What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-26 compared with 2021-11-15 · 162 added, 289 removed, 56 unchanged (89% of the section changed)

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Management’s Discussion

and Analysis of Financial Condition and Results of Operations (“MD&A”) in this Form 10-Q is provided as a supplement

to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes, and the MD&A included

and Analysis of Financial Condition and Results of Operations (“MD&A”) in this Form 10-Q is provided as a supplement to,

and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes, and the MD&A included

in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “Form 10-K”).

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Examples of forward-looking statements include, among others, statements we make regarding:

Expectations of the effect

on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations

and proceedings;

Strategy for acquisitions,

customer retention, growth, product development, market position, financial results and reserves;

Estimates of the amounts of sales

allowances and discounts to our customers and consumers;

Our belief that we will

maintain compliance with our loan agreements and have sufficient liquidity to fund our business operations.

Expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations and proceedings;

Strategy for acquisitions, customer retention, growth, product development, market position, financial results and reserves;

Estimates of the amounts of sales allowances and discounts to our customers and consumers;

Our belief that we will maintain compliance with our loan agreements and have sufficient liquidity to fund our business operations.

Forward looking statements are based on management’s

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performance and they involve certain risks, uncertainties and assumptions that are difficult to predict.

Actual outcomes and results

may differ materially from what is expressed, implied or forecast by our forward-looking statements due in part to the risks, uncertainties,

Actual outcomes and results may

differ materially from what is expressed, implied or forecast by our forward-looking statements due in part to the risks, uncertainties,

and assumptions that include:

The actions of our competitors

and customers, including those related to price competition;

The decisions of customers

or consumers;

Our ability to successfully

implement our business strategy;

Changes in the pricing

of commodities

The effects of government

The impact of the COVID-19

outbreak on our business, suppliers, consumers, customers, and employees;

Disruptions to our supply

chain, or our manufacturing and distribution capabilities, including those due to cybersecurity threats and the COVD-19 outbreak;

Such other factors as discussed

throughout Part I, Item 1 “Business”;

The actions of our competitors and customers, including those related to price competition;

The decisions of customers or consumers;

Our ability to successfully implement our business strategy;

Changes in the pricing of commodities

The effects of government regulation;

The impact of the COVID-19 outbreak on our business, suppliers, consumers, customers, and employees;

Disruptions to our supply chain, or our manufacturing and distribution capabilities, including those due to cybersecurity threats and the COVD-19 outbreak;

Such other factors as discussed throughout Part I, Item 1 “Business”;

Part I, Item 1A “Risk Factors”;

and Part II, Item 7 “Management's

Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended

December 31, 2020 and that are described from time to time in our filings with the SEC.

These factors are not necessarily all of the

important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements.

Other unknown or unpredictable factors could also have material adverse effects on future results.

We intend these forward-looking statements

and Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021 and that are described from time to time in our filings with the SEC.

These factors are not necessarily all of the important

factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements.

Other unknown

or unpredictable factors could also have material adverse effects on future results.

The Company intends these forward-looking statements

to speak only at the date made.

Except as otherwise required to be disclosed in periodic reports required to be filed by public companies

with the SEC pursuant to the SEC's rules, we have no duty to update these statements, and we undertake no obligation to publicly update

or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

with the SEC pursuant to the SEC's rules, Lifeway has no duty to update these statements, and it undertakes no obligation to publicly

update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Recent Developments

COVID-19 Pandemic Impact

In December 2019, a novel coronavirus disease

("COVID-19") was first reported and subsequently characterized by the World Health Organization ("WHO") as a pandemic

in March 2020.

In an effort to reduce the global transmission of COVID-19, various policies and initiatives have been implemented by

governments around the world, including orders to close businesses not deemed "essential", shelter-in-place orders enacted

by state and local governments, and the practice of social distancing measures when engaging in essential activities.

Lifeway has seen

increased orders from retail customers in response to increased consumer demand for food at home in response to government mandated social

distancing and shelter in place orders in the United States and the immune boosting quality of our products.

Local, state, and national governments continue

to emphasize the importance of food supply during this pandemic and asked that food manufacturers and retailers remain open to meet the

needs of our communities.

The health and safety of our employees throughout this pandemic is paramount, and we have taken numerous steps

to keep our employees safe including enhanced sanitation protocols, implementation of social distancing measures at our manufacturing

operations, masks and personal protective equipment for employees across our facilities, preventative temperature screenings across all

manufacturing locations, the rollout of new benefits that help support our employees and their families, and remote work arrangements

for administrative support functions to comply with shelter-in-place orders.

In addition, a cross-functional task force has been established

to monitor and coordinate the Company's response to COVID-19.

During the first quarter of 2020, Management,

anticipating the spread of COVID-19 and its effects, implemented a plan to mitigate effects of COVID-19 on supply and transportation

of materials used to make and package our products, staffing, and transportation of our products to customers.

Management’s proactive

planning allowed the Company to avoid disruption to its manufacturing facilities and production, transportation, and sales and to meet

the increased demand without delay.

The Company has full production capacity available at all locations at this time and does not anticipate

manufacturing or staffing disruptions in the near term.

Pandemic Impact

We have seen increased customer and consumer demand

for our products during the pandemic as consumers increased their food purchases for in-home consumption.

We have not experienced significant

supply chain disruptions or labor supply shortages and have continued to satisfy customer and consumer demand for our products.

continues to proactively manage the supply and transportation of materials used to make and package our products, staffing, and transportation

of our products to customers.

This proactive planning has allowed the Company to avoid disruption to its manufacturing facilities and

production, transportation, and sales and to meet the increased demand.

The Company has maintained full production capacity available

at all locations and does not anticipate manufacturing or staffing disruptions in the near term.

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 2022, our costs increased primarily

due to inflationary price increases of milk, other ingredients, packaging materials, and transportation to our customers.

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.

During 2022, social distancing, shelter-in-place

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

The increased customer demand for our products

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.

Results of Operations

Three Months Ended September 30, 2021 Compared to Three Months

Ended September 30, 2020

Three Months Ended March 31, 2022 Compared to Three Months Ended

March 31, 2021

The following table presents certain information concerning our financial

results, including information presented as a percentage of consolidated net sales:

Three Months Ended September 30,

Three Months Ended March 31,

Cost of goods sold

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Total operating expenses

Income from operations

Other income (expense):

(Loss) income from operations

Other (expense) income:

Interest expense

Gain on investments

Loss on sales or property and equipment

Other Income, net

Total other income (expense)

Income before provision for income taxes

Provision for income taxes

Other (expense) income, net

Total other (expense) income

(Loss) income before provision for income taxes

(Benefit) provision for income taxes

Net (loss) income

Net sales finished at $34,099 for the three-month

period ended September 30, 2021, an increase of $3,514 or 13.5% versus prior year.

The net sales increase was primarily driven by higher

volumes of our branded drinkable kefir, and to a lesser extent the favorable impact of our acquisition of Glen Oaks Farms during the third

quarter of 2021.

period ended March 31, 2022, an increase of $4,723 or 16.1% versus prior year.

The net sales increase was primarily driven by higher volumes

of our branded drinkable kefir and the impact of price increases implemented during the quarter, and to a lesser extent the favorable

impact of our acquisition of GlenOaks Farms during the third quarter of 2021.

Gross profit as a percentage of net sales was

23.7% during the three-month period ended September 30, 2021.

16.4% during the three-month period ended March 31, 2022.

Gross profit percentage was 27.4% in the prior year.

The decrease versus

the prior year was primarily due to the unfavorable impact of milk pricing, and to a lesser extent the increased pricing of freight and

other inputs, partially offset by the decrease in depreciation expense.

Selling Expenses

Selling expenses increased by $606 to $2,722 during

the three-month period ended September 30, 2021 from $2,116 during the same period in 2020.

The increase from prior year is due to increased

investment in advertising and marketing programs.

General and Administrative Expenses

General and administrative expenses increased

$389 to $3,194 during the three-month period ended September 30, 2021 from $2,805 during the same period in 2020.

The increase is primarily

a result of incentive compensation expense.

Provision for Income Taxes

The provision for income taxes includes federal,

state and local income taxes.

The provision for income taxes was $527 and $764 during the three months ended September 30, 2021 and 2020,

respectively.

Our effective income tax rate for the three months

ended September 30, 2021 was 52.3% compared to 29.5% in the same period last year.

The statutory Federal and state tax rates remained

consistent from 2020 to 2021.

The Company has a number of items that are nondeductible or are discrete adjustments to tax expense during

Although similar items were reflected in 2021, the percentage increased due to nondeductible compensation expense under Section

Section 162(m) of the Internal Revenue Code (the

“Code”) limits the deductibility of compensation paid to certain of our executives.

Under Section 162(m), no tax deduction

in taxable years beginning after December 31, 2017 is allowed for compensation paid to any covered employee to the extent that the total

compensation for that covered employee exceeds $1,000,000 in any taxable year.

Our effective tax rate may change from period

to period based on recurring and non-recurring factors including the relative mix of pre-tax earnings (or losses), the underlying income

tax rates applicable to various state and local taxing jurisdictions, enacted tax legislation, the impact of non-deductible items, changes

in valuation allowances, and the expiration of the statute of limitations in relation to unrecognized tax benefits.

We record discrete

income tax items such as enacted tax rate changes and completed tax audits in the period in which they occur.

Income taxes are discussed in Note 10 in the

Notes to the Consolidated Financial Statements.

Nine Months Ended September 30, 2021 Compared to Nine Months

Ended September 30, 2020

The following table presents certain information concerning our financial

results, including information presented as a percentage of consolidated net sales:

Nine Months Ended September 30,

Cost of goods sold

Depreciation expense

Total cost of goods sold

Selling expenses

General & administrative expenses

Amortization expense

Total operating expenses

Income from operations

Other income (expense):

Interest expense

Gain on investments

Loss on sales or property and equipment

Other Income, net

Total other income (expense)

Income before provision for income taxes

Provision for income taxes

Net sales finished at $88,091 for the nine-month

period ended September 30, 2021, an increase of $11,649 or 15.2% versus prior year.

The net sales increase was primarily driven by higher

volumes of our branded drinkable kefir.

Approximately 29% of the net sales increase results from the Farmers to Families Food Box program

with the United States Department of Agriculture (“USDA”) which began during the middle of the first quarter of 2021 and ended

during May 2021.

Approximately 7% of the net sales increase results from our acquisition of Glen Oaks Farms during the third quarter of

Gross profit as a percentage of net sales decreased

to 25.8% during the nine-month period ended September 30, 2021 from 26.8% during the same period in 2020.

The decrease versus the prior

year was primarily due to the unfavorable impact of milk pricing, and to a lesser extent the increased pricing of freight and other inputs,

partially offset by the decrease in depreciation expense.

The decrease versus the

prior year was primarily due to the unfavorable impact of milk pricing, and to a lesser extent the increased pricing of freight and other

inputs, partially offset by the decrease in depreciation expense.

We expect to see continued pressure in milk pricing and other input

costs during the fiscal year 2022.

Selling Expenses

Selling expenses increased by $1,099 to $8,510

during the nine-month period ended September 30, 2021 from $7,411,during the same period in 2020.

The increase versus prior year primarily

reflects an increase in advertising expense related to a television and digital advertising campaigns in the first quarter of 2021 and

increased in person selling and marketing events, partially offset by lower compensation expense.

Selling expenses decreased by $20 to $3,202 during

the three-month period ended March 31, 2022 from $3,222 during the same period in 2021.

General and Administrative Expenses

General and administrative expenses increased

$21 to $8,702 during the nine-month period ended September 30, 2021 from $8,681 during the same period in 2020.

$401 to $3,292 during the three-month period ended March 31, 2022 from $2,891 during the same period in 2021.

The increase is primarily

a result of incentive compensation expense, partially offset by lower office lease and professional fee expense.

a result of increased legal and professional fees, which includes expense related to the fiscal year 2020 Form 10-K restatement.

Provision for Income Taxes

The provision for income taxes includes federal,

state and local income taxes.

The provision for income taxes was $1,851 and $1,223 during the nine months ended September 30, 2021 and

2020, respectively.

Our effective income tax rate for the nine months

ended September 30, 2021 was 35.2% compared to 29.5% in the same period last year.

During the first quarter of 2020, the company’s

effective tax rate was reduced due to the provisions of the Cares Act.

The law provided for the carry back of certain net operating losses

to years in which the tax rates were significantly higher.

The tax benefit was recorded as a discrete item in the first quarter of 2020.

The statutory Federal and state taxes rates remained consistent from 2020 to 2021.

The Company has a number of items that are nondeductible

or are discrete adjustments to tax expense.

Although similar items were reflected in 2021, the percentage increased due to nondeductible

compensation expense under Section 162(m).

Our effective tax rate may change from period

to period based on recurring and non-recurring factors including the relative mix of pre-tax earnings (or losses), the underlying income

tax rates applicable to various state and local taxing jurisdictions, enacted tax legislation, the impact of non-deductible items, changes

in valuation allowances, and the expiration of the statute of limitations in relation to unrecognized tax benefits.

We record discrete

The provision for income taxes was $197 and $593

during the three months ended March 31, 2022 and 2021, respectively.

The effective income tax rate for the three months

ended March 31, 2022 was 18.1% compared to 31.2% in the same period last year.

The statutory Federal and state tax rates remained consistent

from 2021 to 2022.

The Company has items that are nondeductible or are discrete adjustments to tax expense.

The company consistently reflects

non-deductible officer compensation expense, non-deductible compensation expense related to equity incentive awards and separate state

tax rates from period to period.

Although similar items were reflected in 2022, the percentage effect is different due to the difference

in pre-tax (loss) income in 2022 compared to 2021.

The Company’s effective tax rate may change

from period to period based on recurring and non-recurring factors including the relative mix of pre-tax earnings (or losses), the jurisdictional

mix of earnings, enacted tax legislation, state income taxes, the impact of non-deductible items, changes in valuation allowances, settlement

of tax audits, and the expiration of the statute of limitations in relation to unrecognized tax benefits.

The Company records discrete

income tax items such as enacted tax rate changes and completed tax audits in the period in which they occur.

Income taxes are discussed in Note 10 in the

Notes to the Consolidated Financial Statements.

Income taxes are discussed in Note 10 in the Notes

to the Consolidated Financial Statements.

Liquidity and Capital Resources

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.

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.

However, this

increased customer and consumer demand may decrease in the future 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.

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, increasing supply chain constraints generally, and 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 consumer demand for our products.

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.

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 cannot predict the duration or scope of the

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

To date, our manufacturing facilities

have not been significantly impacted.

We have full production capacity available at all locations at this time.

On March 16, 2020, the

food industry, including grocery stores and their suppliers, and transportation were classified by the U.S.

federal government as critical

infrastructure industry.

As a result, our employees and facilities, as well as the retailers and distributors that sell our products,

will be able to remain in operation.

During the first quarter of 2020, Management, anticipating the spread of Covid-19 and its effects,

implemented a plan to mitigate effects of Covid-19 on supply and transportation of materials used to make and package our products, staffing,

and transportation of our products to customers.

While the situation is fluid, we have evaluated all manufacturing locations and do not

anticipate any staffing shortages or interruption of our production, transportation and sale of products in the near term.

At this time, the COVID-19 pandemic has not materially

impacted our operations.

We expect to meet our foreseeable liquidity and capital resource requirements through anticipated cash flows

from operations;

our revolving credit facility;

and cash and cash equivalents to ensure the continuation of the Company as a going concern.

The success of our business and financing strategies will continue to provide us with the financial flexibility to take advantage of

various opportunities as they arise.

Given the dynamic nature of COVID-19, we will continue to assess our liquidity needs while continuing

to manage our discretionary spending and investment strategies.

Sources and Uses of Cash

Lifeway had a net increase in cash and cash equivalents

of $2,092 and $3,780 during the nine-month period ended September 30, 2021 and 2020, respectively.

The drivers of the year over year change

are as follows:

Net cash provided in operating activities was

$6,435 during the nine-month period ended September 30, 2021 compared to net cash provided by operating activities of $5,348 in the same

period in 2020.

The increase in cash provided by operating activities is primarily due to the increase in cash generated through higher

revenues in 2021, and the change in working capital.

Working capital consumption was higher in 2020 due to increased revenue in March

2020 as consumers anticipated the shelter in place directives that ultimately occurred as a result of the COVID-19 pandemic.

assesses the Company's liquidity in terms of its ability to generate cash to fund its operating, investing, and financing activities.

The Company remains in a strong financial position, and while it has been impacted by the macroeconomic challenges with commodity inflation

and other input cost increases, the Company believes that its cash flow from operations, revolving credit and term loan facility, and

cash and cash equivalents will continue to provide sufficient liquidity for its working capital needs, capital resource requirements,

and growth initiatives and to ensure the continuation of the Company as a going concern.

additional borrowings are needed, $2,223 was available under the Revolving Credit Facility as of March 31, 2022 (see Note 7, Debt).

We are in compliance with the terms of the Credit Agreement and expect to meet foreseeable financial requirements.

The success of

our business and financing strategies will continue to provide us with the financial flexibility to take advantage of various

opportunities as they arise.

To date, we have been successful in generating cash and obtaining financing as needed.

connection with the COVID-19 pandemic or other circumstances, if a serious economic or credit market crisis ensues, it could have a

negative effect on our liquidity, results of operations and financial condition.

most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials,

labor, manufacturing and distribution, trade and promotions, advertising and marketing, and income tax liabilities) as well as expenditures

for property, plant and equipment.

Long-term cash

requirements primarily relate to funding long-term debt repayments (see Note 7, Debt) and deferred income taxes (see Note 10, Income Taxes,

in our Annual Report on Form 10-K).

Given the dynamic

nature of COVID-19, we will continue to assess our liquidity needs while continuing to manage our discretionary spending and investment

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.

The following table is derived from our Consolidated

Statement of Cash Flows:

Three Months Ended

Net cash (used in) provided by operating activities

Net cash (used in) provided by investing activities

Net cash (used in) provided by financing activities

Operating Activities

Net cash used in operating activities was $648

during the three-month period ended March 31, 2022 compared to net cash provided by operating activities of $1,210 in the same period

The decrease was primarily due to lower cash earnings, which reflect the impact of input and freight cost inflation in 2022,

partially offset by the change in working capital.

Investing Activities

Net cash used in investing activities was $348

during the nine-month period ended September 30, 2021 compared to net cash used in investing activities of $1,163 in the same period in

The increase in net cash used in investing activities in 2021 reflects the August 2021 acquisition of Glen Oak Farms, Inc.

acquisition purchase price was funded through proceeds from our new $5,000 term loan and existing cash.

Capital spending was $1,685 during

the nine-month period ended September 30, 2021 compared to $1,168 in 2020.

during the three-month period ended March 31, 2022 compared to $518 in the same period in 2021.

The decrease in cash used reflects lower

capital spending.

Our capital spending is focused in three core areas:

cost reduction, and facility improvements.

Growth capital spending supports new product innovation and enhancements.

Cost reduction and

facility improvements support manufacturing efficiency, safety and productivity.

Net cash provided by financing activities was

$3,142 during the nine-month period ended September 30, 2021 compared to net cash used in financing activities of $405 in the same period

The increase in net cash provided by financing activities relates to the term loan entered into during August 2021 in connection

with the acquisition of Glen Oaks Farms, Inc.

See Debt Obligations section below for further detail.

On June 24, 2021, the Lifeway’s Board authorized

a plan to repurchase up to 250 shares of Common Stock in the open market within 24 months at no more than $10 per share.

We repurchased

all 250 shares of common stock at a cost of $1,583 during the three-month period ended September 30, 2021.

We intend to hold repurchased

shares in treasury for general corporate purposes, including issuances under our 2015 Omnibus Incentive Plan.

Treasury shares are accounted

for using the cost method.

growth, cost reduction, and facility improvements.

Growth capital

spending supports new product innovation and enhancements.

Cost reduction and facility improvements support manufacturing efficiency,

safety, and productivity.

Financing Activities

Net cash used in financing activities was $250

during the three-month period ended March 31, 2022 compared to net cash provided by financing activities of $0 in the same period in 2021.

The increase in cash used relates to quarterly principal payments under the term loan entered into during August 2021 in connection with

the acquisition of GlenOaks Farms, Inc.

Debt Obligations

On August 18, 2021, Lifeway entered into the Fourth

Modification (the “Fourth Modification”) to the Amended and Restated Loan and Security Agreement (as amended and modified

from time to time, the “Credit Agreement”) with its existing lender and certain of its subsidiaries.

The Fourth Modification

amends the Credit Agreement to provide for, among other things, a $5 million term loan by the existing lender to the borrowers to be repaid

in quarterly installments of principal and interest over a term of five years (the “Term Loan”).

The termination date

of the Term Loan is August 18, 2026, unless earlier terminated.

Except for the addition of the Term Loan, the Credit Agreement remains

substantively unchanged and in full force and effect.

As of September 30, 2021, we had $2,777 outstanding

under the Revolving Credit Facility and $4,726 outstanding under the note payable, net of $24 of unamortized deferred financing fees.

We had $2,223 available for future borrowings under the Revolving Credit Facility as of September 30, 2021.

As amended, all outstanding

amounts under the Loans bear interest, at Lifeway’s election, at either the lender Base Rate (the Prime Rate minus 1.00%) or the

LIBOR plus 1.95%, payable monthly in arrears.

Lifeway is also required to pay a quarterly unused line fee of 0.20% on the Revolving Credit

Facility and, in conjunction with the issuance of any letters of credit, a letter of credit fee of 0.20%.

Lifeway’s interest rate

on debt outstanding under the Loans as of September 30, 2021 was 2.15%.

We are in compliance with all applicable financial

debt covenants as of September 30, 2021.

See Note 7 to our Consolidated Financial Statements for additional information regarding our

indebtedness and related agreements.

As of March 31, 2022, the Company had $2,777 outstanding

and $2,223 available for future borrowings under the revolving line of credit.

Under the credit agreement, the Revolving Credit facility

matures on June 30, 2025.

The were no letters of credit issued or outstanding as of March 31, 2022.

The Company had $4,222 outstanding under the note

payable, net of $28 of unamortized deferred financing fees, as of March 31, 2022,

The Company’s interest rate on debt outstanding

under the revolving line of credit and note payable as of March 31, 2022 was 2.15%.

The Company is in compliance with all applicable

financial debt covenants as of March 31, 2022.

See Note 7 to our Consolidated Financial Statements for additional information regarding

our indebtedness and related agreements.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements

is provided in Note 2 – Summary of Significant Accounting Policies.

Critical Accounting Policies and Estimates

A description of the Company's critical accounting

policies and estimates is contained in its Annual Report on Form 10-K for the year ended December 31, 2021.

There were no material changes

to the Company’s critical accounting policies and estimates in the three months ended March 31, 2022, except for the change in estimated

useful life of one brand name intangible asset which is disclosed in Note 5 – Goodwill and Intangible assets.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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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-Q

Item 2. Management’s Discussion and Analysis