What changed in this filing

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Item 1A. Risk Factors

2023-03-27 compared with 2022-07-21 · 305 added, 338 removed, 179 unchanged (78% of the section changed)

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RISKS RELATED TO OUR BUSINESS

Our product categories face a high level

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

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

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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 products.

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

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 products.

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 new products to maintain our market position

in our product categories;

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.

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.

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

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 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.

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

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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.

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

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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.

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 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.

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.

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

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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.

We rely on a limited number of production and distribution

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

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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;

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.

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

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.

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.

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,

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, 2022, we had $2.77 million outstanding

under the Revolving Credit Facility and $3,72 million outstanding under the note payable, net of $25 thousand of unamortized deferred

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;

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;

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 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

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.

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

Our loan agreements also contain provisions that restrict our ability to:

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

enter into transactions

with affiliates;

sell assets or merge with

other companies.

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

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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.

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.

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 whose responsibilities

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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.

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 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;

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;

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 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.

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 property.

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 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.

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.

Although the members of the Smolyansky family

together control less than 50% of our common stock 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’

By 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

Our business could be negatively affected as a result of the

actions of stockholders.

Our business could be negatively affected as

a result of stockholder actions, which could cause us to incur significant expense, hinder execution of our business strategy, and impact

the trading value of our securities.

Stockholder actions, including potential proxy contests, requires significant time and attention

by management and our Board, potentially interfering with our ability to execute our strategic plan.

We may be required to incur significant

legal fees and other expenses related to stockholder actions, and the attention of our management may be diverted by such actions.

we welcome our stockholders’ constructive input, there can be no assurance that stockholder actions would not result in negative

impacts to the Company.

Any of these impacts could materially and adversely affect our business and operating results, and the market

price of our Common Stock could be subject to significant fluctuation or otherwise be adversely affected by stockholder actions.

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.

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,

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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.

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 22% of

our net sales in the fiscal year ended December 31, 2022.

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

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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

involves the risk of injury to consumers.

Such injuries may result from tampering by unauthorized third parties, inadvertent mislabeling,

product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced

during the storage, processing, handling or transportation phases.

The sale of food products for human consumption involves

the risk of injury to consumers.

Such injuries may result from tampering by unauthorized third parties, inadvertent mislabeling, product

contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during

the storage, processing, handling or transportation phases.

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

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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.

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

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

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.

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 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 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

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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.

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 2022

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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

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.

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 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 2022, 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

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

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.

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.

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

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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,

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.

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

5 unchanged sentences

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, 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

5 unchanged sentences

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

The ultimate 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;

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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-K

Item 1A. Risk Factors