What changed in this filing

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Item 1A. Risk Factors

2022-07-21 compared with 2021-03-25 · 482 added, 456 removed, 35 unchanged (96% of the section changed)

In evaluating and understanding us and

our business, you should carefully consider the risks described below, in conjunction with all of the other information included

in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results

of Operations”

contained in Part II, Item 7 and “Quantitative and Qualitative Disclosures About Market Risk”

contained in Part II, Item 7A.

The risks and uncertainties described below are not the only ones we face.

Additional risks and

uncertainties that we are unaware of, or that we currently believe are not material, may become important factors that adversely

affect our business.

If any of the events or circumstances described in the following risk factors actually occurs, our business,

financial condition, results of operations, and future prospects could be materially and adversely affected.

In evaluating and understanding us and our business,

you should carefully consider the risks described below, in conjunction with all of the other information included in this Annual Report

on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained

in Part II, Item 7 and “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II, Item 7A.

and uncertainties described below are not the only ones we face.

Additional risks and uncertainties that we are unaware of, or that we

currently believe are not material, may become important factors that adversely affect our business.

If any of the events or circumstances

described in the following risk factors actually occurs, our business, financial condition, results of operations, and future prospects

could be materially and adversely affected.

RISKS RELATED TO OUR BUSINESS

Our product categories face a high

level of competition, which could negatively impact our sales and results of operations.

We compete with a limited number of other

domestic kefir producers and consequently faces a small amount of direct competition for kefir products.

However, our kefir-based

products compete with other dairy products, notably spoonable and drinkable yogurt, and, increasingly, with non-dairy probiotic

products that incorporate kefir cultures but are not kefir.

We face significant competition for limited retailer shelf space in

each of our product categories.

Competition in our product categories is based on product innovation, product quality, price, brand

recognition and loyalty, effectiveness of marketing, promotional activity, and our ability to identify and satisfy consumer tastes

and preferences.

We believe that our brands have benefited in many cases from being the first to introduce products in their categories,

and their success has attracted competition from other food and beverage companies that produce branded products, as well as from

private label competitors.

Some of our competitors, such as Danone, General Mills, Chobani, Hain Celestial Group, and Nestle, have

substantial financial and marketing resources.

These competitors and others may be able to introduce innovative products more quickly

or market their products more successfully than we can, which could cause our growth rate to be slower than we anticipate and could

cause sales to decline.

We also compete with producers of non-dairy

products, such as Millennium Products and PepsiCo, that have lower ingredient and production-related costs.

As a result, these

competing producers may be able to offer their products to customers at a lower price point.

This could cause us to lower our prices,

resulting in lower profitability or, in the alternative, cause us to lose market share if we fail to lower prices.

private label competitors are generally able to sell their products at lower prices because private label products typically have

lower marketing costs than their branded counterparts.

If our products fail to compete successfully with other branded or private

label offerings, demand for our products and our sales volumes could be negatively impacted.

Our product categories face a high level

of competition, which could negatively impact our sales and results of operations.

We compete with a limited number of other domestic

kefir producers and consequently face a small amount of direct competition for kefir products.

However, our kefir-based products compete

with other dairy products, notably spoonable and drinkable yogurt, and, increasingly, with non-dairy probiotic products that incorporate

kefir cultures but are not kefir.

We face significant competition for limited retailer shelf space in each of our product categories.

Competition in our product categories is based on product innovation, product quality, price, brand recognition and loyalty, effectiveness

of marketing, promotional activity, and our ability to identify and satisfy consumer tastes and preferences.

We believe that our brands

have benefited in many cases from being the first to introduce products in their categories, and their success has attracted competition

from other food and beverage companies that produce branded products, as well as from private label competitors.

Some of our competitors,

such as Danone, General Mills, Chobani, Hain Celestial Group, and Nestle, have substantial financial and marketing resources.

These competitors

and others may be able to introduce innovative products more quickly or market their products more successfully than we can, which could

cause our growth rate to be slower than we anticipate and could cause sales to decline.

We also compete with producers of non-dairy products,

such as Millennium Products and PepsiCo, that have lower ingredient and production-related costs.

As a result, these competing producers

may be able to offer their products to customers at a lower price point.

This could cause us to lower our prices, resulting in lower

profitability or, in the alternative, cause us to lose market share if we fail to lower prices.

Furthermore, private label competitors

are generally able to sell their products at lower prices because private label products typically have lower marketing costs than their

branded counterparts.

If our products fail to compete successfully with other branded or private label offerings, demand for our products

and our sales volumes could be negatively impacted.

Additionally, due to high levels of competition,

certain of our key retailers may demand price concessions on our products or may become more resistant to price increases for our

Increased price competition and resistance to price increases have had, and may continue to have, a negative effect on

our results of operations.

We may not be able to successfully implement our business

strategy for our brands on a timely basis or at all.

We believe that our future success depends,

in part, on our ability to implement our strategy of leveraging our existing brands with our current and new products to maintain

our market position in our product categories;

certain of our key retailers may demand price concessions on our products or may become more resistant to price increases for our products.

Increased price competition and resistance to price increases have had, and may continue to have, a negative effect on our results of

We may not be able to successfully implement our business strategy

for our brands on a timely basis or at all.

We believe that our future success depends, in

part, on our ability to implement our strategy of leveraging our existing brands with our new products to maintain our market position

in our product categories;

drive increased sales;

acquire or establish new brands;

and create strategic alliances

including potential joint ventures.

and create strategic alliances including potential

joint ventures.

Our ability to implement this strategy depends, among other things, on our ability to:

enter into distribution and other strategic arrangements with third-party retailers and other potential distributors of our products;

compete successfully in the product categories in which we choose to operate;

introduce timely, new, cost-effective, and appealing products and innovate successfully within our existing product categories;

develop and maintain consumer interest in and demand for our brands considering prevailing consumer tastes and preferences;

enter into distribution and other strategic arrangements

with third-party retailers and other potential distributors of our products;

compete successfully in the product categories in which

we choose to operate;

introduce timely, new, cost-effective, and appealing

products and innovate successfully within our existing product categories;

develop and maintain consumer interest in and demand

for our brands considering prevailing consumer tastes and preferences;

increase our brand recognition and loyalty;

enter into strategic arrangements with third-party suppliers to obtain necessary raw materials;

identify suitable acquisition candidates or joint venture partners and accurately assess their value, growth potential, strengths, weaknesses, contingent and other liabilities, and potential profitability;

negotiate acquisitions and joint ventures on terms acceptable to us;

integrate acquired brands, products, or joint ventures into our company and our business strategy.

enter into strategic arrangements with third-party

suppliers to obtain necessary raw materials;

identify suitable acquisition

candidates or joint venture partners and accurately assess their value, growth potential, strengths, weaknesses, contingent and other

liabilities, and potential profitability;

negotiate acquisitions

and joint ventures on terms acceptable to us;

integrate acquired brands,

products, or joint ventures into our company and our business strategy.

If we fail to execute these and other important

elements of our business strategy, our business and results of operations could be adversely affected.

One key element of our business strategy

is to introduce timely, new, cost-effective, and appealing products and to innovate successfully within our existing product categories.

However, consumer tastes and preferences change rapidly, and evolve over time.

Factors that may affect consumer tastes and preferences

dietary trends and increased attention to nutritional values, such as the sugar, fat, protein, fiber or calorie content of different foods and beverages;

concerns regarding the health effects of specific ingredients and nutrients, such as sugar, other sweeteners, dairy, soybeans, nuts, oils, vitamins, fiber and minerals;

concerns regarding the public health consequences associated with obesity, particularly among young people;

decisions by yogurt and non-dairy beverage manufacturers to mislabel their products as “kefir”

in order to benefit from our branding and marketing efforts, a marketing ploy that can cause significant confusion and misunderstanding among consumers;

increased awareness of the environmental and social effects of food processing.

Our future investments may not produce

the results we expect when we expect them for a variety of reasons including those described herein.

Our future product development

and innovation will be reliant on our ability to identify and develop potential new growth opportunities.

This process is inherently

risky and will result in investments of substantial time and resources for which we may not achieve any return or value.

product development and innovation is also affected by our ability to launch new or improved products successfully and on a timely

and cost-effective basis.

We may have to pay cash, incur debt, or

issue equity, equity-linked, or debt securities to fund our business strategy, or may be unable to fund that strategy.

events could adversely affect our financial results and our business.

We could experience similar effects if we invest resources

in a strategy that ultimately proves unsuccessful.

If, due to a failure of our strategy or any other reason, consumer demand

for our products declines, our sales volumes, results of operations, and our business could be negatively affected, and we may

not be able to create or sustain growth or successfully implement our business strategy.

Interruption of our supply chain could affect our

ability to manufacture or distribute products, could adversely affect our business and sales, and/or could increase our operating

costs and capital expenditures.

We have several supply agreements with

suppliers and co-packers that require them to provide us with specific finished goods, including packaging and kefir.

of these products, we essentially rely on a single supplier or co-packer as our sole source for the item.

The failure for any reason

of any such sole source or other co-packer to fulfill its obligations under the applicable agreements with us or the termination

or renegotiation of any such sourcing agreement could result in disruptions to our supply of finished goods and have an adverse

effect on our results of operations.

Additionally, our suppliers and co-packers are subject to risk, including labor disputes,

union organizing activities, financial liquidity, inclement weather, natural disasters, supply constraints, and general economic

and political conditions that could limit their ability to timely provide us with acceptable products, which could disrupt our

supply of finished goods, or require that we incur additional expense by providing financial accommodations to the supplier or

co-packer or taking other steps to seek to minimize or avoid supply disruption, such as establishing new arrangements with other

A new arrangement may not be available on terms as favorable to us as our existing arrangements, if at all.

One key element of our business strategy is to

introduce timely, new, cost-effective, and appealing products and to innovate successfully within our existing product categories.

consumer tastes and preferences change rapidly, and evolve over time.

Factors that may affect consumer tastes and preferences include:

dietary trends and increased

attention to nutritional values, such as the sugar, fat, protein, fiber or calorie content of different foods and beverages;

concerns regarding the

health effects of specific ingredients and nutrients, such as sugar, other sweeteners, dairy, soybeans, nuts, oils, vitamins, fiber

and minerals;

concerns regarding the public health consequences associated

with obesity, particularly among young people;

decisions by yogurt and

non-dairy beverage manufacturers to mislabel their products as “kefir” in order to benefit from our branding and marketing

efforts, a marketing ploy that can cause significant confusion and misunderstanding among consumers;

increased awareness of the environmental and social

effects of food processing.

Our future investments may not produce the results

we expect when we expect them for a variety of reasons including those described herein.

Our future product development and innovation

will be reliant on our ability to identify and develop potential new growth opportunities.

This process is inherently risky and will

result in investments of substantial time and resources for which we may not achieve any return or value.

Successful product development

and innovation is also affected by our ability to launch new or improved products successfully and on a timely and cost-effective basis.

We may have to pay cash, incur debt, or issue

equity, equity-linked, or debt securities to fund our business strategy, or may be unable to fund that strategy.

Any of these events

could adversely affect our financial results and our business.

We could experience similar effects if we invest resources in a strategy

that ultimately proves unsuccessful.

If, due to a failure of our strategy or any other reason, consumer demand for our products declines,

our sales volumes, results of operations, and our business could be negatively affected, and we may not be able to create or sustain

growth or successfully implement our business strategy.

Interruption of our supply chain could affect our ability to

manufacture or distribute products, could adversely affect our business and sales, and/or could increase our operating costs and capital

expenditures.

We have several supply agreements with suppliers

and co-packers that require them to provide us with specific finished goods, including packaging and kefir.

For some of these products,

we essentially rely on a single supplier or co-packer as our sole source for the item.

The failure for any reason of any such sole source

or other co-packer to fulfill its obligations under the applicable agreements with us or the termination or renegotiation of any such

sourcing agreement could result in disruptions to our supply of finished goods and have an adverse effect on our results of operations.

Additionally, our suppliers and co-packers are subject to risk, including labor disputes, union organizing activities, financial liquidity,

inclement weather, natural disasters, supply constraints, and general economic and political conditions that could limit their ability

to timely provide us with acceptable products, which could disrupt our supply of finished goods, or require that we incur additional

expense by providing financial accommodations to the supplier or co-packer or taking other steps to seek to minimize or avoid supply

disruption, such as establishing new arrangements with other providers.

A new arrangement may not be available on terms as favorable

to us as our existing arrangements, if at all.

Our inability to maintain sufficient internal

capacity or establish satisfactory co-packing, warehousing and distribution arrangements could limit our ability to operate our

business or implement our strategic plan and could negatively affect our sales volumes and results of operations.

Disruption of our manufacturing or

distribution chains or information technology systems, including disruption due to cybersecurity threats, could adversely affect

our business.

The success of our business depends, in

part, on maintaining a strong production platform and we rely primarily on internal production resources to fulfill our manufacturing

Our ongoing initiatives to expand our production platform and our productive capacity could fail to achieve such objectives

and, in any case, could increase our operating costs beyond our expectations and could require significant additional capital expenditures.

If we cannot maintain sufficient production, warehousing, and distribution capacity, either internally or through third party agreements,

we may be unable to meet customer demand and/or our manufacturing, distribution, and warehousing costs may increase, which could

negatively affect our business.

Furthermore, damage or disruption to our

manufacturing or distribution capabilities due to weather, natural disaster, fire, environmental incident, terrorism, cybersecurity

threats and other security breaches, pandemic, strikes, the financial or operational instability of key distributors, warehousing,

and transportation providers, or other reasons could impair our ability to manufacture or distribute our products.

We rely on a limited number of production

and distribution facilities.

A disruption in operations at any of these facilities or any other disruption in our supply chain

relating to common carriers, supply of raw materials and finished goods, or otherwise, whether as a result of casualty, natural

disaster, power loss, telecommunications failure, cybersecurity threat, terrorism, labor shortages, contractual disputes or other

causes, could significantly impair our ability to operate our business and adversely affect our relationship with our customers.

Furthermore, our insurance coverage may not be adequate to cover all related costs.

Our information technology systems are

also critical to the operation of our business and essential to our ability to successfully perform day-to-day operations.

systems include, without limitation, networks, applications, and outsourced services in connection with the operation of our business.

A failure of our information technology systems to perform as we anticipate could disrupt our business and result in transaction

errors, processing inefficiencies, and sales losses, causing our business to suffer.

In addition, our information technology systems

may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, systems failures,

and cybersecurity threats.

Cybersecurity threats in particular are persistent, evolve quickly and include, without limitation,

computer viruses, unauthorized attempts to access information, denial of service attacks, and other electronic security breaches.

Like our customers, suppliers, subcontractors and other third parties with whom we do business generally, we expect that we will

continue to be the subject of cybersecurity threats.

In some cases we must rely on the safeguards put in place by the third parties

with whom we do business to protect against security threats.

We believe we have implemented appropriate measures and controls

and have invested in sufficient resources to appropriately identify and monitor these threats and mitigate potential risks, including

risks involving our customers and suppliers.

However, there can be no assurance that any such actions will be sufficient to prevent

cybersecurity breaches, disruptions to mission critical systems, the unauthorized release of sensitive information or corruption

of data, or harm to facilities or personnel.

capacity or establish satisfactory co-packing, warehousing and distribution arrangements could limit our ability to operate our business

or implement our strategic plan and could negatively affect our sales volumes and results of operations.

Disruption of our manufacturing or distribution

chains or information technology systems, including disruption due to cybersecurity threats, could adversely affect our business.

The success of our business depends, in part,

on maintaining a strong production platform and we rely primarily on internal production resources to fulfill our manufacturing needs.

Our ongoing initiatives to expand our production platform and our productive capacity could fail to achieve such objectives and, in any

case, could increase our operating costs beyond our expectations and could require significant additional capital expenditures.

cannot maintain sufficient production, warehousing, and distribution capacity, either internally or through third party agreements, we

may be unable to meet customer demand and/or our manufacturing, distribution, and warehousing costs may increase, which could negatively

affect our business.

Furthermore, damage or disruption to our manufacturing

or distribution capabilities due to weather, natural disaster, fire, environmental incident, terrorism, cybersecurity threats and other

security breaches, pandemic, strikes, the financial or operational instability of key distributors, warehousing, and transportation providers,

or other reasons could impair our ability to manufacture or distribute our products.

We rely on a limited number of production and

distribution facilities.

A disruption in operations at any of these facilities or any other disruption in our supply chain relating to

common carriers, supply of raw materials and finished goods, or otherwise, whether as a result of casualty, natural disaster, power loss,

telecommunications failure, cybersecurity threat, terrorism, labor shortages, contractual disputes or other causes, could significantly

impair our ability to operate our business and adversely affect our relationship with our customers.

Furthermore, our insurance coverage

may not be adequate to cover all related costs.

Our information technology systems are also critical

to the operation of our business and essential to our ability to successfully perform day-to-day operations.

These systems include, without

limitation, networks, applications, and outsourced services in connection with the operation of our business.

A failure of our information

technology systems to perform as we anticipate could disrupt our business and result in transaction errors, processing inefficiencies,

and sales losses, causing our business to suffer.

In addition, our information technology systems may be vulnerable to damage or interruption

from circumstances beyond our control, including fire, natural disasters, systems failures, and cybersecurity threats.

Cybersecurity

threats in particular are persistent, evolve quickly and include, without limitation, computer viruses, unauthorized attempts to access

information, denial of service attacks, and other electronic security breaches.

Like our customers, suppliers, subcontractors and other

third parties with whom we do business generally, we expect that we will continue to be the subject of cybersecurity threats.

cases, we must rely on the safeguards put in place by the third parties with whom we do business to protect against security threats.

We believe we have implemented appropriate measures and controls and have invested in sufficient resources to appropriately identify

and monitor these threats and mitigate potential risks, including risks involving our customers and suppliers.

However, there can be

no assurance that any such actions will be sufficient to prevent cybersecurity breaches, disruptions to mission critical systems, the

unauthorized release of sensitive information or corruption of data, or harm to facilities or personnel.

These threats and other events could disrupt

our operations, or the operations of our customers, suppliers, subcontractors and other third parties;

could require significant

management attention and resources;

could require significant management

attention and resources;

could result in the loss of business, regulatory actions and potential liability;

negatively impact our reputation among our customers and the public.

Any of these outcomes could have a negative impact on our

financial condition, results of operations, or liquidity.

Our debt and financial obligations

could adversely affect our financial condition, our ability to obtain future financing, and our ability to operate our business.

We have outstanding debt obligations that

could adversely affect our financial condition and limit our ability to successfully implement our business strategy.

from time to time, we may need additional financing to support our business and pursue our business strategy, including strategic

acquisitions.

Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance,

the condition of the capital markets, and other factors.

We cannot assure that additional financing will be available to us on

favorable terms when required, or at all.

If we raise additional funds through the issuance of equity, equity-linked, or debt securities,

those securities may have rights, preferences, or privileges senior to those of our common stock, and, in the case of equity and

equity-linked securities, our existing stockholders may experience dilution.

As of December 31, 2020, we had outstanding

borrowings of $2,768, net of $9 of unamortized deferred financing costs, which consisted of a revolving line of credit.

agreements contain certain restrictions and requirements that among other things:

require us to maintain a quarterly fixed charge coverage ratio and minimum working capital ratio;

limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions, to fund growth or for general corporate purposes;

limit our future ability to refinance our indebtedness on terms acceptable to us or at all;

limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan;

and could negatively impact

our reputation among our customers and the public.

Any of these outcomes could have a negative impact on our financial condition, results

of operations, or liquidity.

Our debt and financial obligations could

adversely affect our financial condition, our ability to obtain future financing, and our ability to operate our business.

We have outstanding debt obligations that could

adversely affect our financial condition and limit our ability to successfully implement our business strategy.

Furthermore, from time

to time, we may need additional financing to support our business and pursue our business strategy, including strategic acquisitions.

Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition

of the capital markets, and other factors.

We cannot assure that additional financing will be available to us on favorable terms when

required, or at all.

If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities

may have rights, preferences, or privileges senior to those of our common stock, and, in the case of equity and equity-linked securities,

our existing stockholders may experience dilution.

As of December 31, 2021, we had $2.77 million

outstanding under the Revolving Credit Facility and $4.47 million outstanding under the note payable, net of $30 thousand of unamortized

deferred financing.

Our loan agreements contain certain restrictions and requirements that among other things:

require us to maintain a quarterly fixed charge coverage

ratio and minimum working capital ratio;

limit our ability to obtain

additional financing in the future for working capital, capital expenditures and acquisitions, to fund growth or for general corporate

limit our future ability to refinance our indebtedness

on terms acceptable to us or at all;

limit our flexibility in

planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan;

impose on us financial and operational restrictions.

Our ability to meet our debt service

obligations will depend on our future performance, which will be affected by the other risk factors described in this Annual Report

on Form 10-K.

If we do not generate enough cash flow to pay our debt service obligations, we may be required to refinance all

or part of our existing debt, sell our assets, borrow more money or raise equity.

There is no guarantee that we will be able to

take any of these actions on a timely basis, on terms satisfactory to us, or at all.

Our notes bear interest at variable rates.

If market interest rates increase, it will increase our debt service requirements, which could adversely affect our cash flow.

Our loan agreements also contain provisions that restrict our

Our ability to meet our debt service obligations

will depend on our future performance, which will be affected by the other risk factors described in this Annual Report on Form 10-K.

If we do not generate enough cash flow to pay our debt service obligations, we may be required to refinance all or part of our existing

debt, sell our assets, borrow more money or raise equity.

There is no guarantee that we will be able to take any of these actions on

a timely basis, on terms satisfactory to us, or at all.

Our Revolving Credit Facility and term loan bear

interest at variable rates.

If market interest rates increase, it will increase our debt service requirements, which could adversely affect

our cash flow.

Our loan agreements also contain provisions that restrict our ability

borrow money or guarantee debt;

create liens;

make specified types of investments and acquisitions;

pay dividends on or redeem or repurchase stock;

enter into new lines of business;

enter into transactions with affiliates;

sell assets or merge with other companies.

These restrictions on the operation of

our business could harm our ability to execute on our business strategy by, among other things, limiting our ability to take advantage

of financing, merger and acquisition opportunities, and other corporate opportunities.

Various risks, uncertainties, and events

beyond our control could affect our ability to comply with these covenants.

Unless cured or waived, a default would permit lenders

to accelerate the maturity of the debt under the credit agreement and to foreclose upon the collateral securing the debt.

Loss of our key management or other

personnel, or an inability to attract such management and other personnel, could negatively impact our business.

make specified types of

investments and acquisitions;

pay dividends on or redeem

or repurchase stock;

enter into new lines of

enter into transactions

with affiliates;

sell assets or merge with

other companies.

These restrictions on the operation of our business

could harm our ability to execute on our business strategy by, among other things, limiting our ability to take advantage of financing,

merger and acquisition opportunities, and other corporate opportunities.

Various risks, uncertainties, and events beyond our control

could affect our ability to comply with these covenants.

Unless cured or waived, a default would permit lenders to accelerate the maturity

of the debt under the credit agreement and to foreclose upon the collateral securing the debt.

Loss of our key management or other personnel,

or an inability to attract such management and other personnel, could negatively impact our business.

We depend on the skills, working relationships,

and continued services of key personnel, including our experienced senior management team.

We also depend on our ability to attract

and retain qualified personnel to operate and expand our business.

If we lose one or more members of our senior management team,

or if we fail to attract talented new employees, our business and results of operations could be negatively affected.

We also depend on our ability to attract and

retain qualified personnel to operate and expand our business.

If we lose one or more members of our senior management team whose responsibilities

cannot otherwise be distributed among our other officers, or if we fail to attract talented new employees, our business and results of

operations could be negatively affected.

Employee strikes and other labor-related

disruptions may adversely affect our operations.

We have a union contract governing the

terms and conditions of employment for a significant portion of our workforce.

Although we believe union relations since the union’s

certification as the exclusive bargaining representative of this portion of our workforce have been amicable, there is no assurance

that this will continue in the future or that we will not be subject to future union organizing activity.

There are potential adverse

effects of labor disputes with our own employees or by others who provide warehousing, transportation, and distribution, both domestic

and foreign, of our raw materials or other products.

Strikes or work stoppages or other business interruptions could occur if we

are unable to renew collective bargaining agreements on satisfactory terms or enter into new agreements on satisfactory terms,

which could impair manufacturing and distribution of our products or result in a loss of sales, which could adversely impact our

business, financial condition, or results of operations.

The terms and conditions of existing, renegotiated, or new collective

bargaining agreements could also increase our costs or otherwise affect our ability to fully implement future operational changes

to enhance our efficiency or to adapt to changing business needs or strategy.

Our intellectual property rights are valuable, and any

inability to protect them could reduce the value of our products and brands.

We have a union contract governing the terms

and conditions of employment for a significant portion of our workforce.

Although we believe union relations since the union’s

certification as the exclusive bargaining representative of this portion of our workforce have been amicable, there is no assurance that

this will continue in the future or that we will not be subject to future union organizing activity.

There are potential adverse effects

of labor disputes with our own employees or by others who provide warehousing, transportation, and distribution, both domestic and foreign,

of our raw materials or other products.

Strikes or work stoppages or other business interruptions could occur if we are unable to renew

collective bargaining agreements on satisfactory terms or enter into new agreements on satisfactory terms, which could impair manufacturing

and distribution of our products or result in a loss of sales, which could adversely impact our business, financial condition, or results

of operations.

The terms and conditions of existing, renegotiated, or new collective bargaining agreements could also increase our costs

or otherwise affect our ability to fully implement future operational changes to enhance our efficiency or to adapt to changing business

needs or strategy.

Our intellectual property rights are valuable, and any inability

to protect them could reduce the value of our products and brands.

We consider our intellectual property rights,

particularly our trademarks, but also our copyrights, registered domain names, and proprietary trade secrets, technology, know-how,

processes and other proprietary rights to be a significant and valuable aspect of our business.

We attempt to protect our intellectual

property rights by relying on a combination of trademark, copyright, trade dress, trade secret, and other intellectual property

laws, and domain name dispute resolution systems;

as well as licensing agreements, third-party confidentiality, nondisclosure,

and assignment agreements;

particularly our trademarks, but also our copyrights, registered domain names, and proprietary trade secrets, technology, know-how, processes

and other proprietary rights to be a significant and valuable aspect of our business.

We attempt to protect our intellectual property

rights by relying on a combination of trademark, copyright, trade dress, trade secret, and other intellectual property laws, and domain

name dispute resolution systems;

as well as licensing agreements, third-party confidentiality, nondisclosure, and assignment agreements;

and by policing third-party misuses of our intellectual property.

Our failure to obtain or maintain

adequate protection of our intellectual property rights, or any change in law or other changes that serve to lessen or remove the

current legal protections of our intellectual property, may diminish our competitiveness and could materially harm our business.

We also face the risk of claims that we

have infringed third parties’

intellectual property rights.

Any claims of intellectual property infringement, even those

without merit, could be expensive and time consuming to defend, cause us to cease making, licensing, or using products that incorporate

the challenged intellectual property, require us to redesign or rebrand our products or packaging, divert management’s attention

and resources, or require us to enter into royalty or licensing agreements to obtain the right to use a third party’s intellectual

Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all.

Additionally,

a successful claim of infringement against us could result in our being required to pay significant damages, enter into costly

license or royalty agreements, or stop the sale of certain products, any of which could have a negative effect on our results of

The Smolyansky family controls a majority of our common

Our failure to obtain or maintain adequate protection of our intellectual

property rights, or any change in law or other changes that serve to lessen or remove the current legal protections of our intellectual

property, may diminish our competitiveness and could materially harm our business.

We also face the risk of claims that we have

infringed third parties’ intellectual property rights.

Any claims of intellectual property infringement, even those without merit,

could be expensive and time consuming to defend, cause us to cease making, licensing, or using products that incorporate the challenged

intellectual property, require us to redesign or rebrand our products or packaging, divert management’s attention and resources,

or require us to enter into royalty or licensing agreements to obtain the right to use a third party’s intellectual property.

royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all.

Additionally, a successful claim

of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements,

or stop the sale of certain products, any of which could have a negative effect on our results of operations.

The Smolyansky family controls a substantial portion of our common

stock and has the ability to control the outcome of matters submitted for stockholder approval.

A majority of our common stock is controlled

by members of the Smolyansky family, and collectively, they have the ability to control the outcome of stockholder votes, including

the election of all of our directors and the approval or rejection of any merger, change of control, or other significant corporate

No person interested in acquiring Lifeway will be able to do so without obtaining the consent of the Smolyansky family.

We believe that having the Smolyansky family as a significant part of a long-term-focused, committed, and engaged stockholder base

provides us with an important strategic advantage, particularly in a business with a mature, well-recognized brand.

This advantage

could be eroded or lost, however, should Smolyansky family members cease, collectively, to be controlling stockholders of Lifeway.

We desire to remain independent and family-owned, and we believe the Smolyansky family shares these interests.

However, the Smolyansky

family’s interests may not always be aligned with other stockholders’

By exercising their control, the Smolyansky

family could cause Lifeway to take actions that are at odds with the investment goals of institutional, short-term, non-voting,

or other non-controlling investors, or that have a negative effect on our stock price.

Because the Smolyansky family, collectively,

controls a majority of our common stock (approximately 50.1%), we are considered a “controlled company”

Listing Rules.

Controlled companies are exempt from Nasdaq listing standards that require a board composed of a majority of independent

directors, a fully independent nominating/corporate governance committee, and a fully independent compensation committee.

Board of Directors has determined that Lifeway will avail itself of these exemptions, though we currently maintain a Board composed

of a majority of independent directors.

As a result of the controlled company exemption, our corporate governance practices differ

from those of non-controlled companies, which are subject to all of the Nasdaq corporate governance requirements.

Specifically,

while we continue to maintain a majority of independent directors on the Board and to ensure that a committee of those independent

directors select director nominees and determine the compensation of our officers, we have not, in the past, maintained separate

compensation or nominating committees.

In May, 2020, the Board of Directors formed a separate Compensation Committee and adopted

a Compensation Committee Charter.

In the event we cease to be a controlled company, we will be required to comply with all of

the corporate governance standards under Nasdaq’s rules, subject to applicable transition periods.

Members of the Smolyansky family together control

49.61% of our common stock and collectively, they could significantly influence any matter requiring approval by our stockholders, including

the election of all of our directors and the approval or rejection of any merger, change of control, or other significant corporate transaction.

It is unlikely that any person interested in acquiring Lifeway will be able to do so without obtaining the consent of some members of

the Smolyansky family.

The Smolyansky family’s interests may not always be aligned with other stockholders’ interests.

exercising their influence, members of the Smolyansky family could cause Lifeway to take actions that are at odds with the investment

goals of institutional, short-term, non-voting, or other non-controlling investors, or that have a negative effect on our stock price.

Recently identified material weaknesses in our internal control

over financial reporting could have a significant adverse effect on our business and the price of our common stock.

Maintaining effective internal control over financial

reporting is necessary for us to produce reliable financial statements.

As a public reporting company, we are subject to the rules and

regulations established from time to time by the SEC and Nasdaq.

These rules and regulations require, among other things, that we have,

and periodically evaluate, procedures with respect to our internal control over financial reporting.

In addition, as a public company

we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so

that our management can certify as to the effectiveness of our internal control over financial reporting.

We have identified a material weakness in our

internal control.

A description of the material weakness can be found in Item 9A of this Annual Report on Form 10-K.

Unless and until this material weakness has been

remediated or should new material weaknesses arise or be discovered in the future, material misstatements could occur and go undetected

in our interim or annual consolidated financial statements, and we may be required to restate our financial statements.

In addition, we

may experience delays in satisfying our reporting obligations or to comply with SEC rules and regulations, which could result in investigations

and sanctions by regulatory authorities.

Any of these results could adversely affect our business and the value of our common stock.

RISKS RELATED TO OUR INDUSTRY

The consolidation of our customers

or the loss of any of our largest customers could negatively impact our sales and results of operations.

Customers, such as supermarkets and food

distributors, continue to consolidate.

This consolidation has produced larger, more sophisticated organizations with increased

negotiating and buying power that are able to resist price increases or demand increased promotional programs, as well as operate

with lower inventories, decrease the number of brands that they carry and increase their emphasis on private label products, all

of which could negatively impact our business.

The consolidation of retail customers also increases the risk that a significant

adverse impact on their business could have a corresponding material adverse impact on our business.

Two of our customers together accounted

for 21% of our net sales in the fiscal year ended December 31, 2020.

Where we enter into written agreements with our customers,

they are generally terminable after short notice periods by the customer.

In addition, our customers sometimes award contracts

based on competitive bidding, which could result in lower profits for contracts we win and the loss of business for contracts we

The loss of any large customer, the reduction of purchasing levels, or the cancellation of any business from a large customer

for an extended period of time could negatively affect our sales and results of operations.

We rely on sales made by or through our

independent distributors to customers.

The consolidation of our customers or the

loss of any of our largest customers could negatively impact our sales and results of operations.

Customers, such as supermarkets and food distributors,

continue to consolidate.

This consolidation has produced larger, more sophisticated organizations with increased negotiating and buying

power that are able to resist price increases or demand increased promotional programs, as well as operate with lower inventories, decrease

the number of brands that they carry and increase their emphasis on private label products, all of which could negatively impact our

The consolidation of retail customers also increases the risk that a significant adverse impact on their business could have

a corresponding material adverse impact on our business.

Two of our customers together accounted for 23%

of our net sales in the fiscal year ended December 31, 2021.

Where we enter into written agreements with our customers, they are generally

terminable after short notice periods by the customer.

In addition, our customers sometimes award contracts based on competitive bidding,

which could result in lower profits for contracts we win and the loss of business for contracts we lose.

The loss of any large customer,

the reduction of purchasing levels, or the cancellation of any business from a large customer for an extended period of time could negatively

affect our sales and results of operations.

We rely on sales made by or through our independent

distributors to customers.

Distributors purchase directly for their own account for resale.

The loss of, or business

disruption at, one or more of these distributors may harm our business.

If we are required to obtain additional or alternative

distribution agreements or arrangements in the future, we cannot be certain that we will be able to do so on satisfactory terms

or in a timely manner.

Our inability to enter into satisfactory distribution agreements may inhibit our ability to implement our

business plan or to establish markets necessary to expand the distribution of our products successfully.

We are subject to the risk of product

contamination and product liability claims, which could harm our reputation, force us to recall products and incur substantial

The loss of, or business disruption at, one

or more of these distributors may harm our business.

If we are required to obtain additional or alternative distribution agreements or

arrangements in the future, we cannot be certain that we will be able to do so on satisfactory terms or in a timely manner.

Our inability

to enter into satisfactory distribution agreements may inhibit our ability to implement our business plan or to establish markets necessary

to expand the distribution of our products successfully.

We are subject to the risk of product contamination

and product liability claims, which could harm our reputation, force us to recall products and incur substantial costs.

The sale of food products for human consumption

3 unchanged sentences

during the storage, processing, handling or transportation phases.

We also may be subject to liability if our products or production

processes violate applicable laws or regulations, including environmental, health, and safety requirements, or in the event our

products cause injury, illness, or death.

Under certain circumstances, we may be

required to recall or withdraw products, suspend production of our products, or cease operations, which may lead to a material

adverse effect on our business.

We also may be subject to liability if our products or production processes

violate applicable laws or regulations, including environmental, health, and safety requirements, or in the event our products cause injury,

illness, or death.

Under certain circumstances, we may be required

to recall or withdraw products, suspend production of our products, or cease operations, which may lead to a material adverse effect

on our business.

In addition, customers may cancel orders for such products as a result of such events.

a situation does not necessitate a recall or market withdrawal, and even if we and each of our co-packers and suppliers comply

in all material respects with all applicable laws and regulations, we may become subject to claims or lawsuits relating to such

Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion

that our products caused illness or physical harm, including the risk of reputational harm being magnified and/or distorted through

the rapid dissemination of information over the Internet, including through news articles, blogs, chat rooms, and social media,

could adversely affect our reputation with existing and potential customers and consumers and our corporate and brand image.

claims or liabilities of this type might not be covered by our insurance or by any rights of indemnity or contribution that we

may have against others.

We maintain product liability and product recall insurance in amounts that we believe to be adequate.

However, we cannot be sure that we will not incur claims or liabilities for which we are not insured or that exceed the amount

of our insurance coverage.

A product liability judgment against us or a product recall could have a material adverse effect on

our business, consolidated financial condition, results of operations or liquidity.

We rely on independent certification for several of our

products and facilities.

We rely on independent certification, such

as certifications of our products as “organic”, or “gluten-free,”

to differentiate our products from others.

The loss of any independent certifications could adversely affect our market position as a probiotic-based products and natural,

“better for you”

foods company, which could harm our business.

We rely on independent SQF certification at some of

our facilities, a certification that some of our customers require us to maintain.

We must comply with the requirements of

independent organizations or certification authorities in order to label our products as certified.

For example, we can lose our

“organic”

certification if a manufacturing plant becomes contaminated with non-organic materials, or if it is not properly

cleaned after a production run.

Even if a situation does not

necessitate a recall or market withdrawal, and even if we and each of our co-packers and suppliers comply in all material respects with

all applicable laws and regulations, we may become subject to claims or lawsuits relating to such matters.

Even if a product liability

claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or physical

harm, including the risk of reputational harm being magnified and/or distorted through the rapid dissemination of information over the

Internet, including through news articles, blogs, chat rooms, and social media, could adversely affect our reputation with existing and

potential customers and consumers and our corporate and brand image.

Moreover, claims or liabilities of this type might not be covered

by our insurance or by any rights of indemnity or contribution that we may have against others.

We maintain product liability and product

recall insurance in amounts that we believe to be adequate.

However, we cannot be sure that we will not incur claims or liabilities for

which we are not insured or that exceed the amount of our insurance coverage.

A product liability judgment against us or a product recall

could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

We rely on independent certification for several of our products

and facilities.

We rely on independent certification, such as

certifications of our products as “organic,” or “gluten-free,” to differentiate our products from others.

loss of any independent certifications could adversely affect our market position as a probiotic-based product and natural, “better

for you” foods company, which could harm our business.

We rely on independent SQF certification at some of our facilities, a certification

that some of our customers require us to maintain.

We must comply with the requirements of independent

organizations or certification authorities in order to label our products as certified.

For example, we can lose our “organic”

certification if a manufacturing plant becomes contaminated with non-organic materials, or if it is not properly cleaned after a production

In addition, all organic raw materials must be certified organic or organic compliant.

could lose their organic certifications if our raw material suppliers lose their organic certifications.

Similarly, we could lose

our SQF certification if we do not meet the requirements of the SQF Code.

The loss of these certifications could cause us to lose

customers that require Lifeway products and/or facilities to carry some or all of them, which could negatively affect our sales

and results of operations.

Increases in the cost of raw milk

could reduce our gross margin and profit.

Conventional and organic raw milk, our

primary raw material, is an agricultural commodity that is subject to price fluctuations.

Although both conventional and organic

milk prices in fiscal 2020 were lower than the prior year, there can be no assurance that such prices will remain at these levels

in the future.

The supply and price of raw milk may be impacted by, among other things, weather, natural disasters, real or perceived

supply shortages, lower dairy and crop yields, general increases in farm inputs and costs of production, political and economic

conditions, labor actions, government actions, and trade barriers.

Increases in the market price for raw milk or over-order premiums

charged by producers may also impact our ability to enter into purchase commitments at a fixed price.

There can be no assurance

that our purchasing practices will mitigate future price risk.

As a result, increases in the cost of raw milk could have an adverse

impact on our profitability.

In addition, the dairy industry continues

to experience periodic imbalances between supply and demand for organic raw milk.

Industry regulation and the costs of organic

farming compared to costs of conventional farming can impact the supply of organic raw milk in the market.

Oversupply levels of

organic raw milk can increase competitive pressure on our products and pricing, while supply shortages can cause higher input costs

and reduce our ability to deliver product to our customers.

Cost increases in raw materials and other inputs could cause our profits

to decrease significantly compared to prior periods, as we may be unable to increase our prices to offset the increased cost of

these raw materials and other inputs.

If we are unable to obtain raw materials and other inputs for our products or offset any

increased costs for such raw materials and inputs, our business could be negatively affected.

Reduced availability of raw materials

and other inputs, as well as increased costs for them, could adversely affect us.

Our products could lose their organic certifications

if our raw material suppliers lose their organic certifications.

Similarly, we could lose our SQF certification if we do not meet the

requirements of the SQF Code.

The loss of these certifications could cause us to lose customers that require Lifeway products and/or

facilities to carry some or all of them, which could negatively affect our sales and results of operations.

Increases in the cost of raw milk could

reduce our gross margin and profit.

Conventional and organic raw milk, our primary

raw material, is an agricultural commodity that is subject to price fluctuations.

Both conventional and organic milk prices in fiscal

2021 were higher than the prior year, and there can be no assurance that such prices will remain at these levels in the future.

and price of raw milk may be impacted by, among other things, weather, natural disasters, real or perceived supply shortages, lower dairy

and crop yields, general increases in farm inputs and costs of production, political and economic conditions, labor actions, government

actions, and trade barriers.

Increases in the market price for raw milk or over-order premiums charged by producers may also impact our

ability to enter into purchase commitments at a fixed price.

There can be no assurance that our purchasing practices will mitigate future

As a result, increases in the cost of raw milk could have an adverse impact on our profitability.

In addition, the dairy industry continues to

experience periodic imbalances between supply and demand for organic raw milk.

Industry regulation and the costs of organic farming compared

to costs of conventional farming can impact the supply of organic raw milk in the market.

Oversupply levels of organic raw milk can increase

competitive pressure on our products and pricing, while supply shortages can cause higher input costs and reduce our ability to deliver

product to our customers.

Cost increases in raw materials and other inputs could cause our profits to decrease significantly compared

to prior periods, as we may be unable to increase our prices to offset the increased cost of these raw materials and other inputs.

we are unable to obtain raw materials and other inputs for our products or offset any increased costs for such raw materials and inputs,

our business could be negatively affected.

Reduced availability of raw materials and

other inputs, as well as increased costs for them, could adversely affect us.

Our business depends heavily on raw materials

and other inputs in addition to conventional and organic raw milk, such as sweeteners, diesel fuel, packaging material, resin,

and other commodities.

Our raw materials are generally sourced from third-party suppliers, and we are not assured of continued

supply, pricing, or exclusive access to raw materials from any of these suppliers.

In addition, some of our raw materials are also

agricultural products, and therefore subject to the same vulnerabilities described above for raw milk.

Other events that adversely

affect our third-party suppliers and that are out of our control could also impair our ability to obtain the raw materials and

other inputs that we need in the quantities and at the prices that we desire.

Such events include problems with our suppliers’

businesses, finances, labor relations, costs, production, insurance, and reputation.

The organic ingredients we use in some

of our products are less plentiful and available from a fewer number of suppliers than their conventional counterparts.

with other manufacturers in the procurement of organic product ingredients may increase in the future if consumer demand for organic

products increases.

Our business is subject to various

food, environmental, and health and safety laws and regulations, which may increase our compliance costs, subject us to liabilities,

or otherwise adversely affect our business.

Our business operations are subject to

numerous requirements in the United States relating to food safety, production, and marketing, as well as the protection of the

environment, and health and safety matters.

The food production and marketing industry is subject to a variety of federal, state,

local, and foreign laws and regulations, including food safety requirements related to the ingredients, manufacture, processing,

storage, marketing, advertising, labeling, and distribution of our products, as well as those related to worker health and workplace

Our activities, both in and outside of the United States, are subject to extensive regulation.

We are regulated by, among

other federal and state authorities, the FDA, USDA, the U.S.

Federal Trade Commission (“FTC”), and the U.S.

of Commerce, and Labor, as well as by similar authorities in the foreign countries in which we do business.

Environmental laws

including the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980,

as amended, and the National Organic Standards of the U.S.

Department of Agriculture, as well as similar state and local statutes

and regulations in the United States and in each of the foreign countries in which we do business apply to our business operations

These laws and regulations govern, among other things, air emissions and the discharge of wastewater and other pollutants,

the use of refrigerants, the handling and disposal of hazardous materials, and the cleanup of contamination in the environment.

In addition, the marketing and advertising

of our products could make us the target of claims relating to alleged false or deceptive advertising under federal, state, and

foreign laws and regulations, and we may be subject to initiatives that limit or prohibit the marketing and advertising of our

products to children.

We are also subject to federal laws and

regulations relating to our organic products and production.

For example, as required by the National Organic Program (“NOP”),

we rely on third parties to certify certain of our products and production locations as organic.

Regulations and formal and informal

positions taken by the NOP pursuant to the Organic Foods Production Act of 1990, which created the NOP, are subject to continued

review and scrutiny.

Changes in these laws or regulations or

the introduction of new laws or regulations could increase our compliance costs, increase other costs of doing business for us,

our customers, or our suppliers, or restrict our actions, which could adversely affect our results of operations.

In some cases,

new laws and regulations or other federal and state regulatory initiatives could interrupt distribution of our products or force

changes in our production processes and our products.

Governmental regulations also affect taxes and levies, healthcare costs,

energy usage, immigration, and other labor issues, all of which may have a direct or indirect effect on our business or those of

our customers or suppliers.

These costs could negatively affect our results of operations and financial condition.

we are found to be in violation of applicable laws and regulations in these areas, we could be subject to civil remedies, including

third-party claims for property damage or personal injury, fines, injunctions, recalls, clean up costs, and other civil sanctions,

as well as potential criminal sanctions, any of which could have a material adverse effect on our business.

RELATED TO COVID-19 AND OTHER PANDEMIC OR DISEASE OUTBREAKS

or disease outbreaks, such as the novel coronavirus (COVID-19 virus), may disrupt consumption and trade patterns, supply chains,

and production processes, which could materially affect our operations and results of operations.

ultimate impact that the COVID-19 pandemic or any future pandemic or disease outbreak will have on our business and our consolidated

results of operations is uncertain.

we have seen increased customer and consumer demand for our products as consumers initially began pantry loading and have increased

their at-home consumption as a result of social distancing and stay-at-home and work-from-home mandates and recommendations.

this increased customer and consumer demand may decrease in the coming months if and when the need for social distancing and stay-at-home

and work-from-home mandates and recommendations decrease, and we are unable to predict the nature and timing of when that impact

may occur, if at all.

to date we have not experienced supply chain constraints, and we have continued to be able to fully satisfy customer and

consumer demand for our products, the continued unprecedented demand for food and other consumer packaged goods products as a

result of the COVID-19 pandemic or any future pandemic may limit the availability of, or increase the cost of, ingredients,

packaging and other raw materials necessary to produce our products, and our operations may be negatively impacted.

Additionally, pandemics or disease outbreaks could result in a widespread health crisis that could adversely affect economies

and financial markets, consumer spending and confidence levels resulting in an economic downturn that could affect customer

and other inputs in addition to conventional and organic raw milk, such as sweeteners, diesel fuel, packaging material, resin, and other

Our raw materials are generally sourced from third-party suppliers, and we are not assured of continued supply, pricing,

or exclusive access to raw materials from any of these suppliers.

In 2021, costs to us increased primarily due to inflationary price increases

of other ingredients, packaging materials, and freight.

However, for market conditions or competitive reasons, our pricing actions may

also lag input cost changes, or we may not be able to pass along the full effect of increases in raw materials and other input costs as

we incur them.

The organic ingredients we use in some of our

products are less plentiful and available from a fewer number of suppliers than their conventional counterparts.

Competition with other

manufacturers in the procurement of organic product ingredients may increase in the future if consumer demand for organic products increases.

Our business is subject to various food,

environmental, and health and safety laws and regulations, which may increase our compliance costs, subject us to liabilities, or otherwise

adversely affect our business.

Our business operations are subject to numerous

requirements in the United States relating to food safety, production, and marketing, as well as the protection of the environment, and

health and safety matters.

The food production and marketing industry is subject to a variety of federal, state, local, and foreign laws

and regulations, including food safety requirements related to the ingredients, manufacture, processing, storage, marketing, advertising,

labeling, and distribution of our products, as well as those related to worker health and workplace safety.

Our activities, both in and

outside of the United States, are subject to extensive regulation.

We are regulated by, among other federal and state authorities, the

FDA, USDA, the U.S.

Federal Trade Commission (“FTC”), and the U.S.

Departments of Commerce, and Labor, as well as by similar

authorities in the foreign countries in which we do business.

Environmental laws including the Clean Air Act, the Clean Water Act, the

Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the National Organic Standards of the U.S.

Department of Agriculture, as well as similar state and local statutes and regulations in the United States and in each of the foreign

countries in which we do business apply to our business operations as well.

These laws and regulations govern, among other things, air

emissions and the discharge of wastewater and other pollutants, the use of refrigerants, the handling and disposal of hazardous materials,

and the cleanup of contamination in the environment.

In addition, the marketing and advertising of

our products could make us the target of claims relating to alleged false or deceptive advertising under federal, state, and foreign

laws and regulations, and we may be subject to initiatives that limit or prohibit the marketing and advertising of our products to children.

We are also subject to federal laws and regulations

relating to our organic products and production.

For example, as required by the National Organic Program (“NOP”), we rely

on third parties to certify certain of our products and production locations as organic.

Regulations and formal and informal positions

taken by the NOP pursuant to the Organic Foods Production Act of 1990, which created the NOP, are subject to continued review and scrutiny.

Changes in these laws or regulations or the introduction

of new laws or regulations could increase our compliance costs, increase other costs of doing business for us, our customers, or our suppliers,

or restrict our actions, which could adversely affect our results of operations.

In some cases, new laws and regulations or other federal

and state regulatory initiatives could interrupt distribution of our products or force changes in our production processes and our products.

Governmental regulations also affect taxes and levies, healthcare costs, energy usage, immigration, and other labor issues, all of which

may have a direct or indirect effect on our business or those of our customers or suppliers.

These costs could negatively affect our results

of operations and financial condition.

Further, if we are found to be in violation of applicable laws and regulations in these areas,

we could be subject to civil remedies, including third-party claims for property damage or personal injury, fines, injunctions, recalls,

cleanup costs, and other civil sanctions, as well as potential criminal sanctions, any of which could have a material adverse effect on

our business.

RISKS RELATED TO COVID-19 AND

OTHER PANDEMIC OR DISEASE OUTBREAKS

Pandemics or disease outbreaks,

such as the COVID-19 pandemic, may disrupt consumption and trade patterns, supply chains, available labor supply, and production processes,

which could materially affect our operations and results of operations.

The ultimate impact that the COVID-19

pandemic or any future pandemic or disease outbreak will have on our business and our consolidated results of operations is uncertain.

To date we have seen increased customer

and consumer demand for our products.

efforts to manage and mitigate these factors may be unsuccessful, and the effectiveness of these efforts depends on factors beyond

our control, including the duration and severity of any pandemic or disease outbreak, as well as third party actions taken to contain

its spread and mitigate public health effects.

ultimate impact of the COVID-19 pandemic on our business will depend on many factors, including, among others, the duration of

social distancing and stay-at-home and work-from-home mandates and recommendations and whether additional waves of COVID-19 or

different variants of COVID-19 will affect the United States and other markets, our ability and the ability of our suppliers to

continue to operate our and their manufacturing facilities and maintain the supply chain without material disruption and procure

ingredients, packaging and other raw materials when needed despite unprecedented demand in the food industry, and the extent to

which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating and

shopping habits.

We have not experienced significant supply chain disruptions or labor supply shortages and we have

continued to be able to satisfy customer and consumer demand for our products.

However, the COVID-19 pandemic, or any future pandemic,

may limit the availability of, or increase the cost of, employees, ingredients, packaging and other inputs necessary to produce our products,

and our operations may be negatively impacted.

In 2021, our costs increased primarily due to inflationary price increases of milk,

other ingredients, packaging materials, and freight.

However, because of market conditions or for competitive reasons, our pricing actions

may sometimes lag input cost changes, or we may not be able to pass along the full effect of increases in raw materials and other input

costs as we incur them.

In 2022, social distancing, shelter-in-place

and work-from-home mandates and recommendations have begun to be reduced or eliminated.

The increased customer demand we have realized

over the past two years as consumers increased their at-home consumption and e-commerce purchasing during the COVID-19 pandemic may change

or decrease due to the decrease in social distancing and stay-at-home and work-from-home mandates and recommendations.

We are unable to

predict the nature and timing of when such change may occur, if at all.

impact of the COVID-19 pandemic on our business will depend on many factors, including, among others, whether additional waves of COVID-19

or different variants of COVID-19 will affect the United States and other markets and the duration of any social distancing and stay home

and work from home mandates or recommendations that may occur as a result of such COVID-19 wave or variant;

our ability and the ability

of our suppliers to continue to maintain production despite unprecedented demand in the food industry, supply chain disruptions, tight

labor markets and increased raw materials and packaging costs;

and the extent to which macroeconomic conditions resulting from the pandemic

and the pace of the subsequent recovery impact consumer eating and shopping habits.

We cannot predict the duration or scope of the disruption

Therefore, the financial impact cannot be reasonably

estimated at this time.

or the impact of any recovery from the impacts of COVID-19.

Therefore, the financial impact cannot be reasonably estimated at this time.

Future pandemics

or disease outbreaks could similarly adversely affect economies and financial markets, consumer spending and confidence levels and result

in an economic downturn that affects customer demand for our products.

Our efforts to manage and mitigate these risks may be unsuccessful,

and the effectiveness of these efforts depends on factors beyond our control, including the duration and severity of any pandemic or disease

outbreak, as well as third party actions taken to contain its spread and mitigate public health effects.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors