What changed in this filing

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Item 1. Financial Statements

2026-05-14 compared with 2025-11-12 · 137 added, 152 removed, 436 unchanged (40% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

September 30, 2025 and December 31, 2024

March 31, 2026 and December 31, 2025

(In thousands)

September 30, 2025

March 31, 2026

Current assets

Cash and cash equivalents

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

Accounts receivable, net of allowance for credit losses and discounts & allowances of $ 2,530

and $ 1,730 at March 31, 2026 and December 31, 2025, respectively

Inventories, net

8 unchanged sentences

Accrued expenses

Accrued income taxes

Total current liabilities

Line of credit

Operating lease liabilities

Deferred income taxes, net

Other long-term liabilities

Total liabilities

Commitments and contingencies (Note 9)

Stockholders’ equity

4 unchanged sentences

17,274 shares issued;

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

15,282 and 15,232 outstanding

at March 31, 2026 and December 31, 2025, respectively

Treasury stock, at cost

7 unchanged sentences

Consolidated Statements of Operations

For the three and nine months ended September

30, 2025 and 2024

For the three months ended March 31, 2026 and

(In thousands, except per share data)

Three 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

Gain on sale of investments

Gain on sales of investments

Other income (expense), net

Total other income (expense)

Total other (expense) income

Income before provision for income taxes

8 unchanged sentences

Balance, January 1, 2025

Issuance of common stock

Stock-based compensation

Balance, March 31, 2025

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

Issuance of common stock in connection with

stock-based compensation

Stock-based compensation

Balance, September 30, 2024

LIFEWAY FOODS, INC.

4 unchanged sentences

Issuance of common Stock

Equity award settled in cash

Stock-based compensation

Balance, March 31, 2026

Issuance of common stock in connection with stock-based compensation

Stock-based compensation

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)

Nine months ended September 30,

Three months ended March

Cash flows from operating activities:

3 unchanged sentences

Non-cash interest expense

Gain on sale of equipment

Bad debt expense

Gain on sale of investments

8 unchanged sentences

Accrued income taxes

Net cash provided by operating activities

Other long-term liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Purchases of property and equipment

Proceeds from sale of equipment

Proceeds from sale of investments

Net cash used in investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Repayment of note payable

Borrowings under line of credit

Repayments under line of credit

Payment of deferred financing costs

Net cash used in financing activities

Equity award settled in cash

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

6 unchanged sentences

Accrued purchase of property and equipment

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

Right-of-use assets obtained in exchange for lease

See accompanying notes to consolidated financial

49 unchanged sentences

Total advertising expense was $ 3,375 and $ 2,136

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.

for the three months ended March 31, 2026 and 2025, respectively.

Fair value measurements

2 unchanged sentences

The Company received cash proceeds of $ 5,152 and recognized

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

a gain on the sale of investment of $ 3,352 during the three months ended March 31, 2025.

The Company is managed as a single reportable

20 unchanged sentences

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, and our interim periods during the fiscal year ending December 31, 2026.

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

Upon adoption, the impact

of ASU 2023-09 will be limited to certain notes to the Consolidated Financial Statements.

Note 3 – Inventories, net

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 September 30, 2025

Balance at March 31, 2026

Accumulated impairment losses

2 unchanged sentences

Schedule of other intangible assets

September 30, 2025

March 31, 2026

December 31, 2025

5 unchanged sentences

Schedule of future amortization expense on intangible assets

Three months ended December 31, 2025

Nine months ended December 31, 2026

The weighted-average remaining amortization expense

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.

period for the customer relationship and brand name intangible assets is 10.3 and 10.6 years, respectively, as of March 31, 2026.

weighted-average remaining amortization expense period for total intangible assets is 10.5 years as of March 31, 2026.

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 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

September 30, 2025.

On December 29, 2025,

the Company entered into the Sixth Modification to the Amended and Restated Loan and Security Agreement (the “Sixth Modification”)

with its current lender.

The Sixth Modification, provides for, among other things, (i) modification of the Fixed Charge Coverage Ratio

only for the period from December 31, 2025 through June 30, 2027 to exclude the Waukesha, WI unfinanced capital expenditures attributable

to plant optimization and manufacturing capacity expansion as approved by Lender, up to $50,000 (ii) modification of the Change of Control

definition to reflect that specified changes to the Company’s board of directors do not constitute a Change of Control and (iii)

extended the termination date of the Credit Agreement to February 5, 2029.

The remaining material terms and conditions of the Credit Agreement

remain substantially unchanged.

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

As of March 31, 2026, the Company had $ 7,000

outstanding under the Revolving Credit Facility.

The Company had $ 18,000

available for future borrowings under the Revolving Credit Facility as of March 31, 2026.

Lifeway’s interest rate on debt

outstanding under the Revolving Credit Facility as of March 31, 2026 was 5.54 %.

Lifeway was in compliance with the fixed charge

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

coverage ratio and maximum cash flow leverage ratio covenants at March 31, 2026.

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 $ 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.

Total lease expense was $ 62 and $ 37 (including short term leases) for the three months ended March 31, 2026 and 2025, respectively.

Future maturities of lease liabilities were as

1 unchanged sentence

Operating Leases

Three months ended December 31, 2025

Nine months ended December 31, 2026

Total lease payments

1 unchanged sentence

The weighted-average remaining lease term for

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.

its operating leases was 4.3 years as of March 31, 2026.

The weighted average discount rate of its operating leases was 9.70 % as of March

Cash paid for amounts included in the measurement of lease liabilities was $ 45 and $ 19 for the three months ended March 31,

2026 and 2025, respectively.

Note 9 – Commitments and contingencies

Lifeway from time to time, may be involved in

various legal proceedings, claims, disputes, regulatory matters, audits, and proceedings arising in the ordinary course of, or incidental

to, the Company’s business, including commercial disputes, product liabilities, intellectual property matters and employment-related

Lifeway is involved in various legal proceedings,

claims, disputes, regulatory matters, audits, and proceedings arising in the ordinary course of, or incidental, to the Company’s

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 has been incurred and the amount of such loss

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.

10 unchanged sentences

Note 10 – Income taxes

Income taxes were recognized at effective rates of

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.

Income taxes were recognized at effective rates

of 25.3 % and 28.7 % for the three months ended March 31, 2026 and 2025, respectively.

The change in the Company’s effective tax rate

is primarily driven by the increase in pre-tax book income and changes in the amount of non-deductible officer compensation and non-deductible

stock-based compensation expense.

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.

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

12 unchanged sentences

The OBBBA does not have a material impact on

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

our estimated annual effective tax rate.

Management is assessing the impact on cash flows for 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.

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

March 31, 2026, 2.57 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 September 30, 2025,

As of March 31, 2026, 379

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

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In Thousands)

2 unchanged sentences

Stock Options

The following table summarizes stock option activity during the nine

months ended September 30, 2025:

The following table summarizes stock option activity during the three

months ended March 31, 2026:

Schedule of stock option activity

4 unchanged sentences

Outstanding at December 31, 2025

Outstanding at September 30, 2025

Exercisable at September 30, 2025

Outstanding at March 31, 2026

Exercisable at March 31, 2026

Restricted Stock Units

Restricted stock unit awards generally vest based

on the passage of time in approximately three equal installments on each of the first three anniversaries of the grant date.

Certain non-employee

directors have elected to defer receipt of their awards until their departure from the Board of Directors.

Restricted stock unit awards generally vest in

approximately three equal installments on each yearly anniversary of the grant date.

Certain non-employee directors have elected to defer

receipt of their awards until their departure from the Board of Directors.

The following table summarizes restricted stock

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

unit activity during the three months ended March 31, 2026.

Schedule of RSU activity

1 unchanged sentence

(In thousands)

Outstanding at December 31, 2024

Nonvested, at December 31, 2025

Shares issued upon vesting

Outstanding at September 30, 2025

Vested and deferred at September 30, 2025

Shares settled in cash

Nonvested, at March 31, 2026

Earned and deferred at March 31, 2026

Unrecognized compensation expense related to nonvested

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.

restricted stock units was $ 759 as of March 31, 2026 and will be recognized over a weighted average period of 1.1 years.

The grant 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 nine months ended September 30, 2025.

activity during the three months ended March 31, 2026.

Schedule of performance units

Weighted Average Grant Date Fair Value

Weighted Average Grant

Date Fair Value

(In thousands)

1 unchanged sentence

Shares issued upon vesting

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.

Nonvested, at March 31, 2026

Includes 51 thousand

additional shares granted in connection with the vesting of the 2023 award in 2026 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 $ 1,569 as of September 30, 2025 and are expected to be recognized over a weighted average

performance units is estimated to be approximately $ 1,627 as of March 31, 2026 and are expected to be recognized over a weighted average

period of 1.4 years.

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

Deferred Time-Vested and Performance-Based

On March 6, 2026, the Company granted deferred

cash awards, consisting of time-vested and performance-based awards, to the Chief Executive Officer and Chief of Staff.

These awards were

issued as part of the Company’s fiscal-year 2026 long-term incentive program, structured as cash awards to comply with the Company’s

contractual obligations prohibiting the issuance of equity to the Chief Executive Officer and certain of her affiliates.

The deferred time-vested cash awards vest in approximately

three equal installments on each yearly anniversary of the grant date.

The deferred performance-based cash award performance

goals are established upfront and are measured over a cumulative three-year measurement period.

The performance goals are 1) 3-year cumulative

net revenue, and 2) 3-year cumulative adjusted EBITDA.

The target cash awards are weighted 50% on net revenue and

50% on adjusted EBITDA.

Participants may earn more or less than the target cash award, and are bound by minimum and maximum thresholds

of net revenue and adjusted EBITDA.

The deferred performance-based cash awards will be earned and will vest, if at all, after the end

of the three-year measurement period.

Retirement Benefits

3 unchanged sentences

prescribed formula.

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

For the three months ended March 31, 2026 and 2025, total contribution expense recognized in the consolidated statements

of operations was $ 251 and $ 261 , 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

Nine Months Ended

September 30,

(In Thousands)

39 unchanged sentences

Net sales of products by category were as follows

for the nine months ended September 30:

for the three months ended March 31:

Schedule of segment products by category

1 unchanged sentence

Cream and other

ProBugs Kefir

Drinkable Yogurt

Net sales of products by category were as follows

for the three months ended September 30:

Drinkable Kefir other than ProBugs

Cream and other

Drinkable Yogurt

ProBugs Kefir

2 unchanged sentences

food industry located within the United States.

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.

Two major customers accounted for a total of 26 % and 24 % of net sales for the three months

ended March 31, 2026 and 2025, respectively.

Geographic Information

Net sales outside the of the United States represented

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

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

less than 1% of total consolidated net sales for the three months ended March 31, 2026 and 2025.

Net sales are determined based on the

destination where the products are shipped by Lifeway.

All the Company’s long-lived assets are

13 unchanged sentences

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

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

On October 29, 2025, the Company entered into

7 unchanged sentences

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”)

To increase the supply of organic milk available

to the Company for the manufacture of finished goods, the Company purchased 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 799 mature dairy cows during 2025

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.

for $ 2,870 .

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 right 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 $ 824 in prepaid and other current assets and $ 2,046 in other assets as of March 31,

2026 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