclose the terms under which this right may be exercised.  If your products are sold with a right of return, submit the analysis that you performed under FASB ASC 605-15-25-1 and 3 in determining the point at which you recognize revenue.

ANSWER:

The Company expects customers, either distributors who go into third party retail stores to sell the product they have purchased from us, or the direct retail customer that may service their own stores, to rotate the perishable products as general good business practice.  It is to the benefit of the distributor or retailer, as well as the Company, not to have spoiled, out dated, or substandard product on the shelf.  However, due to the perishable nature of the product, the Company’s distributors and retailers have no right to return any product to the Company.  The Company will clarify its position in future disclosure.

Accounts Receivable, page 28

4.

We note your disclosure explaining that you perform ongoing credit evaluations of your customers.  Tell us whether these credit evaluations are being performed for both distributors and retailers alike, and explain your rationale.  We would like to understand the extent to which you regard distributors as customers.

ANSWER:

The Company deems as a customer any entity to which it sells its products, i.e., delivers to, ships to, etc. and then invoices to, and receives payment from, whether that entity is a middle man "distributor", who will sell to an end retailer, or the end retailer itself.  The Company performs a credit evaluation on any new customer.

Mr. Karl Hiller

October 14, 2011

Page Four

Controls and Procedures, page 41

5.

We note that you identified material weaknesses in your internal control over financial reporting as of December 31, 2010, 2009, 2008 and 2007; and understand that such weaknesses still exist as of June 30, 2011.  Under Rule 13a-15(a) of Regulation 13A, you are required to maintain internal control over financial reporting.  Please disclose details of your plans including a timetable to remediate all material weaknesses.

ANSWER:

In each of the last three years, the Company has engaged a professional services firm to assist it in documenting and testing its internal controls over financial reporting.  The professional services firm provides a listing of identified deficiencies in the design of the Company’s internal control over financial reporting as well as operational deficiencies identified in each year.  The Company has implemented new policies or procedures each year based on the observations from the professional services firm and reduced the number of deficiencies each year.

The Company plans to continue to engage the professional services firm to continue testing of the internal control over financial reporting in 2011.  The Company also plans to make further changes in the design of its internal control over financial reporting and expects further improvement in the results of the testing.  The most significant component of the changes in the internal control over financial reporting is inclusion of additional entity level controls over advertising and sales promotional discounts with customers, controls over the identification, recording and review of period end activity for accounts receivable, accounts payable, fixed assets, inventory, and deferred taxes.
The Company expects to implement these changes during 2011.

The Company currently outsources the accounting of its general ledger and financial reporting to a third party on a quarterly basis.  Additional entity level control mentioned above will include a more frequent review of account activity in the fourth quarter of 2011.  Additionally, the Company plans to increase the review performed by the outsourced general ledger at period ends to ensure proper reporting and classification of items noted above during 2011.

The Company expects these changes to eliminate the material weaknesses.  The Company, together with the professional services firm, will continue to test the Company’s internal control over financial reporting to ensure the corrective measures set forth above accomplish the elimination of the material weaknesses.

Mr. Karl Hiller

October 14, 2011

Page Five

Closing Comments

The Company hereby acknowledges that:

·

The Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·

Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·

The Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope this addresses all of the Commission’s comments and concerns.  Please do not hesitate to contact us with any further questions.

Sincerely,

Edward Smolyansky

/s/ Edward Smolyansky

CFO, Chief Accounting Officer

and Controller

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Lifeway Foods, Inc.

6431 W. Oakton       Morton Grove, IL 60053

    Phone: (847) 967-1010    Fax: (847) 967-6558   E-mail: info@lifeway.net

Web site:  www.lifeway.net  - www.kefir.com – www.starfruitcafe.com

September 28, 2011

Via EDGAR and FACSIMILE

Mr. Karl Hiller

Branch Chief

United States Securities and Exchange Commission

Division of Corporation Finance

100 F St., N.E.

Washington, D.C.  20549-7010

Re:

Lifeway Foods, Inc.

Form 10-K for the Fiscal Year Ended December 31, 2010

Filed March 31, 2011

File No. 0-17363

Dear Mr. Hiller:

On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below are the Company’s responses to your letter of comment dated September 14, 2011.  The numbered responses of the Company and related captions contained in this letter correspond to the numbered paragraphs and related captions in the letter of comment.

Form 10-K for the Fiscal Year Ended December 31, 2010

Business, page 1

Competition, page 5

1.

Tell us the status of your discussions with Danone Foods, Inc. related to the non-compete agreement and explain your view regarding the anticipated impact of not being able to extend this agreement.  If the likelihood of material implications is reasonably possible, also submit the disclosure that you propose to comply with Item 303 of Regulation S-K.  The guidance in Instruction 3 to paragraph 303(a) requires that you focus in MD&A on material events and uncertainties that would cause reported financial information not to be necessarily indicative of future operating results or future financial condition.

Mr. Karl Hiller

September 28, 2011

Page Two

ANSWER:

Exceptions to Danone’s non-compete obligations as modified by the extensions of such obligation previously allowed for effective competition of Danone’s products with the Company’s products on what has developed into a similar product category basis (organic and/or probiotic dairy).  Also, Stoneyfield Farms, Inc., a subsidiary of Danone, was previously excluded from any competition restriction vis a vis Lifeway. Therefore, the Company believes that extending the terms of the non-compete agreement with Danone may not afford the Company any additional protection in the marketplace.  They may, in fact, serve only to limit the Company’s ability to expand into new
markets and/or products.  Accordingly, the possibility of not extending the non-compete obligations is not viewed by the Company as a material event or uncertainty. However, the Company continues to negotiate with Danone to determine if the Company could be served by continuing the non-compete obligations.

Employees, page 14

2.

We understand from your disclosures on pages 4, 27 and 30 that you recognize revenue when distributors take custody of your products, although it appears you may have distributors who are also your employees.  Please describe any circumstances under which you recognize revenue when products are placed in the custody of distributors who are your employees or who are utilizing your vehicles.  Tell us the extent to which you consider distributors utilized in your operations to be employees for purposes of your disclosure on page 14 and indicate whether your approach is consistent with that taken in determining federal employment taxes and federal and state income tax withholding.  Please identify the factors you
considered in making these determinations.

ANSWER:

The Company only has relationships with third party distributors.  No distributors are considered to be employees.  Company owned vehicles are used by Company employees for local same day deliveries only and revenue is recognized on the date of delivery to the end retail customers.  Drivers of those vehicles are employees of the Company and all payroll, withholdings, and income taxes are accounted for in the same manner.  Going forward, the Company will include commentary to clarify the distinction between distributors and employees.

Mr. Karl Hiller

September 28, 2011

Page Three

Financial Statements and Supplementary Data, page 20

Revenue Recognition, page 27

3.

We note your disclosure on page four explaining that each distributor must meet certain product handling, service and administrative requirements, which include replacing damaged, old, and substandard packages at retail stores.  Please expand your disclosure to clarify whether your distributors and retailers have a right of return and, if so, also disclose the terms under which this right may be exercised.  If your products are sold with a right of return, submit the analysis that you performed under FASB ASC 605-15-25-1 and 3 in determining the point at which you recognize revenue.

ANSWER:

The Company expects customers, either distributors who go into third party retail stores to sell the product they have purchased from us, or the direct retail customer that may service their own stores, to rotate the perishable products as general good business practice.  It is to the benefit of the distributor or retailer, as well as the Company, not to have spoiled, out dated, or substandard product on the shelf.  However, due to the perishable nature of the product, the Company’s distributors and retailers have no right to return any product to the Company.  The Company will clarify its position in future disclosure.

Accounts Receivable, page 28

4.

We note your disclosure explaining that you perform ongoing credit evaluations of your customers.  Tell us whether these credit evaluations are being performed for both distributors and retailers alike, and explain your rationale.  We would like to understand the extent to which you regard distributors as customers.

ANSWER:

The Company deems as a customer any entity to which it sells its products, i.e., delivers to, ships to, etc. and then invoices to, and receives payment from, whether that entity is a middle man "distributor", who will sell to an end retailer, or the end retailer itself.  The Company performs a credit evaluation on any new customer.

Mr. Karl Hiller

September 28, 2011

Page Four

Controls and Procedures, page 41

5.

We note that you identified material weaknesses in your internal control over financial reporting as of December 31, 2010, 2009, 2008 and 2007; and understand that such weaknesses still exist as of June 30, 2011.  Under Rule 13a-15(a) of Regulation 13A, you are required to maintain internal control over financial reporting.  Please disclose details of your plans including a timetable to remediate all material weaknesses.

ANSWER:

In each of the last three years, the Company has engaged a professional services firm to assist it in documenting and testing its internal controls over financial reporting.  The professional services firm provides a listing of identified deficiencies in the design of the Company’s internal control over financial reporting as well as operational deficiencies identified in each year.  The Company has implemented new policies or procedures each year based on the observations from the professional services firm and reduced the number of deficiencies each year.

The Company plans to continue to engage the professional services firm to continue testing of the internal control over financial reporting in 2011.  The Company also plans to make further changes in the design of its internal control over financial reporting and expects further improvement in the results of the testing.  The most significant component of the changes in the internal control over financial reporting is inclusion of additional entity level controls over advertising and sales promotional discounts with customers, controls over the identification, recording and review of period end activity for accounts receivable, accounts payable, fixed assets, inventory, and deferred taxes.
The Company expects to implement these changes during 2011 and 2012.

The Company currently outsources the accounting of its general ledger and financial reporting to a third party on a quarterly basis.  Additional entity level control mentioned above will include a more frequent review of account activity in the fourth quarter of 2011.  Additionally, the Company plans to increase the review performed by the outsourced general ledger at period ends to ensure proper reporting and classification of items noted above.

Mr. Karl Hiller

September 28, 2011

Page Five

Closing Comments

The Company hereby acknowledges that:

·

The Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·

Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·

The Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope this addresses all of the Commission’s comments and concerns.  Please do not hesitate to contact us with any further questions.

Sincerely,

Edward Smolyansky

/s/ Edward Smolyansky

CFO, Chief Accounting Officer

and Controller

September 14, 2011
 Edward P. Smolyansky, CFO & CAO Lifeway Foods, Inc. 6431 West Oakton Morton Grove, Illinois  60053
Re: Lifeway Foods
  Form 10-K for Fiscal Year Ended December 31, 2010   Filed March 31, 2011   File No.:  0-17363

Dear Mr. Smolyansky:
We have reviewed your filing and have the following comments.  In some of our
comments, we may ask you to provide us with  information so we may better understand your
disclosure.
 Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advi sing us when you will provide the requested
response.  If you do not believe our comments apply to your fact s and circumstances or do not
believe an amendment is appropriate, pl ease tell us why in your response.
 After reviewing any amendment to your filing and the information you provide in
response to these comments, we may have additional comments.
Form 10-K for Fiscal Year Ended December 31, 2010

 Business, page 1

 Competition, page 5

 1. Tell us the status of your di scussions with Danone Foods, In c. related to the non-compete
agreement and explain your view regarding th e anticipated impact of not being able to
extend this agreement.  If the likelihood of material implications is reasonably possible,
also submit the disclosure that you propose to  comply with Item 303 of Regulation S-K.
The guidance in Instruction 3 to paragra ph 303(a) requires that you focus in MD&A on
material events and uncertainties that woul d cause reported financial information not to
be necessarily indicative of future operati ng results or future financial condition.

Edward P. Smolyansky
Lifeway Foods, Inc.   September 14, 2011 Page 2

 Employees, page 14

 2. We understand from your disclosures on page s 4, 27 and 30 that you recognize revenue
when distributors take custody of your products, although it appears you may have
distributors who are also your employees.  Please describe any circumstances under
which you recognize revenue when products are placed in the custody of distributors who
are your employees or who are utilizing your vehicles.  Tell us the extent to which you
consider distributors utilized  in your operations to be em ployees for purposes of your
disclosure on page 14 and indica te whether your approach is c onsistent with that taken in
determining federal employment taxes and federal and state income tax withholding.
Please identify the factors you consider ed in making these determinations.
 Financial Statements and Supplementary Data, page 20

 Revenue Recognition, page 27

 3. We note your disclosure on page four explaini ng that each distributor must meet certain
product handling, service and administrative  requirements, which include replacing
damaged, old, and substandard packages at retail  stores.  Please expand your disclosure to
clarify whether your distributor s and retailers have a right of return and, if so, also
disclose the terms under which this right ma y be exercised.  If your products are sold
with a right of return, submit the analys is that you performed under FASB ASC 605-15-
25-1 and 3 in determining the point at which you recognize revenue.
 Accounts Receivable, page 28

4. We note your disclosure explai ning that you perform ongoing credit evaluations of your
customers.  Tell us whether these credit evaluations are being performed for both
distributors and retailers alik e, and explain your rationale.  We would like to understand
the extent to which you regard distributors as customers.
 Controls and Procedures, page 41

 5. We note that you identified material weaknesse s in your internal control over financial
reporting as of December 31, 2010, 2009, 2008 and 2007; and understand that such
weaknesses still exist as of  June 30, 2011.  Under Rule 13a-15(a) of Regulation 13A, you
are required to maintain internal control ove r financial reporting.  Please disclose details
of your plans including a timetable to remediate all material weaknesses.

We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing include s the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules requir e.  Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.

Edward P. Smolyansky
Lifeway Foods, Inc.   September 14, 2011 Page 3

  In responding to our comments, please provi de a written statement from the company
acknowledging that:
 the company is responsible for the adequacy an d accuracy of the disclo sure in the filing;

 staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

 the company may not assert staff comments as  a defense in any proceeding initiated by
the Commission or any person under the federa l securities laws of  the United States.

You may contact Michael Fa y at 202-551-3812 if you have questions regarding the
comments and related matters.  Please contac t me with any other questions at 202-551-3686.

 Sincerely,
  /s/ Karl Hiller          K a r l  H i l l e r          B r a n c h  C h i e f

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-4628

DIVISION OF
CORPORATION FINANCE
        August 6, 2009
 Ms. Julie Smolyansky President, Chief Executive Officer and Director

Lifeway Foods, Inc. 6431 West Oakton Morton Grove, IL 60053
 Re: Lifeway Foods, Inc.
  Form 10-K for the Fiscal Year Ended December 31, 2008
Filed March 31, 2009 Form 10-Q for the Quarterly Period Ended March 31, 2009 Filed May 15, 2009
  File No. 0-17363

Dear Ms. Smolyansky:
We have completed our review of your 2008 Form 10-K, and do not, at this time,
have any further comments.

     S i n c e r e l y ,

 H. Roger Schwall
Assistant Director

CORRESP
1
filename1.htm

    www.eXFILE.com 888.775-4789 --- LIFEWAY FOODS, INC.  CORRESPONDENCE

    July 1,
2009

    Via EDGAR and
FACSIMILE

    Mr. Mark
Wojciechowski

    Staff
Accountant

    United
States Securities and Exchange Commission

    Division
of Corporation Finance

    100 F
St., N.E.

    Washington,
D.C.  20549-7010

              Re:

              Lifeway Foods,
      Inc.

                Form
      10-K for the Fiscal Year Ended December 31, 2008

                  Filed
      March 31, 2009

                    Form
      10-Q for the Quarterly Period Ended March 31, 2009 Filed  May
      15, 2009

                    File
      No. 0-17363

    Dear Mr.
Wojciechowski:

    On behalf of Lifeway Foods, Inc.
(“Lifeway” or the “Company”), set forth below are the Company’s responses to
your letter of comment dated May 28, 2009 to Ms. Julie Smolyansky, Chief
Executive Officer and President of the Company.  The numbered
responses of the Company and related captions contained in this letter
correspond to the numbered paragraphs and related captions in the letter of
comment.

        Mr. Mark
Wojciechowski

        July 1,
2009

        Page
2

    Form 10-K for the Fiscal
Year Ended December 31, 2008

    General

              1.

              We
      note your disclosure that your Proxy Statement for your 2009 Annual
      Meeting of Shareholders scheduled to be held June 19, 2009 was to be filed
      no later than April 30, 2009.  Please tell us when you expect to
      file this proxy statement.

    ANSWER:

    The Proxy
Statement for our 2009 Annual Meeting of Shareholders was filed on June 5, 2009.
Please note that the Form 10-K filed on March 31, 2009 contained all required
Part III disclosure.

      Management’s Discussion and
Analysis of Financial Condition and results of
Operations

      Critical Accounting
Policies, page 18

              2.

              Please
      expand your discussion and analysis to disclosure and significant
      assumptions and estimates underlying your critical accounting
      policies.  Please also expand your disclosure to discuss the
      variability that is reasonably likely to result over time from the
      uncertainties inherent in these assumptions and
      estimates.  Consider disclosing a sensitivity analysis or
      discussing how your assumptions and estimates in prior periods have
      compared to actual results.  Refer to Section V of Securities
      and Exchange Commission release No. 33-8350, which can be found on the
      Commission’s website at:

              http://www.sec.gov/rules/interp/33-8350.htm

              In
      your response to this comment, please provide us with a sample of your
      proposed expanded disclosure.

    ANSWER:

    The
Company has not previously released its annual financial statements separately
from its 10-K.  In accordance with past practices, management has
referred to its accounting policies in its financial statements and referenced
the same in the discussion and analysis.  However, in future
discussion and analysis, the Company will include a discussion of its critical
accounting policies.  The following is a proposed expanded
disclosure:

        Mr. Mark
Wojciechowski

        July 1,
2009

        Page
3

    CRITICAL ACCOUNTING
POLICIES

    Lifeway’s
analysis and discussion of its financial condition and results of operations are
based upon its consolidated financial statements that have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“US GAAP”).  The preparation of financial statements in
accordance with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses.  US GAAP provides the framework from which to make these
estimates, assumptions and disclosures.  Lifeway chooses accounting
policies within US GAAP that management believes are appropriate to accurately
and fairly report Lifeway’s operating results and financial position in a
consistent manner.  Management regularly assesses these policies in
light of current and forecasted economic conditions and has discussed the
development and selection of critical accounting policies with its audit
committee of the Board of Directors.  We believe that certain
accounting policies are of more significance in our consolidated financial
statement preparation than others, which policies are discussed
below.  See also Note 2 to the consolidated financial statements for a
summary of our principal accounting policies.

    ALLOWANCE FOR DOUBTFUL
ACCOUNTS

    We
maintain an allowance for doubtful accounts primarily based on the age of
receivables, historical loss experience, factors surrounding the credit risk of
specific customers and unusual circumstances, if any.  We regularly
review the recoverability and age of our trade receivables.  If there
is a deterioration of customers’ creditworthiness or actual defaults are higher
than our historical experience, we will provide additional
allowances.

    We have
had a good experience in collecting our trade receivables and also in estimating
our allowance for doubtful accounts.

    GOODWILL

    Goodwill
represents the excess purchase price over the fair value of the net tangible and
other intangible assets acquired.  Goodwill is not amortized and is
reviewed for impairment at least annually.  We conduct our annual
impairment testing on December 31 to determine if we will be able to recover all
or a portion of the carrying value of goodwill.  We test goodwill more
frequently if events or changes in circumstances indicate that it might be
impaired.

    The
application of the impairment test requires judgment, including the
identification of reporting units, assignments of assets and liabilities to
reporting units and the determination

        Mr. Mark
Wojciechowski

        July 1,
2009

        Page
4

    of the
fair value of each reporting unit.  Further, the impairment test
involves the use of accounting estimates and assumptions related to future
operating results.

    We will
continue to closely monitor the 2009 results and projections for our reporting
units and the economic conditions of the products end-markets.  Any
significant change in market conditions, estimates or judgments could give rise
to impairment in the period that the change becomes known.

    These
impairment tests also involve the use of accounting estimates and assumptions
believed to be reasonable, the results of which form the basis for our
conclusions.  Significant changes to these estimates and assumptions
could adversely impact our conclusion to these impairment tests.

    INTANGIBLE
ASSETS

    The
Company’s intangible assets were acquired as a result of various business
acquisitions. Prior to 2009, the Company accounted for intangible assets based
on the business combination purchase price allocated to the indentified
intangible.  Beginning in 2009, the Company is accounting for business
combinations in accordance with SFAS No.  141(R) which requires assets
acquired be recorded at their fair value.  The Company amortizes
intangible assets over their estimated useful lives.  Intangible
assets recorded and their useful lives are: recipes (4 years), customer lists
and other customer related intangibles (7-12 years), lease agreement (7 years),
trade names (15 years) and formulas (10 years).

    The
Company reviews intangible assets and their related useful lives at least once a
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.

    MARKETABLE
SECURITIES

    All
investment securities are classified as available-for-sale, and are carried at
fair value or quoted market prices.  Unrealized gains and losses on
available-for-sale securities are reported as a separate component of
stockholders’ equity, net of tax.  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

        Mr. Mark
Wojciechowski

        July 1,
2009

        Page
5

    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: (a) the size and duration of the decline; (b) the
financial condition of the investee; and (c) 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.  In determining fair value for
financial assets the use of assumptions about future cash flows and
appropriately risk-adjusted discount rates are acceptable when relevant
observable inputs are not available.  In some cases we may determine
that observable inputs require significant adjustment based on unobservable
data.  More information on the specific methods used to determine fair
values of the Company’s securities available-for-sale at December 31, 2008 can
be found in Note 4, Marketable Securities, in the accompanying notes to the
consolidated financial statements.

    DEFERRED INCOME
TAXES

    Deferred
income taxes arise from temporary differences resulting 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.

    Our tax
rate is based on expected income and tax planning opportunities available in the
various jurisdictions in which we operate.  For interim financial
reporting, we estimate the annual tax rate based on projected taxable income for
the full year and record a quarterly income tax provision in accordance with the
anticipated annual rate.  As the year progresses, we refine the
estimates of the year’s taxable income as new information becomes available,
including year-to-date financial results.  This continual estimation
process may result in a change to our expected effective tax rate for the
year.  When this occurs, we adjust the income tax provision during the
quarter in which the change in estimate occurs so that the year-to-date
provision reflects the expected annual tax rate.  Significant judgment
is required in determining our effective tax rate and in evaluating our tax
positions.

    In
accordance with SFAS No. 109, “Accounting for Income Taxes,” we recognize
deferred tax assets and liabilities based on the differences between the
financial statement carrying amounts and the tax basis of assets and
liabilities.  Deferred tax assets represent items to be used as a tax
deduction or credit in future tax returns for which we have already properly
recorded the tax benefit in the income statement.  At least quarterly,
we assess the likelihood that the deferred tax asset balance will be recovered
from future taxable income.  We take

        Mr. Mark
Wojciechowski

        July 1,
2009

        Page
6

    into
account such factors as prior earnings history, expected future earnings,
carry-back and carry-forward periods and tax strategies that could potentially
enhance the likelihood of a realization of a deferred tax asset.  To
the extent recovery in unlikely, a valuation allowance is established against
the deferred tax asset and increasing our income tax expense in the year such
determination is made.

    Evaluation of Disclosure
Controls and Procedures, page 37

              3.

              We
      note your disclosure that your disclosure controls and procedures were not
      effective as of December 31, 2008.  We also note your related
      disclosure in your Form 10-Q for the quarterly period ended March 31,
      2009.  Please disclose when each significant deficiency was
      identified, by whom it was identified, and when each significant
      deficiency first began.

    ANSWER:

              We
      have identified the following material weaknesses in our internal control
      for financial reporting:

              Item
      1.  An incomplete and undocumented financial reporting process,
      including an overview of the financial disclosure
    principals;

              Item
      2.  No documented accounting procedures manual available for
      employee use; and

              Item
      3.  No documented accounting procedures in valuing of marketable
      securities other than temporary
impairment.

              Edward
      Smolyansky, the Company’s Chief Financial Officer, Chief Accounting
      Officer and Controller, identified the deficiency described in Item 1
      above in early 2008.  Until such time as the deficiency was
      identified, the Company believed its financial reporting process to be
      adequate.

              Edward
      Smolyansky identified the deficiency described in Item 2 above in early
      2008.  The Company has not previously had such an accounting
      procedures manual.

        Mr. Mark
Wojciechowski

        July 1,
2009

        Page
7

              Edward
      Smolyansky identified the deficiency described in Item 3 above around
      November 2008, and such deficiency first began in the third quarter of
      2008.

      Management’s Report in
Internal Control Over Financial Reporting, page 37

              4.

              We
      also note that your management plans to “take corrective action” and to
      implement “additional controls” to address the material weaknesses
      disclosed.  With respect to this remediation effort, please
      expand your disclosure to include each of the specific steps that you have
      undertaken, or intend to undertake, to address such deficiencies, along
      with the timeframe for remediation and any associated materials
      costs.

    ANSWER:

              With
      respect to the Company’s plan to “take corrective action” and to implement
      “additional controls” in order to address material weaknesses discussed in
      Items 1, 2 and 3 of Comment No. 3 above, the Company has taken the
      following steps:

              With
      respect to the deficiency discussed in Item 1, the Company has
      implemented use of a software program called  Microsoft Business
      Solutions-Navision ("NAV") as of June 1, 2009. Basically, the NAV software
      increases the financial reporting ability of the Company over the previous
      accounting software, and it implements more controls and strengthens the
      existing controls over the financial reporting process as well as allowing
      for more documentation of the financial reporting process. The cost
      to the Company to implement the NAV software program is
      approximately $100,000.  The Company believes this action will
      remediate the deficiency discussed in such
item.

              With
      respect to the deficiency discussed in Item 2, the Company has
      postponed further development of such manual until it can
      further analyze the new NAV software's effect on its financial
      controls.

              With
      respect to the deficiency discussed in Item

CORRESP
1
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                    KELLEY DRYE & WARREN LLP

                    A LIMITED
      LIABILITY PARTNERSHIP

                    333
      WEST WACKER DRIVE

                    CHICAGO,
      ILLINOIS  60606

                    (312)
      857-7070

                    NEW YORK,
      NY

                    WASHINGTON,
      DC

                    TYSONS
      CORNER, VA

                    LOS ANGELES,
      CA

                    STAMFORD,
      CT

                    PARSIPPANY,
      NJ

                    BRUSSELS,
      BELGIUM

                    AFFILIATE
      OFFICES

                    MUMBAI,
      INDIA

                    FACSIMILE

                    (312)
      857-7095

                    www.kelleydrye.com

                      TIMOTHY R.
      LAVENDER

                      DIRECT LINE: (312)
      857-2630

                      EMAIL:
      tlavender@kelleydrye.com

        June 26,
2009

        Via EDGAR and
facsimile

        Mr. Mark
Wojciechowski

        Staff
Accountant

        United
States Securities and Exchange Commission

        Division
of Corporation Finance

        100 F
St., N.E.

        Washington,
D.C.  20549-7010

                  Re:

                  Lifeway Foods,
      Inc.

                    Form
      10-K for the Fiscal Year Ended December 31, 2008

                      Filed
      March 31, 2009

                        Form
      10-Q for the Quarterly Period Ended March 31, 2009 Filed  May
      15, 2009

                        File
      No. 0-17363

        Dear Mr.
Wojciechowski:

        On behalf of Lifeway Foods, Inc. (the
“Company”), we
acknowledge receipt of your facsimile letter dated May 28, 2009 by the Company.
The Company originally intended to respond to the letter on June 26, 2009,
however, the Company is requesting additional time to respond to the letter and
will file its response on July 1, 2009.

        Please
feel free to contact me directly at (312) 857-2630 if you have any
questions.

                  Sincerely,

                  /s/ Timothy R. Lavender

                  Timothy
      R. Lavender

                  TRL:dmk

CORRESP
1
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    WWW.EXFILE.COM, INC. -- 888-775-4789 -- LIFEWAY FOODS, INC. -- CORRESPONDENCE

                  KELLEY
      DRYE & WARREN LLP

                  A
      LIMITED LIABILITY PARTNERSHIP

                  333
      WEST WACKER DRIVE

                  CHICAGO,
      ILLINOIS  60606

                  (312)
      857-7070

                  NEW
      YORK, NY

                  WASHINGTON,
      DC

                  TYSONS
      CORNER, VA

                  LOS
      ANGELES, CA

                  STAMFORD,
      CT

                  PARSIPPANY,
      NJ

                  BRUSSELS,
      BELGIUM

                  AFFILIATE
      OFFICES

                  MUMBAI,
      INDIA

                  FACSIMILE

                  (312)
      857-7095

                  www.kelleydrye.com

                    TIMOTHY R.
      LAVENDER

                    DIRECT LINE: (312)
      857-2630

                    EMAIL:
      tlavender@kelleydrye.com

      June 11,
2009

    Via EDGAR and U.S.
Mail

    Mr. Mark
Wojciechowski

    Staff
Accountant

    United
States Securities and Exchange Commission

    Division
of Corporation Finance

    100 F
St., N.E.

    Washington,
D.C.  20549-7010

              Re:

              Lifeway Foods,
      Inc.

                Form
      10-K for the Fiscal Year Ended December 31, 2008

                  Filed
      March 31, 2009

                  Form
      10-Q for the Quarterly Period Ended March 31, 2009 Filed  May
      15, 2009

                  File
      No. 0-17363

    Dear Mr.
Wojciechowski:

    On behalf
of Lifeway Foods, Inc. (the “Company”), we acknowledge receipt of your facsimile
letter dated May 28, 2009 by the Company. The Company intends to respond to the
letter by June 26, 2009.

    Please
feel free to contact me directly at (312) 857-2630 if you have any
questions.

                      Sincerely,

                    /s/ Timothy
      R. Lavender

                    Timothy
      R. Lavender

      TRL:
dmk

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010

DIVISION OF
CORPORATION FINANCE
        May 28, 2009
 Ms. Julie Smolyansky President, Chief Executive Officer and Director

Lifeway Foods, Inc. 6431 West Oakton Morton Grove, IL 60053
 Re: Lifeway Foods, Inc.
  Form 10-K for the Fiscal Year Ended December 31, 2008
Filed March 31, 2009 Form 10-Q for the Quarterly Period Ended March 31, 2009 Filed May 15, 2009
  File No. 0-17363

Dear Ms. Smolyansky:
We have reviewed your filings and have the following comments.  Please provide
a written response to our comments.  Please be as detailed as necessary in your explanation.  In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.  After reviewing this information, we may raise additional comments.       Please understand that the purpose of our review process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing.  We look forward to working with you in these respects.  We welcome any questions you may have about our comments or any other aspect of our review.  Feel free to call us at the telephone numbers listed at the end of this letter.   Form 10-K for the Fiscal Year Ended December 31, 2008

 General

 1. We note your disclosure that your Proxy Statement for your 2009 Annual Meeting of Shareholders scheduled to be held June 19, 2009 was to be filed no later than April 30, 2009.  Please tell us when you expect to file this proxy statement.

Ms. Julie Smolyansky
Lifeway Foods, Inc.
May 28, 2009 Page 2

 Management’s Discussion and Analysis of Financial Condition and results of Operations

Critical Accounting Policies, page 18
 2. Please expand your discussion and analysis to disclose the significant assumptions and estimates underlying your critical accounting policies.  Please also expand your disclosure to discuss the variability that is reasonably likely to result over time from the uncertainties inherent in these assumptions and estimates.  Consider disclosing a sensitivity analysis or discussing how your assumptions and estimates in prior periods have compared to actual results.  Refer to Section V of Securities and Exchange Commission Release No. 33-8350, which can be found on the Commission’s website at:
http://www.sec.gov/rules/interp/33-8350.htm
 In your response to this comment, please provide us with a sample of your proposed expanded disclosure.
 Evaluation of Disclosure Controls and Procedures, page 37

 3. We note your disclosure that  your disclosure controls and procedures were not effective as of December 31, 2008.   We also note your related disclosure in your Form 10-Q for the quarterly period ended March 31, 2009.  Please disclose when each significant deficiency was identified, by whom it was identified, and when each significant deficiency first began.
 Management’s Report in Internal Control Over Financial Reporting, page 37

 4. We also note that your management plans to “take corrective action”  and to implement “additional controls” to address the material weaknesses disclosed.  With respect to this remediation effort, please expand your disclosure to include each of the specific steps that you have undertaken, or intend to undertake, to address such deficiencies, along with the timeframe for remediation and any associated material costs.

Ms. Julie Smolyansky
Lifeway Foods, Inc.
May 28, 2009 Page 3

Form 10-Q for the Quarterly Period Ended March 31, 2009
 Notes to Consolidated Financial Statements

Note 14 Recent Accounting Pronouncements, page 20

5. We note your disclosure regarding the adoption of SFAS 141(R), and that “The Company will apply the provisions of this standard to any acquisitions that it completes on or after December 15, 2008.”  Given your acquisition of Fresh Made, Inc. in February 2009, please modify your disclosure to explain if you applied the provisions of SFAS 141(R) to your acquisition.  In your response to this comment, please provide us with a sample of your proposed expanded disclosures.
  Closing Comments

 Please respond to these comments within 10 business days or tell us when you
will provide us with a response.  Please furnish a letter that keys your responses to our comments and provides any requested information.  Detailed letters greatly facilitate our review.  Please understand that we may have additional comments after reviewing your responses to our comments.   We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes all information required under the Securities Exchange Act of 1934 and that they have provided all information investors require for an informed investment decision.  Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.     In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:  ‚ the company is responsible for the adequacy and accuracy of the disclosure in the filing;
‚ staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
‚ the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Ms. Julie Smolyansky
Lifeway Foods, Inc. May 28, 2009 Page 4

In addition, please be advised that the Division of Enforcement has access to all
information you provide to the staff of the Di vision of Corporation Finance in our review
of your filing or in response to our comments on your filing.
You may contact Mark Wojciechowski at (202) 551-3759, or Jill Davis, Branch
Chief, at (202) 551-3683 if you have questions regarding comments on the financial statements and related matters.  Please contact Tracey McNeil at (202) 551-3392 or, in her absence, Michael Karney at (202) 551-3847 with any other questions.

     S i n c e r e l y ,

 H. Roger Schwall
Assistant Director

CORRESP
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LIFEWAY FOODS, INC.

6431 W Oakton

Morton Grove, Illinois 60053

July 23, 2007

Securities and Exchange Commission

100 F Street NE

Washington, D.C. 20549

    Re:

    Lifeway Foods, Inc.

Registration Statement on Form S-3, as amended (Registration No. 333-137317)

Dear Sir or Madam:

Pursuant to Rule 461 of the General Rules and Regulations under the Securities Act of 1933, as
amended, Lifeway Foods, Inc., an Illinois corporation (the “Company”), hereby requests that the
effectiveness of its Registration Statement on Form S-3, as amended (Registration No. 333-137317)
be accelerated so that it will become effective at 10:30 a.m. (E.S.T.), July 25, 2007, or as soon
thereafter as practicable.

The Company hereby acknowledges that:

    •

    should the Commission or the staff,
acting pursuant to delegated authority,
declare the filing effective, it does not
foreclose the Commission from taking any
action with respect to the filing;

    •

    the action of the Commission or the
staff, acting pursuant to delegated
authority, in declaring the filing
effective, does not relieve the Company
from its full responsibility for the
adequacy and accuracy of the disclosure
in the filing; and

    •

    the Company may not assert this
action as defense in any proceeding
initiated by the Commission or any person
under the federal securities laws of the
United States.

    Very truly yours,

LIFEWAY FOODS, INC..

    By:
    /s/ Edward P. Smolyansky

    Edward P. Smolyansky

    Chief Accounting and Financial Officer

CORRESP
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    TIMOTHY R. LAVENDER

    DIRECT LINE: (312) 857-2630

    EMAIL: tlavender@kelleydrye.com

May 14, 2007

Via EDGAR and U.S. Mail

Ms. Tangela Richter

Branch Chief

United States Securities and Exchange Commission

100 F St., N.E.

Washington, D.C. 20549

    Re:

    Lifeway Foods, Inc.

    Registration Statement on Form S-3

    Filed September 14, 2006

    File No. 333-137317

    Form 10-KSB for the fiscal
year ended December 31, 2005 Filed March 31, 2006

    Form 10-QSB for the fiscal year ended March 31, 2006 Filed November 20, 2006

    Form 10-QSB for the fiscal year ended June 30, 2006 Filed August 14, 2006

    Form 10-QSB for the fiscal year ended September 30, 2006 Filed May 15, 2006

    File No. 0-17363

Dear Ms. Richter:

     On behalf of Lifeway Foods, Inc. (“Lifeway” or the “Company”), set forth below are the
Company’s responses to your letter of comment dated October 13, 2006 to Ms. Julie Smolyansky,
Chief Executive Officer and President of the Company. The numbered responses of the Company and
related captions contained in this letter correspond to the numbered paragraphs and related
captions in the letter of comment. For your convenience, Company’s responses include supplemental
information provided to you herein and revisions to the

Ms. Tangela Richter

May 14, 2007

Page Two

Company’s Registration Statement on Form S-3, Registration No. 333-137317 (the “Form S-3”), the
Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 (the “Form
10-KSB”) and the Company’s Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2006,
June 30, 2006 and September 30, 2006 (the “Forms 10-QSB”).

Form S-3 filed September 14, 2006

Selling Stockholders, page 6

    1.

    Expand the Selling Stockholders table to include the natural person with power to vote or to
dispose of the securities offered for resale by the entity that is listed as a selling
stockholder. If more than one holder is listed as beneficial owner for the same securities,
include explanatory text or footnotes. See Interpretation 4S of the Regulation S-K
portion of the march 1999 supplement to the CG telephone interpretation manual.

     ANSWER:

    The Selling Stockholders table has been revised on page 9 of the Form S-3 to include the
requested disclosure.

Form 10-KSB/A for the Fiscal Year Ended December 31, 2005

Patents, Trademarks, Licenses, Royalty Agreements, page 8

    2.

    We note your disclosure regarding the “BasicsPlus” mark that indicates GalaGen, Inc. assigned
the entire interest, including the goodwill of this mark to the company. Please explain your
meaning of the term goodwill in this disclosure.

     ANSWER:

    The Company used the designation of goodwill being assigned with the trademark “BasicsPlus”
for the legal concept that trademark protection stems from a symbol or a word as it
represents to the consumer a reliable source identifier and as a protection of the company’s
“goodwill” as in the reputation of the company. There is no attempt to designate this as
goodwill in the accounting sense.

    3.

    We note your page 11 disclosure indicating you have undertaken a royalty obligation
associated with the sale of Ilya’s Farm, Inc’s products. Please tell us where these

Ms. Tangela Richter

May 14, 2007

Page Three

    amounts are reflected in your financial statements. Please provide separate disclosure if
material.

     ANSWER:

    The royalty obligations obligations associate with Ilya’s Farm, Inc.’s products is included
in other accrued liabilities and amounted to approximately $7,000.00 which the Company does
not consider material.

Management’s Discussion and Analysis of Financial Condition

Comparison of Quarter Ended December 31, 2005 to Quarter Ended December 31, 2004

Results of Operations, page 15

    4.

    We note your disclosure that indicates sales for LFIE increased due to products sent from
your Illinois facility to Philadelphia, Pennsylvania for distribution in the tri-state area.
Please confirm that these products were sold to a third party and that all elements required
for revenue recognition of have been met. Please refer to SAB topic 13:A.

     ANSWER:

    The products sent from our Illinois facility to Philadelphia, Pennsylvania for distribution
in the tri-state area were sold to third parties and the following criteria were met with
respect thereto in each case: (i) the products were shipped and the Company had no
significant remaining obligations; (ii) persuasive evidence of an agreement or agreements
existed; (iii) the price to the buyer was fixed or determinable; and (iv) collection was
probable.

    5.

    We note your disclosure that indicates you have offset a portion of oil related cost
increases by making prudent investments in energy related securities. Please tell us and
expand your disclosures, to clearly describe the nature of the securities you are referring
to.

     ANSWER:

    The company spends a material amount of money on transportation expense which is directly
tied to the cost of oil. During the fourth quarter of 2005, the company invested in various
funds that invest in, among other things, energy related equities in order to hedge

Ms. Tangela Richter

May 14, 2007

Page Four

    their exposure to the rising costs of oil. This disclosure has been added to pages 15-16 of
the Form 10-KSB.

Report of Independent Registered Public Accounting Firm, page 19

    6.

    The opinion included in your document is not clear as to the periods covered by the report.
It appears that a single year’s information contained in the statements of income, changes in
stockholder’s equity and cash flows have been audited. Please provide a revised audit opinion
that indicates, if true, that all years presented have been audited.

     ANSWER:

    The audit opinion has been revised on page 19 of the Form 10-KSB.

Consolidated Statements of Income and Comprehensive Income, page 22

    7.

    Please tell us if your measure of gross profit includes depreciation expense associated
with the cost of goods sold.

     ANSWER:

    Depreciation has historically been included in operating expenses. We have amended the Form
10-KSB and the Forms 10-QSB to include depreciation in our measure of gross profit. The
amounts reclassified from operating expenses to cost of goods sold related to depreciation
are included below:

Depreciation Adjustments

    2005

    2004

    10-KSB

    585,500

    643,004

    2006

    2005

    10-QSB — Q1

    126,911

    124,546

    10-QSB — Q2

    131,714

    161,311

    10-QSB — Q3

    149,641

    151,112

Ms. Tangela Richter

May 14, 2007

Page Five

    8.

    Please provide us with an analysis of the components of the line item referred to as
“Operating expenses.” Please refer to rule 5-03(b) of Regulation S-X.

     ANSWER:

    The line item referred to as “Operating Expenses” consists of selling expenses and general
and administrative expenses. The line item has been revised to show such components on page
22 of the Form 10-KSB and, in addition, on page 4 of each of the Forms 10-QSB.

Note 2 – summary of significant Accounting Policies

Revenue Recognition, page 25

    9.

    Please expand your revenue recognition policy to address the elements described in SAB Topic
13:A.

     ANSWER:

    The discussion of the revenue recognition policy on page 25 of the Form 10-KSB and on page 7
of each of the Forms 10-QSB has been revised as requested.

Controls and Procedures, page 36

    10.

    It is not clear whether your management concluded that your disclosure controls and
procedures, as defined by Rule 13a-15(e) or 15d-15(e) of the Exchange Act, were effective as
of the end of the period covered by t his report. Please revise to clearly state your
management’s conclusion with respect to the effectiveness of your disclosure controls and
procedures. This comment extends to your Forms 10-QSB. Please revise those forms
accordingly.

     ANSWER:

    The Company has revised page 36 of the Form 10-KSB, page 20 of the Form 10-QSB for the
quarter ended March 31, 2006 and page 19 of the Form 10-QSB for the quarter ended June 30,
2006 to clearly state management’s conclusion that disclosure controls and procedures were
effective as of the end of the period covered by the respective report. Please note that the
Company’s Form 10-QSB for the quarter ended September 30, 2006 contained the revised
language at the time of its filing on November 20, 2006.

Ms. Tangela Richter

May 14, 2007

Page Six

    11.

    You state that there were no “significant changes” in your internal control over financial
reporting. Please note that Item 308(c) of Regulation S-B requires that you disclose
any change in your internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Exchange Act rules 13a-15 or 15D-15 that
occurred during the fourth fiscal quarter that has “materially affected, or is reasonably
likely to materially affect, the small business issuer’s internal control over financial
reporting.” See also Regulation S-B, paragraph 4(d) of Exhibit 31. Please review your
disclosure and revise as appropriate. This comment also applies to your forms 10-QSB.

     ANSWER:

    The Company has revised page 36 of the form 10-KSB, page 20 of the Form 10-QSB for the
quarter ended March 31, 2006 and page 19 of the Form 10-QSB for the quarter ended June 30,
2006 to state there were no changes in the Company’s internal control over financial
reporting identifying in connection with the valuation required by the Exchange Act that has
“materially affected, or is reasonably likely to material affect, small business issuer’s
internal control over financial reporting.” Please note that the Company’s Form 10-QSB for
the quarter ended September 30, 2006 contained the revised language at the time of its
filing on November 20, 2006.

          We hope this addresses all of the Commission’s comments and concerns. Please do not hesitate
to contact us with any further questions.

Sincerely,

Timothy R. Lavender

TRL:jjz

<DOCUMENT>
<TYPE>LETTER
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

         DIVISION OF
CORPORATION FINANCE
Mail Stop 7010

      October 13, 2006

Via U.S. Mail

Ms. Julie Smolyansky, Chief Executive Officer and President
Lifeway Foods, Inc.
6431 West Oakton
Morton Grove, IL 60053

      Re:	Lifeway Foods, Inc.
		Registration Statement on Form S-3
      Filed September 14, 2006
		File No. 333-137317

		Form 10-KSB for the fiscal year ended December 31, 2005
		Filed March 31, 2006
		File No. 0-17363

Dear Mr. Smolyansky:

      We have limited our review of your filing to those issues we
have addressed in our comments.  Where indicated, we think you
should
revise your document in response to these comments.  If you
disagree,
we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary.  Please be as detailed
as
necessary in your explanation.  In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure.  After reviewing this information, we may raise
additional
comments.

      Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects.  We welcome
any
questions you may have about our comments or on any other aspect
of
our review.  Feel free to call us at the telephone numbers listed
at
the end of this letter.

Form S-3 filed September 14, 2006

Selling Stockholders, page 6

1. Expand the Selling Stockholders table to include the natural
person
with power to vote or to dispose of the securities offered for
resale
by the entity that is listed as a selling stockholder.  If more
than
one holder is listed as beneficial owner for the same securities,
include explanatory text or footnotes.  See Interpretation 4S of
the
Regulation S-K portion of the March 1999 supplement to the CF
telephone interpretation manual.

Form 10-KSB for the Fiscal Year Ended December 31, 2005

Patents, Trademarks, Licenses, Royalty Agreements, page 8

2. We note your disclosure regarding the "BasicsPlus" mark that
indicates GalaGen, Inc. assigned the entire interest, including
the
goodwill of this mark to the company.  Please explain your meaning
of
the term goodwill in this disclosure.

3. We note your page 11 disclosure indicating you have undertaken
a
royalty obligation associated with the sale of Ilya`s Farm, Inc`s
products.  Please tell us where these amounts are reflected in
your
financial statements.  Please provide separate disclosure if
material.

Management`s Discussion and Analysis of Financial Condition

Comparison of Quarter Ended December 31, 2005 to Quarter Ended
December 31, 2004

Results of Operations, page 15

4. We note your disclosure that indicates sales for LFIE increased
due
to products sent from your Illinois facility to Philadelphia,
Pennsylvania for distribution in the tri-state area.  Please
confirm
that these products were sold to a third party and that all
elements
required for revenue recognition of have been met.  Please refer
to
SAB Topic 13:A.

5. We note your disclosure that indicates you have offset a
portion of
oil related cost increases by making prudent investments in energy
related securities.  Please tell us and expand your disclosures,
to
clearly describe the nature of the securities you are referring
to.

Report of Independent Registered Public Accounting Firm, page 19

6. The opinion included in your document is not clear as to the
periods covered by the report.  It appears that a single year`s
information contained in the statements of income, changes in
stockholder`s equity and cash flows have been audited.  Please
provide
a revised audit opinion that indicates, if true, that all years
presented have been audited.

Consolidated Statements of Income and Comprehensive Income, page
22

7. Please tell us if your measure of gross profit includes
depreciation expense associated with the cost of goods sold.

8. Please provide us with an analysis of the components of the
line
item referred to as "Operating expenses."  Please refer to Rule 5-
03(b) of Regulation S-X.

Note 2 - Summary of Significant Accounting Policies

Revenue Recognition, page 25

9. Please expand your revenue recognition policy to address the
elements described in SAB Topic 13:A.

Controls and Procedures, page 36

10. It is not clear whether your management concluded that your
disclosure controls and procedures, as defined by Rule 13a-15(e)
or
15d-15(e) of the Exchange Act, were effective as of the end of the
period covered by this report.  Please revise to clearly state
your
management`s conclusion with respect to the effectiveness of your
disclosure controls and procedures.  This comment extends to your
Forms 10-QSB.  Please revise those forms accordingly.

11. You state that there were no "significant changes" in your
internal control over financial reporting.  Please note that Item
308(c) of Regulation S-B requires that you disclose any change in
your
internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Exchange Act
Rules
13a-15 or 15d-15 that occurred during the fourth fiscal quarter
that
has "materially affected, or is reasonably likely to materially
affect, the small business issuer`s internal control over
financial
reporting."  See also Regulation S-B, paragraph 4(d) of Exhibit
31.
Please review your disclosure and revise as appropriate.  This
comment
also applies to your Forms 10-QSB.

* * * * *
Closing Comments

      As appropriate, please amend your registration statement in
response to these comments.  You may wish to provide us with
marked
copies of the amendment to expedite our review.  Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information.  Detailed cover
letters greatly facilitate our review.  Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.

      We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Act of 1933
and
that they have provided all information investors require for an
informed investment decision.  Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.

	Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:

?	should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;

?	the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and

?	the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.

	In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in connection with our review of your
filing or
in response to our comments on your filing.

      We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering of
the securities specified in the above registration statement.  We
will
act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.

      We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement.  Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration.  Please provide this
request at least two business days in advance of the requested
effective date.

      You may contact Kevin Stertzel at (202) 551-3723 or Jill
Davis,
Branch Chief, at (202) 551-3683 if you have questions regarding
comments on the financial statements and related matters.  Please
contact Carmen Moncada-Terry at (202) 551-3687 or, in her absence,
Tangela Richter, Branch Chief, at (202) 551-3685 with any other
questions.

      					Sincerely,

      					Tangela Richter
      Branch Chief

cc: 	J. Davis
	K. Stertzel
      C. Moncada-Terry

      VIA FACSIMILE

	Timothy R. Lavender, Esq.
      Kelley Drye & Warren LLP
      (312) 857-7095
Ms. Julie Smolyansky
Lifeway Foods, Inc.
October 13, 2006
Page 2

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