What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-13 · 172 added, 132 removed, 493 unchanged (38% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

June 30, 2024 and December 31, 2023

September 30, 2024 and December 31, 2023

(In thousands)

June 30, 2024

September 30, 2024

Current assets

Cash and cash equivalents

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

Accounts receivable, net of allowance for credit losses and discounts & allowances of $ 1,320 and $ 1,270 at September 30, 2024 and December 31, 2023 respectively

Inventories, net

18 unchanged sentences

2,500 shares authorized;

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

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

Common stock, no par value;

1 unchanged sentence

shares issued;

14,791 outstanding at June

30, 2024 and December 31, 2023

14,816 and 14,691 outstanding at September 30, 2024 and December 31, 2023, respectively

Paid-in capital

7 unchanged sentences

Consolidated Statements of Operations

For the three and six months ended June 30,

For the three and nine months ended September

30, 2024 and 2023

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine months Ended

September 30,

Cost of goods sold

26 unchanged sentences

Balance, June 30, 2023

Issuance of common stock in connection with stock-based compensation

Stock-based compensation

Balance, September 30, 2023

LIFEWAY FOODS, INC.

9 unchanged sentences

Balance, June 30, 2024

Issuance of common stock in connection with stock-based compensation

Stock-based compensation

Balance, September 30, 2024

See accompanying notes to consolidated financial

3 unchanged sentences

(In thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

17 unchanged sentences

Proceeds from sales or equipment

Purchase of investments

Net cash used in investing activities

10 unchanged sentences

Accrued purchase of property and equipment

Increase in right-of-use assets and operating lease obligations

See accompanying notes to consolidated financial

11 unchanged sentences

The consolidated financial statements and related notes should be read in conjunction with the consolidated financial

statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

of operations for any interim period are not necessarily indicative of future or annual results.

statements and related notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed by Lifeway Foods,

(together with all of its wholly-owned subsidiaries unless the context otherwise requires, the “Company”).

operations for any interim period are not necessarily indicative of future or annual results.

Principles of consolidation

1 unchanged sentence

the accounts of Lifeway Foods, Inc.

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

All significant intercompany accounts and transactions have been eliminated.

and all its wholly-owned subsidiaries.

All significant intercompany accounts and transactions have

been eliminated.

Note 2 – Summary of Significant Accounting

28 unchanged sentences

Total advertising expense was $ 4,131 and $ 2,884

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.

for the nine months ended September 30, 2024 and 2023, respectively.

Total advertising expense was $ 1,599 and $ 878 for the three months

ended September 30, 2024 and 2023, respectively.

The Company is managed as a single reportable

11 unchanged sentences

to Reportable Segment Disclosures.

The new guidance requires entities to report incremental information about significant segment expenses

The new standard requires entities to report incremental information about significant segment expenses

included in a segment’s profit or loss measure as well as the name and title of the chief operating decision maker.

The new standard

also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually.

The new standard is effective for our annual period ending December 31, 2024 and our interim periods during the fiscal year ending December

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

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.

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 new standard does not affect recognition or measurement in the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU No.

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.

The new standard also eliminates

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

The new standard

is effective for our fiscal year ending December 31, 2025.

The guidance does not affect recognition or measurement in the Company’s

consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03,

Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220):

Disaggregation of Income

Statement Expenses.

The new standard requires additional disclosure of certain amounts included in the expense captions presented on the

Statement of Operations as well as disclosures about selling expenses.

The new standard is effective on a prospective basis, with the

option for retrospective application, for our annual period ending December 31, 2027 and our interim periods during the fiscal year ending

December 31, 2028.

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

Note 3 – Inventories, net

1 unchanged sentence

Schedule of inventories

September 30,

Finished goods

3 unchanged sentences

Schedule of property, plant and equipment

September 30,

Buildings and improvements

9 unchanged sentences

Accumulated impairment losses

Balance at June 30, 2024

Balance at September 30, 2024

Accumulated impairment losses

1 unchanged sentence

Other intangible assets, net consisted of the following:

Schedule of finite-lived intangible assets

June 30, 2024

Schedule of other intangible assets, net

September 30, 2024

December 31, 2023

5 unchanged sentences

Schedule of estimated amortization expense on intangible assets

Six months ended December 31, 2024

Three months ended December 31, 2024

The weighted-average remaining amortization expense

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.

period for the customer relationship and brand name intangible assets is 11.8 and 12.1 years, respectively, as of September 30, 2024.

The weighted-average remaining amortization expense period for total intangible assets is 12.0 years as of September 30, 2024.

Note 6 – Accrued Expenses

Accrued expenses consisted of the following:

Schedule of accrued expenses

Schedule of accrued expense

September 30,

Payroll and incentive compensation

4 unchanged sentences

Note payable consisted of the following:

Schedule of debt

Schedule of note payable

September 30,

Term loan due August 18, 2026.

31 unchanged sentences

Lifeway was in compliance with the fixed charge

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

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

Revolving Credit Facility

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

As of September 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

June 30, 2024.

September 30, 2024.

Note 8 – Leases

The Company leases certain machinery and equipment

with fixed base rent payments and variable costs based on usage.

Remaining lease terms for these leases range from less than one year

to six years.

The Company includes lease extension options, if applicable and reasonably certain to be exercised, in the calculation of

the right-of-use asset and lease liabilities.

Lifeway includes only fixed payments for lease components in the measurement of the right-of-use

asset and lease liability.

Variable lease payments are those that vary because of changes in facts or circumstances occurring after the

commencement date, other than the passage of time.

Company leases certain machinery and equipment with fixed base rent payments and variable costs based on usage.

Remaining lease terms

for these leases range from less than one year to five years.

Company includes lease extension options, if applicable and reasonably certain to be exercised, in the calculation of the right-of-use

asset and lease liabilities.

Lifeway includes only fixed payments for lease components in the measurement of the right-of-use asset and

lease liability.

Variable lease payments are those that vary because of changes in facts or circumstances occurring after the commencement

date, other than the passage of time.

There are no residual value guarantees.

Lifeway does not currently have leases which

meet the finance lease classification as defined under ASC 842.

Lifeway does not currently have leases which meet the finance

lease classification as defined under ASC 842.

Lifeway treats contracts as a lease when the contract

12 unchanged sentences

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

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.

Total lease expense was $ 110 and $ 102 (including short term leases) for the nine months ended September 30, 2024 and 2023, respectively.

Total lease expense was $ 33 and $ 41 (including short term leases) for the three months ended September 30, 2024 and 2023, respectively.

Future maturities of lease liabilities were as

1 unchanged sentence

Operating Leases

Six months ended December 31, 2024

Three months ended December 31, 2024

Total lease payments

1 unchanged sentence

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.

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

The weighted average discount rate of its operating leases was 8.94 % as of

September 30, 2024.

Cash paid for amounts included in the measurement of lease liabilities was $ 68 and $ 70 for the nine months ended September

30, 2024 and 2023, respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 22 and $ 24 for the three

months ended September 30, 2024 and 2023, respectively.

Note 9 – Commitments and contingencies

17 unchanged sentences

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 %

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

of 30.4 % and 32.5 % for the nine months ended September 30, 2024 and 2023, respectively.

Income taxes were recognized at effective rates

of 31.2 % and 30.8 % for the three months ended September 30, 2024 and 2023, respectively.

The Company calculates the provision for income

12 unchanged sentences

in pre-tax income in 2024 compared to 2023.

Unrecognized tax benefits were $ 0 at June 30,

Unrecognized tax benefits were $ 0 at September

30, 2024 and 2023.

11 unchanged sentences

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”)

At September 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.

13 unchanged sentences

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,

As of September 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 six

months ended June 30, 2024:

The following table summarizes stock option activity during the nine

months ended September 30, 2024:

Schedule of stock option activity

exercise price

remaining contractual life

contractual life

intrinsic value

1 unchanged sentence

Outstanding at December 31, 2023

Outstanding at June 30, 2024

Exercisable at June 30, 2024

Outstanding at September 30, 2024

Exercisable at September 30, 2024

Restricted Stock Units

6 unchanged sentences

The following

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

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

Schedule of RSUs activity

4 unchanged sentences

Shares issued upon vesting

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

Outstanding at September 30, 2024

Vested and deferred at September 30, 2024

For the nine months ended September 30, 2024 and

2023 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $ 703 and $ 356 , respectively.

For the nine months ended September 30, 2024 and 2023 tax-related benefits of $ 197 and $ 100 , respectively, were also recognized.

three months ended September 30, 2024 and 2023 total pre-tax stock-based compensation expense recognized in the consolidated statements

of operations was $ 235 and $ 154 , respectively.

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

$ 43 , 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

Future compensation expense related to restricted stock units was $ 793 as of September 30, 2024

and will be recognized on a weighted average basis over the next 1.25 years.

Long-Term Incentive Plan Compensation

9 unchanged sentences

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

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.

For the nine months ended September 30, 2024 and 2023, $ 24 and $ 87

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

For the three months ended

September 30, 2024 and 2023, $ 0 and $ 18 was expensed as stock-based compensation expense in the consolidated statements of operations,

respectively.

As of September 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 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.

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.

For the nine months ended September 30, 2024 and 2023, $ 40 and $ 161

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

For the three months ended

September 30, 2024 and 2023, $ 0 and $ 33 was expensed as stock-based compensation expense in the consolidated statements of operations,

respectively.

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

2022 Equity Award

12 unchanged sentences

The PSU awards do not vest during the three-year measurement period.

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

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

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

For the nine months ended September 30, 2024 and 2023, $ 420 and $ 356 was expensed

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

For the three months ended September 30,

2024 and 2023, $ 132 and $ 116 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

18 unchanged sentences

The PSU awards do not vest during the three-year measurement period.

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

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

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

For the nine months ended September 30, 2024 and 2023, $ 377 and $ 118 was expensed

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

For the three months ended September 30,

2024 and 2023, $ 122 and $ 102 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

18 unchanged sentences

The PSU awards do not vest during the three-year measurement period.

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

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

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

For the nine months ended September 30, 2024 and 2023, $ 334 and $ 0 was expensed

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

For the three months ended September 30,

2024 and 2023, $ 113 and $ 0 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively.

19 unchanged sentences

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.

As of September 30, 2024, 394 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

2 unchanged sentences

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

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.

For the nine months ended September 30, 2024 and 2023 total contribution expense recognized in the consolidated statements of operations

was $ 495 and $ 364 , respectively.

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

consolidated statements of operations was $ 133 and $ 106 , respectively.

Note 12 - Earnings Per Share

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine months Ended

September 30,

(In thousands)

14 unchanged sentences

Net sales of products by category were as follows

for the six months ended June 30:

Schedule of sales of products by category

for the nine months ended September 30:

Schedule of net sales of products by category

Drinkable Kefir other than ProBugs

3 unchanged sentences

Net sales of products by category were as follows

for the three months ended June 30:

for the three months ended September 30:

Drinkable Kefir other than ProBugs

6 unchanged sentences

Two major customers accounted for a total of approximately 25 % 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.

the nine months ended September 30, 2024 and 2023, respectively.

Two major customers accounted for a total of approximately 24 % of net

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

Geographic Information

Net sales outside the of the United States represented

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.

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

Net sales outside

of the United States are determined based on where ownership transfers to the customer.

All the Company’s long-lived assets are

in the United States.

Note 14 – Subsequent Events

On November 4, 2024, the Company entered

into a Shareholder Rights Agreement with Computershare Trust Company, N.A., as rights agent (the “Rights Agreement”).

Pursuant to the Rights Agreement, the Company’s board of directors declared a dividend of one preferred share purchase right

(each a “Right”) for each outstanding share of Company common stock to stockholders of record as of the close of

business on November 18, 2024.

Each Right entitles its holder, subject to the terms of the Rights Agreement, to purchase from the

Company one one-thousandth of one share of Series A Junior Participating Preferred Stock, no par value, of the Company at an

exercise price of $130.00 per Right, subject to adjustment.

Rights will attach to any shares of Company common stock that become

outstanding after November 18, 2024 and prior to the earlier of the Distribution Time (as defined in the Rights Agreement) and the

redemption or expiration of the Rights, and in certain other circumstances described in the Rights

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