Item 4.01 Changes
in Certify Accountant
On June 8, 2022, Lifeway Foods, Inc. (“Lifeway”
or the “Company”) was notified by Mayer Hoffman McCann P.C., its independent registered public accounting firm
(“MHM”), that MHM would not stand for re-appointment after completion of the current audit of the Company’s
financial statements for the fiscal year ending December 31, 2021. However, MHM informed the Company that it will continue to
perform services for the Company in connection with the fiscal quarters ended March 31, 2022 and ending June 30, 2022 and
September 30, 2022. The Company is working diligently with MHM to file its Form 10-K for the
fiscal year ended December 31, 2021 (the “2021 Form 10-K”) as soon as practicable. Lifeway has begun the
process of evaluating other independent registered public accounting firms to replace MHM and expects to appoint a new firm as soon
as practicable. MHM has committed to fully cooperate with the replacement firm to ensure an orderly transition.
MHM’s audit reports on the Company’s financial statements
as of and for the years ended December 31, 2020 and 2019 did not contain an adverse opinion or a disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting principles.
As previously reported, on April 29, 2022, the Audit and Corporate
Governance Committee of the Board of Directors of the Company, after discussion with management and MHM, concluded that the Company’s
previously issued (i) audited consolidated financial statements for the year ended December 31, 2020, and (ii) unaudited
consolidated financial statements for the periods ended March 31, 2020, June 30, 2020, September 30, 2020, March 31,
2021, June 30, 2021, and September 30, 2021 (collectively, the “Affected Periods”) should be restated and no longer
relied upon due to material errors in the recording of deferred income taxes related to indefinite-lived intangible assets associated
with the 2009 acquisition of Fresh Made, Inc. The error resulted in a $1.18 million understatement of both deferred income tax liabilities
and goodwill of as of January 1, 2020, but had no impact on the Company’s liquidity or cash position. The Company intends to restate
the audited consolidated financial statements for the Affected Periods (collectively the “Restatement”) and correct the related
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2021 Form 10-K as soon
as practicable.
In connection with the Restatement, management has evaluated the Company’s
internal control over financial reporting and determined that a material weakness existed as of December 31, 2021, related to the
fact that the company did not design internal controls to identify and correct the errors discussed above. As a result, the Company’s
management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2021.
Management is currently evaluating the Company’s disclosure controls and procedures as of such date, but has not yet reached a conclusion.
The Company will report the material weakness in the 2021 Form 10-K and is taking steps to remediate the related internal control deficiencies.
During the years ended December 31, 2021 and 2020, and the subsequent
interim period through June 8, 2022, there were (i) no “disagreements,” as defined in Item 304(a)(1)(iv) of Regulation
S-K, between the Company and MHM on any matter of accounting principles or practices, financial statement disclosure or auditing scope
or procedure which, if not resolved to MHM’s satisfaction, would have caused MHM to make reference to the subject matter of the
disagreement in connection with its report for such year and (ii) no “reportable events,” as defined in Item 304(a)(1)(v)
of Regulation S-K, except for the Restatement and the material weakness in the Company’s internal control over financial reporting
discussed above.
The Company provided MHM with a copy of the disclosures it is making
in this Current Report on Form 8-K and requested that MHM furnish the Company with a letter addressed to the Securities and Exchange Commission
stating whether or not it agrees with the statements contained herein. A copy of MHM’s letter, dated June 14, 2022, is filed as
Exhibit 16.1 to this Current Report on Form 8-K.