What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-13 compared with 2024-05-14 · 244 added, 192 removed, 381 unchanged (53% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

March 31, 2024 and December 31, 2023

June 30, 2024 and December 31, 2023

(In thousands)

March 31, 2024

June 30, 2024

Current assets

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses and discounts & allowances of $ 1,640 and $ 1,270 at March 31, 2024 and December 31, 2023 respectively

Accounts receivable, net of allowance for credit losses and discounts & allowances of $ 1,550 and $ 1,270 at June 30, 2024 and December 31, 2023 respectively

Inventories, net

18 unchanged sentences

2,500 shares authorized;

no shares issued or outstanding at March 31, 2024 and December 31, 2023

no shares issued or outstanding at June 30, 2024 and December 31, 2023

Common stock, no par value;

1 unchanged sentence

17,274 shares issued;

14,691 outstanding at March 31, 2024 and December 31, 2023

14,791 outstanding at June

30, 2024 and December 31, 2023

Paid-in capital

3 unchanged sentences

Total liabilities and stockholders' equity

See accompanying notes to consolidated financial statements

See accompanying notes to consolidated financial

LIFEWAY FOODS, INC.

1 unchanged sentence

Consolidated Statements of Operations

For the three ended March 31, 2024 and 2023

For the three and six months ended June 30,

2024 and 2023

(In thousands, except per share data)

Three Months Ended

Six Months Ended

Cost of goods sold

8 unchanged sentences

Interest expense

Gain on sale of property and equipment

Other income (expense), net

4 unchanged sentences

Weighted average common shares outstanding:

See accompanying notes to consolidated financial statements

See accompanying notes to consolidated financial

LIFEWAY FOODS, INC.

AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Stockholders’

(In thousands)

2 unchanged sentences

Balance, March 31, 2023

Issuance of common stock in connection with stock-based compensation

Stock-based compensation

Balance, June 30, 2023

LIFEWAY FOODS, INC.

AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Stockholders’

(In thousands)

2 unchanged sentences

Balance, March 31, 2024

See accompanying notes to consolidated financial statements

Issuance of common stock in connection with stock-based compensation

Issuance of common stock on exercise of stock options

Stock-based compensation

Balance, June 30, 2024

See accompanying notes to consolidated financial

LIFEWAY FOODS, INC.

2 unchanged sentences

(In thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

3 unchanged sentences

Non-cash interest expense

Bad debt expense

Gain on sale of equipment

(Increase) decrease in operating assets:

9 unchanged sentences

Purchases of property and equipment

Proceeds from sales or equipment

Net cash used in investing activities

2 unchanged sentences

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

5 unchanged sentences

Accrued purchase of property and equipment

Right-of-use assets obtained in exchange for lease obligations

See accompanying notes to consolidated financial statements

See accompanying notes to consolidated financial

LIFEWAY FOODS, INC.

13 unchanged sentences

Principles of consolidation

The consolidated financial statements include the

accounts of Lifeway Foods, Inc.

The consolidated financial statements include

the accounts of Lifeway Foods, Inc.

and all its wholly owned subsidiaries (collectively “Lifeway” or the “Company”).

1 unchanged sentence

Note 2 – Summary of Significant Accounting

Our significant accounting policies, which are summarized

in detail in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, have not materially changed.

The following is

a description of certain of our significant accounting policies.

Our significant accounting policies, which are

summarized in detail in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, have not materially changed.

The following

is a description of certain of our significant accounting policies.

Use of estimates

13 unchanged sentences

approximates or equals fair value due to their short-term nature.

Lifeway from time to time may have bank deposits in

excess of insurance limits of the Federal Deposit Insurance Corporation.

The Company places its cash and cash equivalents with high credit

quality financial institutions.

Lifeway has not experienced any losses in such accounts and believes the financial risks associated with

these financial instruments are minimal.

Lifeway from time to time may have bank deposits

in excess of insurance limits of the Federal Deposit Insurance Corporation.

The Company places its cash and cash equivalents with high

credit quality financial institutions.

Lifeway has not experienced any losses in such accounts and believes the financial risks associated

with these financial instruments are minimal.

Advertising and promotional costs

Advertising costs are expensed as incurred and reported

in Selling expense in the Company’s consolidated statement of operations.

Total advertising expense was $ 1,372 and $ 1,463 for the

three months ended March 31, 2024 and 2023, respectively.

The Company is managed as a single reportable segment.

The Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), reviews financial information

on an aggregate basis for purposes of allocating resources and assessing financial performance, as well as for making strategic operational

decisions and managing the organization.

Substantially all of Lifeway’s consolidated revenues relate to the sale of cultured dairy

products that it produces using the same processes and materials and are sold to consumers through a common network of distributors and

retailers in the United States.

Advertising costs are expensed as incurred and

reported in Selling expense in the Company’s consolidated statement of operations.

Total advertising expense was $ 2,531 and $ 2,006

for the six months ended June 30, 2024 and 2023, respectively.

Total advertising expense was $ 1,159 and $ 543 for the three months ended

June 30, 2024 and 2023, respectively.

The Company is managed as a single reportable

The Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), reviews financial

information on an aggregate basis for purposes of allocating resources and assessing financial performance, as well as for making strategic

operational decisions and managing the organization.

Substantially all of Lifeway’s consolidated revenues relate to the sale of

cultured dairy products that it produces using the same processes and materials and are sold to consumers through a common network of

distributors and retailers in the United States.

Recent accounting pronouncements

9 unchanged sentences

The guidance does not affect recognition or measurement in the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU No.

In December 2023, the FASB issued

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures that requires entities to disclose additional information

about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid.

standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities.

Improvements to Income Tax Disclosures that requires entities to disclose

additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and

income taxes paid.

The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and

unrecognized deferred tax liabilities.

The guidance is effective for our fiscal year ending December 31, 2024.

The guidance does not affect recognition or measurement in the

Company’s consolidated financial statements.

The guidance does not

affect recognition or measurement in the Company’s consolidated financial statements.

Note 3 – Inventories, net

17 unchanged sentences

Accumulated impairment losses

Balance at March 31, 2024

Balance at June 30, 2024

Accumulated impairment losses

2 unchanged sentences

Schedule of finite-lived intangible assets

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

Schedule of estimated amortization expense on intangible assets

Nine months ended December 31, 2024

Six months ended December 31, 2024

The weighted-average remaining amortization expense

period for the customer relationship and brand name intangible assets is 12.3 and 12.6 years, respectively, as of March 31, 2024.

weighted-average remaining amortization expense period for total intangible assets is 12.5 years as of March 31, 2024.

period for the customer relationship and brand name intangible assets is 12.1 and 12.4 years, respectively, as of June 30, 2024.

The weighted-average

remaining amortization expense period for total intangible assets is 12.3 years as of June 30, 2024.

Note 6 – Accrued Expenses

9 unchanged sentences

Term loan due August 18, 2026.

Interest (7.39% at March 31, 2024) payable monthly.

Interest payable monthly.

Unamortized deferred financing costs

2 unchanged sentences

Total long-term portion

The scheduled maturities of the term loan, excluding deferred financing

costs, at March 31, 2024 are as follows:

Schedule of maturities of long-term debt

Nine months ended December 31, 2024

Total term loan

The Company paid the outstanding term loan balance

of $ 2,250 in full during the second quarter of 2024 and expensed the remaining unamortized deferred financing costs.

Credit Agreement

The Company is party to an 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 Company is party to an 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 Credit Agreement provides for, among other things, a $ 5 million term loan to be repaid in quarterly installments

13 unchanged sentences

ending through the expiration date.

The Credit Agreement continues to provide for events of default, including failure to repay principal

and interest when due and failure to perform or violation of the provisions or covenants of the agreement, as a result of which amounts

due under the Credit Agreement may be accelerated.

The loans and all other amounts due and owed under the Credit Agreement and related

documents are secured by substantially all of the Company’s assets.

Lifeway was in compliance with the fixed charge coverage

ratio and minimum working capital covenants at March 31, 2024.

The Credit Agreement provides for events of default, including failure to repay principal and interest

when due and failure to perform or violation of the provisions or covenants of the agreement, as a result of which amounts due under the

Credit Agreement may be accelerated.

The loans and all other amounts due and owed under the Credit Agreement and related documents are

secured by substantially all of the Company’s assets.

Lifeway was in compliance with the fixed charge

coverage ratio and minimum working capital covenants at June 30, 2024.

Revolving Credit Facility

As of March 31, 2024, the Company had $ 0 outstanding

As of June 30, 2024, the Company had $ 0 outstanding

under the Revolving Credit Facility.

The Company had $ 5,000 available for future borrowings under the Revolving Credit Facility as of

March 31, 2024.

June 30, 2024.

Note 8 – Leases

15 unchanged sentences

and obtains substantially all the economic benefits of the asset.

Right-of-use assets and lease liabilities are measured

and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

elected the practical expedient to combine lease and non-lease components into a single component for all of its leases.

When the Company

is unable to determine an implicit interest rate, it uses its incremental borrowing rate based on the information available at the commencement

date in determining the present value of future payments for those leases.

Lifeway includes options to extend or terminate the lease in

the measurement of the right-of-use asset and lease liability when it is reasonably certain that it will exercise such options.

expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Right-of-use assets and lease liabilities are

measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

Lifeway has elected the practical expedient to combine lease and non-lease components into a single component for all of its leases.

the Company is unable to determine an implicit interest rate, it uses its incremental borrowing rate based on the information available

at the commencement date in determining the present value of future payments for those leases.

Lifeway includes options to extend or terminate

the lease in the measurement of the right-of-use asset and lease liability when it is reasonably certain that it will exercise such options.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company does not record leases with an initial

1 unchanged sentence

Expense for these short-term leases is recorded on a straight-line basis over the lease

Total lease expense was $ 35 and $ 31 (including short term leases) for the three months ended March 31, 2024 and 2023, respectively.

Future maturities of lease liabilities were as follows:

Total lease expense was $ 77 and $ 61 (including short term leases) for the six months ended June 30, 2024 and 2023, respectively.

Total lease expense was $ 42 and $ 30 (including short term leases) for the three months ended June 30, 2024 and 2023, respectively.

Future maturities of lease liabilities were as

Schedule of future maturities of lease liabilities

Operating Leases

Nine months ended December 31, 2024

Six months ended December 31, 2024

Total lease payments

Present value of lease liabilities

The weighted-average remaining lease term for its

operating leases was 3.5 years as of March 31, 2024.

The weighted average discount rate of its operating leases was 9.49 % as of March

Cash paid for amounts included in the measurement of lease liabilities was $ 24 and $ 25 for the three months ended March 31,

2024 and 2023, respectively.

The weighted-average remaining lease term for

its operating leases was 3.4 years as of June 30, 2024.

The weighted average discount rate of its operating leases was 9.25 % as of June

Cash paid for amounts included in the measurement of lease liabilities was $ 46 for the six months ended June 30, 2024 and 2023.

Cash paid for amounts included in the measurement of lease liabilities was $ 22 and $ 21 for the three months ended June 30, 2024 and 2023,

respectively.

Note 9 – Commitments and contingencies

2 unchanged sentences

business, including commercial disputes, product liabilities, intellectual property matters and employment-related matters.

Lifeway records provisions in the consolidated financial

statements for pending legal matters when it believes it is probable that a loss will be incurred and the amount of such loss can be reasonably

The Company evaluates, on a periodic basis, developments in legal matters that could affect the amount of any accrual and developments

that would make a loss contingency both probable and reasonably estimable.

If a loss contingency is not both probable and estimable, it

does not establish an accrued liability.

Currently, none of its accruals for outstanding legal matters are material individually or in

the aggregate to its financial position and it is management’s opinion that the ultimate resolution of these outstanding legal matters

will not have a material adverse effect on its business, financial condition, results of operations, or cash flows.

However, if the Company

is ultimately required to make payments in connection with an adverse outcome, it is possible that such contingency could have a material

adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Lifeway records provisions in the consolidated

financial statements for pending legal matters when it believes it is probable that a loss will be incurred and the amount of such loss

can be reasonably estimated.

The Company evaluates, on a periodic basis, developments in legal matters that could affect the amount of

any accrual and developments that would make a loss contingency both probable and reasonably estimable.

If a loss contingency is not both

probable and estimable, it does not establish an accrued liability.

Currently, none of its accruals for outstanding legal matters are

material individually or in the aggregate to its financial position and it is management’s opinion that the ultimate resolution

of these outstanding legal matters will not have a material adverse effect on its business, financial condition, results of operations,

or cash flows.

However, if the Company is ultimately required to make payments in connection with an adverse outcome, it is possible that

such contingency could have a material adverse effect on the Company’s business, financial condition, results of operations or cash

Note 10 – Income taxes

Income taxes were recognized at effective rates

of 30.0 % and 33.8 % for the six months ended June 30, 2024 and 2023, respectively.

Income taxes were recognized at effective rates of 29.4 %

30.8 % and 37.9 % for the three months ended March 31, 2024 and 2023, respectively.

The Company calculates the provision for income taxes

during interim reporting periods by applying an estimate of the annual effective tax rate for the full year, excluding unusual or infrequently

occurring discrete items, and applies that rate to income (loss) before provision for income taxes for the period.

and 32.6 % for the three months ended June 30, 2024 and 2023, respectively.

The Company calculates the provision for income

taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full year, excluding unusual or

infrequently occurring discrete items, and applies that rate to income (loss) before provision for income taxes for the period.

The Company’s effective tax rate may change

9 unchanged sentences

in pre-tax income in 2024 compared to 2023.

Unrecognized tax benefits were $ 0 at March 31, 2024

and 2023, respectively.

Unrecognized tax benefits were $ 0 at June 30,

2024 and 2023.

The Company does not expect material changes to its unrecognized tax benefits during the next twelve months.

1 unchanged sentence

Omnibus Incentive Plan

In December 2015, Lifeway stockholders approved the

2015 Omnibus Incentive Plan, which authorized the issuance of an aggregate of 3.5 million shares to satisfy awards of stock options, stock

appreciation rights, unrestricted stock, restricted stock, restricted stock units, performance shares and performance units to qualifying

Under the 2015 Omnibus Incentive Plan, the Board of Directors or its Compensation Committee approves stock

awards to executive officers and certain senior executives, generally in the form of restricted stock or performance shares.

of performance shares that participants may earn depends on the extent to which the corresponding performance goals have been achieved.

Stock awards generally vest over a three-year performance or service period.

At March 31, 2024, no shares remain available for award under

the 2015 Omnibus Incentive Plan as it was terminated on August 31, 2022.

However, any outstanding awards under the 2015 Omnibus Incentive

Plan are unaffected by the termination of the 2015 Omnibus Incentive Plan or by the approval of the 2022 Omnibus Incentive Plan (the “2022

Plan”) as described below.

In December 2015, Lifeway stockholders approved

the 2015 Omnibus Incentive Plan, which authorized the issuance of an aggregate of 3.5 million shares to satisfy awards of stock options,

stock appreciation rights, unrestricted stock, restricted stock, restricted stock units, performance shares and performance units to qualifying

Under the 2015 Omnibus Incentive Plan, the Board of Directors or its Compensation Committee approves stock awards to executive

officers and certain senior executives, generally in the form of restricted stock or performance shares.

The number of performance shares

that participants may earn depends on the extent to which the corresponding performance goals have been achieved.

Stock awards generally

vest over a three-year performance or service period.

At June 30, 2024, no shares remain available for award under the 2015 Omnibus Incentive

Plan as it was terminated on August 31, 2022.

However, any outstanding awards under the 2015 Omnibus Incentive Plan are unaffected by

the termination of the 2015 Omnibus Incentive Plan or by the approval of the 2022 Omnibus Incentive Plan (the “2022 Plan”)

as described below.

On August 31, 2022, Lifeway stockholders approved

6 unchanged sentences

Incentive Plan.

Awards granted under the 2022 Plan are generally subject

to a minimum vesting period of at least one year.

Awards may be subject to cliff-vesting or graded-vesting conditions, with graded vesting

starting no earlier than one year after the grant date.

The Plan Administrator may provide for shorter vesting periods in an award agreement

for no more than five percent of the maximum number of shares authorized for issuance under the 2022 Plan.

As of March 31, 2024, 2.64

Awards granted under the 2022 Plan are generally

subject to a minimum vesting period of at least one year.

Awards may be subject to cliff-vesting or graded-vesting conditions, with graded

vesting starting no earlier than one year after the grant date.

The Plan Administrator may provide for shorter vesting periods in an award

agreement for no more than five percent of the maximum number of shares authorized for issuance under the 2022 Plan.

As of June 30, 2024,

2.64 million shares remain available to award under the 2022 Plan.

Stock Options

The following table summarizes stock option activity during the three months

ended March 31, 2024:

The following table summarizes stock option activity during the six

months ended June 30, 2024:

Schedule of stock option activity

4 unchanged sentences

Outstanding at December 31, 2023

Outstanding at March 31, 2024

Exercisable at March 31, 2024

Outstanding at June 30, 2024

Exercisable at June 30, 2024

Restricted Stock Units

6 unchanged sentences

The following

table summarizes RSU activity during the three months ended March 31, 2024.

table summarizes RSU activity during the three months ended June 30, 2024.

Schedule of RSUs activity

4 unchanged sentences

Shares issued upon vesting

Outstanding at March 31, 2024

Vested and deferred at March 31, 2024

For the three months ended March 31, 2024 and 2023

total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $ 233 and $ 104 , respectively.

For the three months ended March 31, 2024 and 2023 tax-related benefits of $ 65 and $ 29 , respectively, were also recognized.

Future compensation

expense related to restricted stock units was $ 918 as of March 31, 2024 and will be recognized on a weighted average basis over the next

Outstanding at June 30, 2024

Vested and deferred at June 30, 2024

For the six months ended June 30, 2024 and

2023 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $ 468

respectively.

For the six months ended June 30, 2024 and 2023 tax-related benefits of $ 131

respectively, were also recognized.

For the three months ended June 30, 2024 and 2023 total pre-tax stock-based compensation expense

recognized in the consolidated statements of operations was $ 235

respectively.

For the three months ended June 30, 2024 and 2023 tax-related benefits of $ 66

respectively, were also recognized.

Future compensation expense related to restricted stock units was $ 706

as of June 30, 2024 and will be recognized on a weighted average basis over the next 1.2

Long-Term Incentive Plan Compensation

2 unchanged sentences

2020 CEO Incentive Award

During the fourth quarter 2020, Lifeway awarded a

long-term equity-based incentive of $ 750 to its Chief Executive Officer (the “2020 CEO Award”) depending on Lifeway’s

During the fourth quarter 2020, Lifeway awarded

a long-term equity-based incentive of $ 750 to its Chief Executive Officer (the “2020 CEO Award”) depending on Lifeway’s

2020 performance levels compared to the respective targets.

3 unchanged sentences

approval under the Stock Purchase Agreement dated October 1, 1999.

For the three months ended March 31, 2024 and 2023, $ 18 and $ 43 was

expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

As of March 31, 2024, the total

remaining unearned compensation of $ 6 will be recognized in 2024, subject to vesting.

For the six months ended June 30, 2024 and 2023, $ 24 and $ 69 was expensed

as stock-based compensation expense in the consolidated statements of operations, respectively.

For the three months ended June 30, 2024

and 2023, $ 6 and $ 26 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

June 30, 2024, all compensation has been recognized.

2021 Equity Award

5 unchanged sentences

in April 2022, one-third in April 2023, and one-third in April 2024.

For the three months ended March 31, 2024 and 2023, $ 33 and $ 84 was

For the six months ended June 30, 2024 and 2023, $ 40 and $ 128 was

expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

As of March 31, 2024, the total

remaining unearned compensation of $ 7 will be recognized in 2024, subject to vesting.

For the three months ended June

30, 2024 and 2023, $ 7 and $ 44 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

As of June 30, 2024, all compensation has been recognized.

2022 Equity Award

13 unchanged sentences

have a grant date fair value of $6.25 dollars per share.

For the three months ended March 31, 2024 and 2023, $ 156 and $ 112 was expensed

as stock-based compensation expense in the consolidated statements of operations, respectively.

The 2022 long-term incentive plan also granted restricted

stock unit awards that contain only a service condition and vest on the passage of time in three equal installments on each of the first

three anniversaries of the August 31, 2022 grant date.

The stock-based compensation expense for these awards is included in the Restricted

Stock Units section above.

For the six months ended June 30, 2024 and 2023, $ 288 and $ 240 was expensed as

stock-based compensation expense in the consolidated statements of operations, respectively.

For the three months ended June 30, 2024

and 2023, $ 132 and $ 127 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

The 2022 long-term incentive plan also granted

restricted stock unit awards that contain only a service condition and vest on the passage of time in three equal installments on each

of the first three anniversaries of the August 31, 2022 grant date.

The stock-based compensation expense for these awards is included

in the Restricted Stock Units section above.

2023 Equity Award

13 unchanged sentences

have a grant date fair value of $6.88 dollars per share.

For the three months ended March 31, 2024 and 2023, $ 130 and $ 0 was expensed

as stock-based compensation expense in the consolidated statements of operations, respectively.

The 2023 long-term incentive plan also granted restricted

stock unit awards that contain only a service condition and vest on the passage of time in three equal installments on each of the first

three anniversaries of the June 16, 2023 grant date.

The stock-based compensation expense for these awards is included in the Restricted

Stock Units section above.

For the six months ended June 30, 2024 and 2023, $ 255 and $ 16 was expensed as

stock-based compensation expense in the consolidated statements of operations, respectively.

For the three months ended June 30, 2024

and 2023, $ 124 and $ 16 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

The 2023 long-term incentive plan also granted

restricted stock unit awards that contain only a service condition and vest on the passage of time in three equal installments on each

of the first three anniversaries of the June 16, 2023 grant date.

The stock-based compensation expense for these awards is included in

the Restricted Stock Units section above.

2024 Equity Award

13 unchanged sentences

have a grant date fair value of $13.73 dollars per share.

For the three months ended March 31, 2024 and 2023, $ 102 and $ 0 was expensed

as stock-based compensation expense in the consolidated statements of operations, respectively.

The 2024 long-term incentive plan also granted restricted

stock unit awards that contain only a service condition and vest on the passage of time in three equal installments on each of the first

three anniversaries of the January 10, 2024 grant date.

The stock-based compensation expense for these awards is included in the Restricted

Stock Units section above.

For the six months ended June 30, 2024 and 2023, $ 221 and $ 0 was expensed as

stock-based compensation expense in the consolidated statements of operations, respectively.

For the three months ended June 30, 2024

and 2023, $ 119 and $ 0 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

The 2024 long-term incentive plan also granted

restricted stock unit awards that contain only a service condition and vest on the passage of time in three equal installments on each

of the first three anniversaries of the January 10, 2024 grant date.

The stock-based compensation expense for these awards is included

in the Restricted Stock Units section above.

Non-Employee Director Plan

On August 31, 2022, Lifeway stockholders approved

the 2022 Non-Employee Director Equity and Deferred Compensation Plan (the “2022 Director Plan”), which authorizes the grant

of restricted stock units (“RSUs”), which will vest on such schedule as the Company, in its sole discretion, shall determine.

Each non-employee director of the Company is eligible to be a participant in the 2022 Director Plan until they no longer serve as a non-employee

As of the date of each annual shareholder meeting, the Company may grant each director a number of RSUs for such year and set

the vesting schedule for the RSUs granted.

Whether and how many RSUs the Company will grant to directors in any year is subject to the

sole discretion of the Company and shall in any event be subject to the 2022 Director Plan’s overall share limits.

The maximum aggregate

number of shares of common stock that may be issued under the 2022 Director Plan is 500 thousand shares.

As of March 31, 2024, 430 thousand

shares remain available to award under the 2022 Director Plan.

The aggregate fair market value of shares underlying RSU compensation that

may be issued as RSU compensation to a director in any year shall not exceed $170.

In addition to the grant of RSUs, the 2022 Director

Plan also provides for the deferral by electing participants of all or part of their cash compensation (in 10% increments) into a deferred

cash account, and they may defer all or part of their cash and/or RSU compensation (in 10% increments) into a deferred RSU account.

benefits are paid in a lump sum upon the applicable director’s departure from the Board of Directors.

the 2022 Non-Employee Director Equity and Deferred Compensation Plan, as amended by Amendment No.

1 approved by the Board on June 7, 2024

(the “2022 Director Plan”), which authorizes the grant of restricted stock units (“RSUs”), which will vest on

such schedule as the Company, in its sole discretion, shall determine.

Each non-employee director of the Company is eligible to be a participant

in the 2022 Director Plan until they no longer serve as a non-employee director.

As of the date of each annual shareholder meeting, or

such other date as the Board shall determine, the Company may grant each director a number of RSUs for such year and set the vesting schedule

for the RSUs granted.

Whether and how many RSUs the Company will grant to directors in any year is subject to the sole discretion of the

Company and shall in any event be subject to the 2022 Director Plan’s overall share limits.

The maximum aggregate number of shares

of common stock that may be issued under the 2022 Director Plan is 500 thousand shares.

As of June 30, 2024, 419 thousand shares remain

available to award under the 2022 Director Plan.

The aggregate fair market value of shares underlying RSU compensation that may be issued

as RSU compensation to a director in any year shall not exceed $170.

In addition to the grant of RSUs, the 2022 Director Plan also provides

for the deferral by electing participants of all or part of their cash and/or RSU compensation (in 10% increments) into a deferred RSU

account as RSUs.

Deferred benefits are paid in a lump sum upon the applicable director’s departure from the Board of Directors.

Retirement Benefits

Lifeway has a defined contribution plan which is available

to substantially all full-time employees.

Lifeway has a defined contribution plan which

is available to all full-time employees.

Under the terms of the plan, the Company matches employee contributions under a prescribed formula.

For the three months ended March 31, 2024 and 2023, total contribution expense recognized in the consolidated statements of operations

was $ 193 and $ 150 , respectively.

For the six months ended June 30, 2024 and 2023 total contribution expense recognized in the consolidated statements of operations was

$ 362 and $ 258 , respectively.

For the three months ended June 30, 2024 and 2023, total contribution expense recognized in the consolidated

statements of operations was $ 169 and $ 108 , respectively.

Note 12 - Earnings Per Share

3 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

14 unchanged sentences

Net sales of products by category were as follows

for the three months ended March 31:

for the six months ended June 30:

Schedule of sales of products by category

3 unchanged sentences

ProBugs Kefir

Net sales of products by category were as follows

for the three months ended June 30:

Drinkable Kefir other than ProBugs

Cream and other

Drinkable Yogurt

ProBugs Kefir

Significant Customers

1 unchanged sentence

food industry located within the United States.

Two major customers accounted for approximately 25 % and 24 % of net sales for the three

months ended March 31, 2024 and 2023, respectively.

Two major customers accounted for a total of approximately 26 % and 23 % of net sales for

the six months ended June 30, 2024 and 2023, respectively.

Two major customers accounted for a total of approximately 27 % and 22 % of net

sales for the three months ended June 30, 2024 and 2023, respectively.

Geographic Information

Net sales outside the of the United States represented

less than 1% of total consolidated net sales for the three months ended March 31, 2024 and 2023.

Net sales are determined based on the

destination where the products are shipped by Lifeway.

All the Company’s long-lived assets are in the

United States.

less than 1% of total consolidated net sales for the six months and three months ended June 30, 2024 and 2023.

Net sales are determined

based on the destination where the products are shipped by Lifeway.

All the Company’s long-lived assets are

in the United States.

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 1. Financial Statements