What changed in this filing

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Item 1. Financial Statements

2025-11-12 compared with 2025-08-12 · 124 added, 91 removed, 464 unchanged (32% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

June 30, 2025 and December 31, 2024

September 30, 2025 and December 31, 2024

(In thousands)

June 30, 2025

September 30, 2025

Current assets

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses and discounts & allowances of $ 1,760 and $ 1,590 at June 30, 2025 and December 31, 2024, respectively

Accounts receivable, net of allowance for credit losses and discounts & allowances of $ 1,800 and $ 1,590 at September 30, 2025 and December 31, 2024, respectively

Inventories, net

18 unchanged sentences

17,274 shares issued;

15,221 and 15,100 outstanding at June 30, 2025 and December 31, 2024, respectively

15,229 and 15,100 outstanding at September 30, 2025 and December 31, 2024, respectively

Treasury stock, at cost

7 unchanged sentences

Consolidated Statements of Operations

For the three and six months ended June

For the three and nine months ended September

30, 2025 and 2024

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Cost of goods sold

8 unchanged sentences

Interest expense

Gain on sale of property and equipment

Fair value loss on investments

18 unchanged sentences

Balance, June 30, 2024

Issuance of common stock in connection with

stock-based compensation

Stock-based compensation

Balance, September 30, 2024

LIFEWAY FOODS, INC.

9 unchanged sentences

Balance, June 30, 2025

Issuance of common stock in connection with stock-based compensation

Stock-based compensation

Balance, September 30, 2025

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:

19 unchanged sentences

Proceeds from sale of investments

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities:

62 unchanged sentences

Total advertising expense was $ 6,965 and $ 4,131

for the six months ended June 30, 2025 and 2024, respectively.

Total advertising expense was $ 2,282 and $ 1,159 for the three months ended

June 30, 2025 and 2024, respectively.

for the nine months ended September 30, 2025 and 2024, respectively.

Total advertising expense was $ 2,548 and $ 1,599 for the three months

ended September 30, 2025 and 2024, respectively.

Fair value measurements

2 unchanged sentences

The Company received cash proceeds of $ 5,206 and recognized

a gain on the sale of investment of $ 3,407 during the six months ended June 30, 2025.

The Company received cash proceeds of $ 54 and recognized

a gain on the sale of investment of $ 54 during the three months ended June 30, 2025.

a gain on the sale of investment of $ 3,407 during the nine months ended September 30, 2025.

The Company is managed as a single reportable

33 unchanged sentences

Schedule of inventories

September 30,

Finished goods

2 unchanged sentences

Schedule of property, plant and equipment

September 30,

Buildings and improvements

9 unchanged sentences

Accumulated impairment losses

Balance at June 30, 2025

Balance at September 30, 2025

Accumulated impairment losses

2 unchanged sentences

Schedule of other intangible assets

June 30, 2025

September 30, 2025

December 31, 2024

5 unchanged sentences

Schedule of future amortization expense on intangible assets

Six months ended December 31, 2025

Three months ended December 31, 2025

The weighted-average remaining amortization expense

period for the customer relationship and brand name intangible assets is 11.1 and 11.4 years, respectively, as of June 30, 2025.

weighted-average remaining amortization expense period for total intangible assets is 11.3 years as of June 30, 2025.

period for the customer relationship and brand name intangible assets is 10.8 and 11.1 years, respectively, as of September 30, 2025.

The weighted-average remaining amortization expense period for total intangible assets is 11.0 years as of September 30, 2025.

Note 6 – Accrued Expenses

1 unchanged sentence

Schedule of accrued expenses

September 30,

Payroll and incentive compensation

15 unchanged sentences

The Company had no outstanding borrowings at the time of entry into the Fifth Modification.

As of June 30, 2025, the Company had $ 0 outstanding

As of September 30, 2025, the Company had $ 0 outstanding

under the Revolving Credit Facility.

The Company had $ 25,000 available for future borrowings under the Revolving Credit Facility as of

June 30, 2025.

September 30, 2025.

Lifeway was in compliance with the fixed charge

coverage ratio and maximum cash flow leverage ratio covenants at June 30, 2025.

coverage ratio and maximum cash flow leverage ratio covenants at September 30, 2025.

Note 8 – Leases

26 unchanged sentences

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

Total lease expense was $ 95 and $ 77 (including short term leases) for the six months ended June 30, 2025 and 2024, respectively.

Total lease expense was $ 58 and $ 42 (including short term leases) for the three months ended June 30, 2025 and 2024, respectively.

Total lease expense was $ 146 and $ 110 (including short term leases) for the nine months ended September 30, 2025 and 2024, respectively.

Total lease expense was $ 51 and $ 33 (including short term leases) for the three months ended September 30, 2025 and 2024, respectively.

Future maturities of lease liabilities were as

1 unchanged sentence

Operating Leases

Six months ended December 31, 2025

Three months ended December 31, 2025

Total lease payments

1 unchanged sentence

The weighted-average remaining lease term for

its operating leases was 4.8 years as of June 30, 2025.

The weighted average discount rate of its operating leases was 12.27 % as of June

Cash paid for amounts included in the measurement of lease liabilities was $ 47 and $ 46 for the six months ended June 30, 2025

and 2024, respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 28 and $ 22 for the three months ended

June 30, 2025 and 2024, respectively.

its operating leases was 4.8 years as of September 30, 2025.

The weighted average discount rate of its operating leases was 11.60 % as

of September 30, 2025.

Cash paid for amounts included in the measurement of lease liabilities was $ 73 and $ 68 for the nine months ended

September 30, 2025 and 2024, respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 25 and $ 22 for

the three months ended September 30, 2025 and 2024, respectively.

Note 9 – Commitments and contingencies

3 unchanged sentences

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

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

can be reasonably estimated.

10 unchanged sentences

Note 10 – Income taxes

Income taxes were recognized at effective rates

of 28.4 % and 30.0 % for the six months ended June 30, 2025 and 2024, respectively.

Income taxes were recognized at effective rates of

and 29.4 % for the three months ended June 30, 2025 and 2024, respectively.

The change in the Company’s effective tax rate is primarily

driven by changes in the amount of non-deductible officer compensation and non-deductible stock-based compensation expense.

29.1 % and 30.4 % for the nine months ended September 30, 2025 and 2024, respectively.

Income taxes were recognized at effective rates of

30.3 % and 31.2 % for the three months ended September 30, 2025 and 2024, respectively.

The change in the Company’s effective tax

rate is primarily driven by changes in the amount of non-deductible officer compensation and non-deductible stock-based compensation expense.

The Company calculates the provision for income

7 unchanged sentences

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

On July 4, 2025, the One Big Beautiful Bill Act

("OBBBA") was signed into law, which includes a broad range of tax reform provisions that may affect the Company's financial

The OBBBA changes to corporate taxation include, but are not limited to, 100% bonus depreciation for purchases of qualified property,

an elective deduction for domestic research and experimental expenditures, changes to the definition of adjusted taxable income for purposes

of determining the interest deduction limitation under Internal Revenue Code Section 163(j), and a more favorable tax rate on Foreign-Derived

Deduction Eligible Income and income from non-U.S.

subsidiaries (Net CFC Tested Income).

The OBBBA does not have a material impact on

our estimated annual effective tax rate or cash flows in the current fiscal year.

Note 11 – Stock-based and Other Compensation

8 unchanged sentences

The maximum number of shares authorized to be awarded under the Plan is 3.25 million.

June 30, 2025, 2.57 million shares remain available to award under the Plan.

September 30, 2025, 2.61 million shares remain available to award under the Plan.

Lifeway stockholders approved the 2022 Non-Employee

1 unchanged sentence

The maximum aggregate number of shares that may be issued under the 2022 Director Plan is 500 thousand.

As of June 30, 2025, 390

As of September 30, 2025,

389 thousand shares remain available to award under the 2022 Director Plan.

1 unchanged sentence

payments and the related income tax benefit recognized in net income are as follows:

Schedule of compensation expense related to stock-based

Schedule of compensation expense related to stock-based payments

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In Thousands)

2 unchanged sentences

Stock Options

The following table summarizes stock option activity during the six

months ended June 30, 2025:

The following table summarizes stock option activity during the nine

months ended September 30, 2025:

Schedule of stock option activity

4 unchanged sentences

Outstanding at December 31, 2024

Outstanding at June 30, 2025

Exercisable at June 30, 2025

Outstanding at September 30, 2025

Exercisable at September 30, 2025

Restricted Stock Units

4 unchanged sentences

The following table summarizes restricted stock

unit activity during the six months ended June 30, 2025.

unit activity during the nine months ended September 30, 2025.

Schedule of RSU activity

3 unchanged sentences

Shares issued upon vesting

Outstanding at June 30, 2025

Vested and deferred at June 30, 2025

Outstanding at September 30, 2025

Vested and deferred at September 30, 2025

Unrecognized compensation expense related to nonvested

restricted stock units was $ 687 as of June 30, 2025 and will be recognized over a weighted average period of 1.2 years.

The grant date

fair value of the awards is equal to the Company’s closing price on the grant date.

restricted stock units was $ 535 as of September 30, 2025 and will be recognized over a weighted average period of 1.2 years.

date fair value of the awards is equal to the Company’s closing price on the grant date.

Performance Units

13 unchanged sentences

The following table summarizes performance unit

activity during the six months ended June 30, 2025.

activity during the nine months ended September 30, 2025.

Schedule of performance units

3 unchanged sentences

Shares issued upon vesting

Nonvested at June 30, 2025

Nonvested at September 30, 2025

Includes 55 thousand additional shares granted in connection with the vesting of the 2022 award in 2025 due to above-target performance in accordance with the terms of the award.

Unrecognized compensation expense related to nonvested

performance units is estimated to be approximately $ 1,775 as of June 30, 2025 and are expected to be recognized over a weighted average

performance units is estimated to be approximately $ 1,569 as of September 30, 2025 and are expected to be recognized over a weighted average

period of 0.91 years.

1 unchanged sentence

Retirement Benefits

Lifeway has a defined contribution plan

which is available to substantially all full-time employees.

Under the terms of the plan, the Company matches employee contributions

under a prescribed formula.

For the six months ended June 30, 2025 and 2024, total contribution expense recognized in the

consolidated statements of operations was $ 413 and $ 362 , respectively.

For the three months ended June 30, 2025 and 2024, total

contribution expense recognized in the consolidated statements of operations was $ 152 and $ 169 , respectively.

Lifeway has a defined contribution plan which

is available to substantially all full-time employees.

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

prescribed formula.

For the nine months ended September 30, 2025 and 2024, total contribution expense recognized in the consolidated statements

of operations was $ 564 and $ 495 , respectively.

For the three months ended September 30, 2025 and 2024, total contribution expense recognized

in the consolidated statements of operations was $ 151 and $ 133 , respectively.

Note 12 – Earnings Per Share

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

39 unchanged sentences

Net sales of products by category were as follows

for the six months ended June 30:

for the nine months ended September 30:

Schedule of segment products by category

4 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

Cream and other

ProBugs Kefir

Drinkable Yogurt

ProBugs Kefir

Significant Customers

1 unchanged sentence

food industry located within the United States.

Two customers accounted for a total of approximately 25 % and 26 % of net sales for

the six months ended June 30, 2025 and 2024, respectively.

Two customers accounted for a total of 25 % and 27 % of net sales for the

three months ended June 30, 2025 and 2024, respectively.

Two customers accounted for a total of 24 % and 25 % of net sales for the nine months ended

September 30, 2025 and 2024, respectively.

Two customers accounted for a total of 23 % and 24 % of net sales for the three months ended

September 30, 2025 and 2024, respectively.

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, 2025 and 2024.

less than 1% of total consolidated net sales for the nine months and three months ended September 30, 2025 and 2024.

Net sales are determined

16 unchanged sentences

The Right expires at the end of November 4, 2025, or earlier if exercised.

Note 15 – Subsequent Events

Income Tax Legislation

The One Big Beautiful Bill Act (“OBBBA”),

which includes a broad range of tax reform provisions, was enacted on July 4, 2025 and the Company continues to evaluate the impact on

its financial position.

We currently do not expect the OBBB Act to have a material impact on our estimated annual effective tax rate or

cash flows in the current fiscal year.

Organic Milk Supply

To increase the supply of organic milk available

to the Company for the manufacture of finished goods, the Company is purchasing mature dairy cows (or the “herd”) which will

be managed by a third-party dairy facility (the “Dairy”), and expects to enter into a supply and purchase agreement (“SPA”)

On October 29, 2025, the Company entered into

Amendment No.

1 to the Shareholder Rights Agreement (the “Rights Agreement”).

The Rights Agreement was originally scheduled

to expire at the end of November 4, 2025.

The Company entered into the Amendment, which extended the expiration to the end of October

29, 2026 (and made other conforming changes to the Rights Agreement).

No other material changes were made to the Rights Agreement.

Note 15 – Organic Milk Supply

To increase the supply of organic milk available to

the Company for the manufacture of finished goods, the Company is purchasing mature dairy cows (or the “herd”) which will

be managed by a third-party dairy facility (the “Dairy”), and entered into a supply and purchase agreement (“SPA”)

with a COOP (the “COOP”) to purchase the milk produced by the herd.

The Company purchased 402 mature dairy cows during

July 2025 for $694 and will consider further mature dairy cow purchases in the future.

On July 1, 2025, the Company entered into a thirty-nine

month agreement (the “Herd Agreement”) with a third-party Dairy who will manage care of the herd, milk the herd, and sell

the milk to a COOP, with which Lifeway will have a separate supply and purchase agreement.

The Dairy will make monthly payments to Lifeway

over the agreement period in exchange for its right to sell milk produced by the herd to the COOP and has a right to purchase the herd

at the end of the agreement period for a nominal amount.

The Company is currently assessing the appropriate

accounting treatment for the purchase of the herd and agreement with the Dairy.

the third quarter of 2025 for $ 1,335 and plans further mature dairy cow purchases in the future.

As amended in September 2025, the Company

entered into a sixty month agreement (the “Herd Agreement”) with a third-party Dairy who will manage care of the herd,

milk the herd, and sell the milk to the COOP under the SPA, with a right to purchase the herd at the end of the agreement period for

a nominal amount.

Beginning December 1, 2025, the Dairy will make monthly payments to Lifeway over the five year agreement period in

exchange for its right to possess and control the herd, including the rights to sell milk produced by the herd to the COOP.

The herd agreement is treated as a sale of

non-financial assets to a party that is not a customer.

The Company will recognize a sale upon the delivery of each herd to the

Dairy, with interest income recognized over the agreement period.

The Company has recorded $ 184

in prepaid and other current assets and $ 1,151

in other assets as of September 30, 2025 related to the herd agreement with no recorded gain or loss on sale.

The Company records

the purchases of dairy cows as investing outflows, principal payments received as investing inflows and interest income as operating

inflows on the statement of cash flows.

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