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What changed in Lifeway Foods, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Lifeway Foods, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+127 added−119 removedSource: 10-K (2026-03-17) vs 10-K (2025-03-14)

Top changes in Lifeway Foods, Inc.'s 2025 10-K

127 paragraphs added · 119 removed · 93 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe manufacture (directly or through co-packers) and market products under the Lifeway, Fresh Made and GlenOaks Farms brand names, as well as under private labels on behalf of certain customers.
Biggest changePRODUCTS Our primary product is drinkable kefir, a cultured dairy product. Lifeway kefir is tart and tangy, high in protein, calcium and vitamin D. We manufacture (directly or through co-packers) and market products under the Lifeway, Fresh Made and GlenOaks Farms brand names, as well as under private labels on behalf of certain customers.
Our product categories are: · Drinkable kefir, a cultured dairy product sold in a variety of organic and non-organic sizes, flavors, and types; · European-style soft cheeses, including farmer cheese, white cheese, and Sweet Kiss; · Cream and other, which consists primarily of cream, a byproduct of making our kefir; · Drinkable yogurt, sold in a variety of sizes and flavors; · ProBugs, a line of kefir products designed for children; · Other dairy, which consists primarily of Fresh Made butter and sour cream.
Our product categories are: · Drinkable kefir, a cultured dairy product sold in a variety of organic and non-organic sizes, flavors, and milk types; · European-style soft cheeses, including farmer cheese, white cheese, and Sweet Kiss; · Cream and other, which consists primarily of cream, a byproduct of making our kefir; · Drinkable yogurt, sold in a variety of sizes and flavors; · ProBugs, a line of kefir products designed for children; · Other dairy, which consists primarily of Fresh Made butter and sour cream.
Under the retail-direct channel, we sell our products to retailers and deliver it through either the retailers’ carriers or third-party carriers that deliver to such retailers’ distribution centers. In turn, our retailers then deliver the products to their respective stores. Under the retail direct-model, optimal product merchandising, assortment and product presentation are attended to by the retailer.
Under the retail-direct channel, we sell our products to retailers and deliver products through either the retailers’ carriers or third-party carriers that deliver to such retailers’ distribution centers. In turn, our retailers then deliver the products to their respective stores. Under the retail direct-model, optimal product merchandising, assortment and product presentation are attended to by the retailer.
We provide our independent distributors with products at wholesale prices for distribution to their retail accounts. Lifeway believes that the prices at which we sell our products to distributors are competitive with the prices generally paid by distributors for similar products in the markets served.
We provide our independent distributors with products at wholesale prices for distribution to their retail accounts. Lifeway believes that the prices at which we sell our products to distributors are competitive compared with the prices generally paid by distributors for similar products in the markets served.
Sales to our DSD customers represent approximately 2% of our total net sales for the year ended 2024. Distribution outside of the U.S . Lifeway’s primary market is the United States; however, certain distributors based in the United States sell our products to retailers in Mexico, portions of Central and South America and the Caribbean.
Sales to our DSD customers represent approximately 2% of our total net sales for the year ended 2025. Distribution outside of the U.S . Lifeway’s primary market is the United States; however, certain distributors based in the United States sell our products to retailers in Mexico, portions of Central and South America, and the Caribbean.
These buyers could be specialty stores, retail grocery chains, wholesalers, foodservice operators and distributors, drug chains, mass merchandisers, industrial users, schools and universities, or military installations. With support from our direct sales force, brokers may provide other value-added services.
These buyers could be specialty stores, retail grocery chains, wholesalers, foodservice operators and distributors, drug chains, convenience stores, club stores, mass merchandisers, industrial users, schools and universities, or military installations. With support from our direct sales force, brokers may provide other value-added services.
We have a co-packer agreement to manufacture drinkable kefir in Ireland, to serve our European markets. During 2024 and 2023, approximately 6% and 7% of our revenue, respectively, was derived from products manufactured by co-packers. Our domestic co-packer is Safe Quality Food (“SQF”) certified and follows Good Manufacturing Practices (“GMPs”).
We have a co-packer agreement to manufacture drinkable kefir in Ireland, to serve our European markets. During 2025 and 2024, approximately 5% and 6% of our revenue, respectively, was derived from products manufactured by co-packers. Our domestic co-packer is Safe Quality Food (“SQF”) certified and follows Good Manufacturing Practices (“GMPs”).
Sales to our retail-direct customers represent approximately 52% of our total net sales for the year ended 2024. Under the distributor channel, we sell our products to distributors and deliver it through either the distributors’ carriers or third-party carriers that deliver to such distributors’ designated warehouses. In turn, our distributors then sell and ship our products to their retail customers.
Sales to our retail-direct customers represent approximately 51% of our total net sales for the year ended 2025. Under the distributor channel, we sell our products to distributors and deliver products through either the distributors’ carriers or third-party carriers that deliver to such distributors’ designated warehouses. In turn, our distributors then sell and ship our products to their retail customers.
Sales Incentives and Trade Promotion Allowances Lifeway offers various sales incentives and trade promotional programs to its retailer and distributor customers from time to time in the normal course of business. These sales incentives and trade promotion programs include rebates, in-store display and demo allowances, allowances for non-saleable product, coupons, and other trade promotional activities.
Sales Incentives and Trade Promotion Allowances Lifeway offers various sales incentives and trade promotional programs to its retailer and distributor customers from time to time in the normal course of business. These sales incentives and trade promotion programs include rebates, in-store display and demo allowances, allowances for non-saleable product, every day low price (“EDLP”) coupons, and other trade promotional activities.
Additionally, Lifeway products reach consumers in France, Ireland, and the Middle East under third party co-manufacturing agreements and in-country broker and distributor arrangements. Sales distributed outside the United States represented approximately 3% of net sales for the year ended 2024.
Additionally, Lifeway products reach consumers in France, Ireland, and the Middle East under third party co-manufacturing agreements and in-country broker and distributor arrangements. Sales distributed outside the United States represented 7% of net sales for the year ended 2025.
SQF certification provides an independent and external validation that a product, process or service complies with international, regulatory and other specified standards. SEASONALITY Lifeway’s business is not seasonal. EMPLOYEES As of December 31, 2024, we employed 291 full-time and one part-time employee, of which 100 were members of a union bargaining unit in Illinois.
SQF certification provides an independent and external validation that a product, process or service complies with international, regulatory and other specified standards. SEASONALITY Lifeway’s business is not seasonal. EMPLOYEES As of December 31, 2025, we employed 293 full-time and two part-time employees, of which 97 were members of a union bargaining unit in Illinois.
MAJOR CUSTOMERS During the year ended December 31, 2024, two customers accounted for a total of 25% of our total net sales. Two customers accounted for a total of 26% of net accounts receivable as of December 31, 2024.
MAJOR CUSTOMERS During the year ended December 31, 2025, two customers accounted for a total of 24% of our total net sales. Two customers accounted for a total of 24% of net accounts receivable as of December 31, 2025.
PRODUCTION Manufacturing During 2024 and 2023, approximately 94% and 93% our revenue, respectively, was derived from products manufactured at our own facilities.
PRODUCTION Manufacturing During 2025 and 2024, approximately 95% and 94% of our revenue, respectively, was derived from products manufactured at our own facilities.
Sales to our distributor customers represent approximately 46% of our total net sales for year ended 2024.
Sales to our distributor customers represent approximately 47% of our total net sales for year ended 2025.
Net sales of products by category were as follows for the years ended December 31: 2024 2023 In thousands $ % $ % Drinkable Kefir other than ProBugs $ 153,493 82% $ 127,726 80% Cheese 14,554 8% 13,781 9% Cream and other 8,299 4% 7,382 4% Drinkable Yogurt 5,619 3% 6,236 4% Probugs Kefir 3,421 2% 3,429 2% Other dairy 1,434 1% 1,569 1% Net Sales $ 186,820 100% $ 160,123 100% 1 Product innovation and new product development Lifeway is committed to maintaining its positions as the leading producer of kefir and a recognized leader in the market for probiotic products.
Net sales of products by category were as follows for the years ended December 31: 2025 2024 In thousands $ % $ % Drinkable Kefir other than ProBugs $ 181,423 85% $ 153,493 82% Cheese 16,571 8% 14,554 8% Cream and other 8,693 4% 8,299 4% Drinkable Yogurt 2,284 1% 5,619 3% Probugs Kefir 2,214 1% 3,421 2% Other dairy 1,311 1% 1,434 1% Net Sales $ 212,496 100% $ 186,820 100% 1 Product innovation and new product development Lifeway is committed to maintaining its position as the leading producer of kefir and a recognized leader in the market for probiotic products.
Lifeway has grown to become the largest producer and marketer of kefir in the U.S. and an important player in the broader market spaces of probiotic-based products and natural, “better for you” foods. PRODUCTS Our primary product is drinkable kefir, a cultured dairy product. Lifeway kefir is tart and tangy, high in protein, calcium and vitamin D.
Lifeway has grown to become the largest producer and marketer of kefir in the U.S. and an important player in the broader market spaces of probiotic-based products and natural, “better for you” foods. Unless otherwise noted herein, all amounts in this Form 10-K are in thousands, except per share numbers.
Removed
Thanks to our exclusive blend of kefir cultures, each cup of our flagship low fat kefir contains 12 live and active cultures and 25 to 30 billion beneficial CFU (Colony Forming Units) at the time of manufacture.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe are also subject to federal laws and regulations relating to our organic products and production. For example, as required by the National Organic Program (“NOP”), we rely on third parties to certify certain of our products and production locations as organic.
Biggest changeFor example, as required by the National Organic Program (“NOP”), we rely on third parties to certify certain of our products and production locations as organic. Regulations and formal and informal positions taken by the NOP pursuant to the Organic Foods Production Act of 1990, which created the NOP, are subject to continued review and scrutiny.
The loss of any large customer, the reduction of purchasing levels, or the cancellation of any business from a large customer for an extended period of time could negatively affect our sales and results of operations. 14 We rely on sales made by or through our independent distributors to customers. Distributors purchase directly for their own account for resale.
The loss of any large customer, the reduction of purchasing levels, or the cancellation of any business from a large customer for an extended period of time could negatively affect our sales and results of operations. We rely on sales made by or through our independent distributors to customers. Distributors purchase directly for their own account for resale.
If individuals are elected or appointed to our Board with a specific agenda, the ability of our Board to function effectively could be adversely affected, which could in turn adversely affect our ability to effectively and timely implement our strategic plan and create additional value for our stockholders, and adversely affect our business, operating results and financial condition. 12 Litigation regarding the Stockholders’ Agreement may be protracted and costly.
If individuals are elected or appointed to our Board with a specific agenda, the ability of our Board to function effectively could be adversely affected, which could in turn adversely affect our ability to effectively and timely implement our strategic plan and create additional value for our shareholders, and adversely affect our business, operating results and financial condition. 12 Litigation regarding the Stockholders’ Agreement may be protracted and costly.
If customers choose to delay, defer or reduce transactions with us or do business with our competitors instead of us, then our business, financial condition and operating results would be adversely affected. We may be required to incur significant legal fees and other expenses related to stockholder actions, and the attention of our management may be diverted by such actions.
If customers choose to delay, defer or reduce transactions with us or do business with our competitors instead of us, then our business, financial condition and operating results would be adversely affected. We may be required to incur significant legal fees and other expenses related to shareholder actions, and the attention of our management may be diverted by such actions.
These proposals, similar proposals that we may receive in the future and any other actions by stockholders or others relating to a potential change of control transaction involving the Company could interfere with our ability to execute our strategic plans, make it more difficult to attract and retain qualified executives and employees, cause management distraction, require us to utilize more resources than anticipated towards review of strategic alternatives and result in the loss of potential business opportunities, any of which could have a material negative impact on the Company.
Proposals to acquire the Company that we may receive in the future and any other actions by stockholders or others relating to a potential change of control transaction involving the Company could interfere with our ability to execute our strategic plans, make it more difficult to attract and retain qualified executives and employees, cause management distraction, require us to utilize more resources than anticipated towards review of strategic alternatives and result in the loss of potential business opportunities, any of which could have a material negative impact on the Company.
Some of our competitors, such as Danone, General Mills, Chobani, Hain Celestial Group, and Nestle, have substantial financial and marketing resources.
Some of our competitors, such as Danone, General Mills, Chobani, Hain Celestial Group, Horizon and Nestle, have substantial financial and marketing resources.
The actions of certain of our stockholders could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation and adversely impact our stock price. We value constructive input from investors and regularly engage in dialogue with our stockholders regarding strategy and performance.
The actions of certain of our shareholders could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation and adversely impact our stock price. We value constructive input from investors and regularly engage in dialogue with our shareholders regarding strategy and performance.
Further, if we are found to be in violation of applicable laws and regulations in these areas, we could be subject to civil remedies, including third-party claims for property damage or personal injury, fines, injunctions, recalls, cleanup costs, and other civil sanctions, as well as potential criminal sanctions, any of which could have a material adverse effect on our business. 17 ITEM 1B.
Further, if we are found to be in violation of applicable laws and regulations in these areas, we could be subject to civil remedies, including third-party claims for property damage or personal injury, fines, injunctions, recalls, cleanup costs, and other civil sanctions, as well as potential criminal sanctions, any of which could have a material adverse effect on our business.
Although the Company does not have any indebtedness outstanding as of December 31, 2024, the Company may incur indebtedness in the future. Outstanding debt obligations could adversely affect our financial condition and limit our ability to successfully implement our business strategy.
Although the Company does not have any indebtedness outstanding as of December 31, 2025, the Company may incur indebtedness in the future. Outstanding debt obligations could adversely affect our financial condition and limit our ability to successfully implement our business strategy.
These perceived uncertainties may also be exploited by our competitors or other stockholders, which could result in lost business opportunities and make it more difficult to execute on our long-term strategic plan.
These perceived uncertainties may also be exploited by our competitors or other shareholders, which could result in lost business opportunities and make it more difficult to execute on our long-term strategic plan.
Further, Danone’s proposals, similar future proposals that we may receive in the future or any actual or perceived actions by our stockholders or others relating to a potential transaction involving the Company may cause significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the Company’s underlying fundamentals and prospects.
Any proposals that we may receive in the future or any actual or perceived actions by our stockholders or others relating to a potential transaction involving the Company may cause significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the Company’s underlying fundamentals and prospects.
Our loan agreements contain certain restrictions and requirements that among other things: · require us to maintain a quarterly fixed charge coverage ratio and minimum working capital ratio; · limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions, to fund growth or for general corporate purposes; · limit our future ability to refinance our indebtedness on terms acceptable to us or at all; · limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan; and · impose on us financial and operational restrictions.
Our loan agreement contains certain restrictions and requirements that among other things: · require us to maintain a quarterly fixed charge coverage ratio and minimum working capital ratio; · limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions, to fund growth or for general corporate purposes; · limit our future ability to refinance our indebtedness on terms acceptable to us or at all; · limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan; and · impose on us financial and operational restrictions.
Such stockholder action could give rise to perceived uncertainties as to our future, adversely affect our relationships with our employees, customers or suppliers and make it more difficult to attract and retain qualified personnel and business partners.
Such shareholder action could give rise to perceived uncertainties as to our future, adversely affect our relationships with our employees, customers or suppliers and make it more difficult to attract and retain qualified personnel and business partners.
Stockholder actions, including potential proxy contests, require significant time and attention by management and our Board, potentially interfering with our ability to execute our strategic plan.
Shareholder actions, including potential proxy contests, require significant time and attention by management and our Board, potentially interfering with our ability to execute our strategic plan.
Conventional and organic milk, our primary raw material, is an agricultural commodity that is subject to price fluctuations. Conventional milk prices were higher in fiscal 2024 than the prior year, and there can be no assurance that such prices will remain at these levels in the future.
Conventional and organic milk, our primary raw material, is an agricultural commodity that is subject to price fluctuations. Conventional milk prices were lower in fiscal 2025 than the prior year, and there can be no assurance that such prices will remain at these levels in the future.
In addition, the marketing and advertising of our products could make us the target of claims relating to alleged false or deceptive advertising under federal, state, and foreign laws and regulations, and we may be subject to initiatives that limit or prohibit the marketing and advertising of our products to children.
In addition, the marketing and advertising of our products could make us the target of claims relating to alleged false or deceptive advertising under federal, state, and foreign laws and regulations, and we may be subject to initiatives that limit or prohibit the marketing and advertising of our products to children. 16 We are also subject to federal laws and regulations relating to our organic products and production.
Our business depends heavily on raw materials and other inputs in addition to conventional and organic raw milk, such as sweeteners, diesel fuel, packaging material, resin, and other commodities. Our raw materials are generally sourced from third-party suppliers, and we are not assured of continued supply, pricing, or exclusive access to raw materials from any of these suppliers.
Our business depends heavily on raw materials and other inputs in addition to conventional and organic raw milk, such as cultures, flavoring, packaging material, and other commodities. Our raw materials are generally sourced from third-party suppliers, and we are not assured of continued supply, pricing, or exclusive access to raw materials from any of these suppliers.
The consolidation of retail customers also increases the risk that a significant adverse impact on their business could have a corresponding material adverse impact on our business. Two of our customers together accounted for 25% of our net sales in the fiscal year ended December 31, 2024.
The consolidation of retail customers also increases the risk that a significant adverse impact on their business could have a corresponding material adverse impact on our business. 14 Two of our customers together accounted for 24% of our net sales in the fiscal year ended December 31, 2025.
In 2024, costs to us increased modestly due to inflationary price increases. However, for market conditions or competitive reasons, our customer pricing actions may lag input cost changes, or we may not be able to pass along the full effect of increases in raw materials and other input costs as we incur them.
For market conditions or competitive reasons, our customer pricing actions may lag input cost changes, or we may not be able to pass along the full effect of increases in raw materials and other input costs as we incur them.
If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to those of our common stock, and, in the case of equity and equity-linked securities, our existing stockholders may experience dilution.
If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to those of our common stock, and, in the case of equity and equity-linked securities, our existing stockholders may experience dilution. 9 As of December 31, 2025, we had $0 outstanding under the Revolving Credit Facility.
It is unlikely that any person interested in acquiring Lifeway will be able to do so without obtaining the consent of some combination of Julie Smolyansky, Edward Smolyansky, Ludmila Smolyansky and Danone. The interests of the Smolyansky family members and Danone could differ from those of other stockholders in ways that could be adverse to the interests of other stockholders.
It is unlikely that any person interested in acquiring Lifeway will be able to do so without obtaining the consent of some combination of Julie Smolyansky, Edward Smolyansky, Ludmila Smolyansky, Danone and Divisadero.
We may be subject to continued or similar activism in the future, which could cause us to incur significant expense, hinder execution of our business strategy and adversely impact the market price of Company common stock.
We may be subject to shareholder activism in the future, including nominations of candidates for election to our Board to replace current Board members or other shareholder proposals, which could cause us to incur significant expense, hinder execution of our business strategy and adversely impact the market price of Company common stock.
Our four largest shareholders, Julie Smolyansky (the Company’s chief executive officer and the daughter of our founder), Edward Smolyansky (our former chief operations officer and son of our founder), Ludmila Smolyansky (a former member of our Board and the widow of our founder) and Danone, beneficially owned approximately 18%, 21%, 8% and 23% of the Company’s outstanding common stock, respectively, as of December 31, 2024.
Our five largest shareholders, Julie Smolyansky (the Company’s chief executive officer and the daughter of our founder), Edward Smolyansky (our former chief operations officer and son of our founder), Ludmila Smolyansky (a former member of our Board and the widow of our founder), Danone North America PBC and its affiliates (collectively, “Danone”) and Divisadero, beneficially owned approximately 18%, 20%, 6%, 23% and 9% of the Company’s outstanding common stock, respectively, as of December 31, 2025.
Additionally, a successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative effect on our results of operations.
Additionally, a successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative effect on our results of operations. 11 A substantial portion of our common stock is held by members of the Smolyansky family, Danone and Divisadero Street Partners, L.P.
Additionally, concentration of ownership could also harm the market price of our common stock if investors perceive disadvantages in owning stock in a company of which a substantial portion of common stock is beneficially owned by a small number of stockholders. 11 Our business could be adversely affected as a result of proposals to acquire the Company or other actions taken by stockholders related to a possible acquisition of the Company.
Additionally, concentration of ownership could also harm the market price of our common stock if investors perceive disadvantages in owning stock in a company of which a substantial portion of common stock is beneficially owned by a small number of stockholders.
The organic ingredients we use in some of our products are less plentiful and available from a fewer number of suppliers than their conventional counterparts.
The organic ingredients we use in some of our products are less plentiful and available from a fewer number of suppliers than their conventional counterparts. Competition with other manufacturers in the procurement of organic product ingredients may increase in the future if consumer demand for organic products exceeds the supply.
The Rights Agreement expires on November 4, 2025, unless earlier terminated or the Rights are redeemed or exchanged by the Board. Additional information regarding the Rights Agreement is contained in the Company’s Current Report on Form 8-K filed with the SEC on November 5, 2024.
Additional information regarding the Rights Agreement and the Amendment are contained in the Company’s Current Report on Form 8-K filed with the SEC on November 5, 2024 and the Company’s Current Report on Form 8-K filed with the SEC on October 30, 2025, respectively.
Competition with other manufacturers in the procurement of organic product ingredients may increase in the future if consumer demand for organic products exceeds the supply. 16 Our business is subject to various food, environmental, and health and safety laws and regulations, which may increase our compliance costs, subject us to liabilities, or otherwise adversely affect our business.
Our business is subject to various food, environmental, and health and safety laws and regulations, which may increase our compliance costs, subject us to liabilities, or otherwise adversely affect our business.
A substantial portion of our common stock is held by members of the Smolyansky family and Danone, and they have the ability to control the outcome of matters submitted for stockholder approval.
(“Divisadero”), and they have the ability to control the outcome of matters submitted for stockholder approval.
Our Board and management team are committed to acting in the best interests of all of our stockholders. Two of the Company’s largest stockholders, Edward Smolyansky and Ludmila Smolyansky, filed a Schedule 13D/A with the U.S.
Our Board and management team are committed to acting in the best interests of all of our shareholders.
The litigation regarding the Stockholders’ Agreement may be protracted and expensive, and under certain circumstances, the Company may be required to reimburse Danone for its legal fees incurred in connection with such litigation.
If such litigation is recommenced, it may be protracted and expensive, and under certain circumstances, the Company may be required to reimburse Danone for its legal fees incurred in connection with such litigation. Our shareholder rights plan includes terms and conditions that could discourage a takeover or other transaction that stockholders may consider favorable.
RISKS RELATED TO OUR INDUSTRY The consolidation of our customers or the loss of any of our largest customers could negatively impact our sales and results of operations. Customers, such as supermarkets and food distributors, continue to consolidate.
Any material disruption to our supply chain or competitive disadvantage resulting from third-party AI adoption could adversely affect our business, financial condition, and results of operations. RISKS RELATED TO OUR INDUSTRY The consolidation of our customers or the loss of any of our largest customers could negatively impact our sales and results of operations.
There can be no assurance that any such transaction will be completed now or in the future. We have had to, and may continue to be required to, incur fees and other expenses related to Danone’s proposals, including for third-party advisors.
There can be no assurance that any such transaction will be completed now or in the future.
As previously disclosed by the Company, the Company believes that the Stockholders’ Agreement is void ab initio and unenforceable. Danone has filed suit in the Circuit Court of Cook County, Law Division, in part, to enforce the Stockholders’ Agreement.
Danone has filed suit in the Circuit Court of Cook County, Law Division, in part, to enforce the Stockholders’ Agreement. Pursuant to the Cooperation Agreement, the parties have jointly sought a stay of the pending litigation relating.
Removed
Although the Company believes that the Stockholders’ Agreement, dated as of October 1, 1999 (and as amended on December 24, 1999 and as extended in certain respects in eight extensions executed by certain of the parties to the Stockholders’ Agreement, the last of which was dated as of December 31, 2009 (the “Stockholders’ Agreement”)), by and among Danone North America Public Benefit Corporation or an affiliate thereof (collectively, “Danone”), Lifeway and certain Lifeway shareholders, is invalid, the Stockholders’ Agreement purports to limit the Company’s ability to issue shares of Company common stock or convertible securities outside of specified, limited situations without providing Danone a right of first refusal, in the case of issuances of Company common stock, or first obtaining Danone’s prior consent, in the case of issuances of securities convertible into Company common stock in excess of a specified amount.
Added
The interests of the Smolyansky family members, Danone and Divisadero could differ from those of other stockholders in ways that could be adverse to the interests of other stockholders.
Removed
If the Stockholders’ Agreement is valid or if third parties are unwilling to participate in transactions due to the uncertainty relating to the validity of the Stockholders’ Agreement, the Company may not be able to raise additional funds through the issuance of equity or equity-linked securities. 9 As of December 31, 2024, we had $0 outstanding under the Revolving Credit Facility and note payable.
Added
Our business could be adversely affected as a result of proposals to acquire the Company or other actions taken by stockholders related to a possible acquisition of the Company.
Removed
In September 2024, Danone publicly made an unsolicited proposal to acquire all of the shares of Company common stock that it did not already own for $25.00 per share of Company common stock, subject to due diligence, among other things. Then in November 2024, Danone revised its proposal to $27.00 per share of Company common stock.
Added
The Rights Agreement was originally scheduled to expire on November 4, 2025. On October 29, 2025, the Company and the Rights Agent entered into the Amendment No. 1 to Shareholder Rights Agreement (the “Amendment”) which extended the scheduled expiration of the Rights Agreement to October 29, 2026, unless earlier terminated or the Rights are redeemed or exchanged by the Board.
Removed
Our Board carefully considered the initial proposal and the revised proposal in consultation with the Company’s independent financial and legal advisors, and ultimately determined that both proposals substantially undervalued the Company and were not in the best interests of the Company or its stockholders or other stakeholders.
Added
The increasing use of artificial intelligence technologies by our competitors, customers, and suppliers could impact our competitive position. Artificial intelligence (“AI”) and machine learning technologies are rapidly evolving and are increasingly being adopted across industries, including in manufacturing. Our competitors, customers, and suppliers may adopt AI technologies that could affect our competitive position.
Removed
Securities and Exchange Commission (the “SEC”) on August 14, 2024 announcing their intention, among other things, to nominate seven director candidates for election to our Board and replace seven of the eight members of our Board.
Added
If we fail to effectively adopt and integrate AI technologies, or if our competitors do so more successfully, we could experience a decline in our competitive position. We may also face risks from AI technologies used by third parties, including vendors, customers, and service providers, over which we have limited control.
Removed
Edward and Ludmila Smolyansky subsequently filed a preliminary consent solicitation statement with the SEC in furtherance of this objective, and they have made public statements critical of our Board, management and strategy, repeatedly called for the sale of the Company and publicly supported a sale of the Company for $25 per share.
Added
Customers, such as supermarkets and food distributors, continue to consolidate.
Removed
A contested election with respect to the Company’s directors could require us to incur substantial legal, public relations and other advisory fees and proxy solicitation expenses.
Removed
Further, we may choose to initiate, or may become subject to, litigation as a result of proposals by Edward and Ludmila Smolyansky or other stockholders or proxy contests or matters relating thereto, which would serve as a further distraction to our Board and management and could require us to incur significant additional costs.
Removed
Further, the uncertainty relating to the status of the Stockholders’ Agreement may cause third parties to refuse to engage in activities that are purportedly prohibited by the Stockholders’ Agreement. Our shareholder rights plan includes terms and conditions that could discourage a takeover or other transaction that stockholders may consider favorable.
Removed
Regulations and formal and informal positions taken by the NOP pursuant to the Organic Foods Production Act of 1990, which created the NOP, are subject to continued review and scrutiny.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Chief Financial Officer presents updates to the Audit and Corporate Governance Committee and the full Board of Directors, on, among other things, the Company’s cyber risks and threats, the status of projects to strengthen the Company’s information security systems, and the emerging threat landscape.
Biggest changeThe Chief Financial Officer and our Director of IT present updates to the Audit and Corporate Governance Committee and the full Board of Directors , on, among other things, the Company’s cyber risks and threats, the status of projects to strengthen the Company’s information security systems, and the emerging threat landscape. 17 Management Our Chief Financial Officer is responsible for management oversight of our information security program and controls, which includes cybersecurity risk management.
The Director has extensive experience in the information technology field, and cybersecurity knowledge and skills gained through relevant experiences. The Director and Chief Financial Officer regularly review potential risks and measures implemented by the Company to identify and mitigate cyber security risks. 18
The Director and Chief Financial Officer regularly review potential risks and measures implemented by the Company to identify and mitigate cyber security risks.
Management Our Chief Financial Officer is responsible for management oversight of our information security program and controls, which includes cybersecurity risk management. Our Director of IT (“Director”) is responsible for the development, operation, and maintenance of our information security program and controls.
Our Director of IT is responsible for the development, operation, and maintenance of our information security program and controls. The Director of IT has extensive experience in the information technology field, and cybersecurity knowledge and skills gained through relevant experiences.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are engaged in litigation matters arising in the ordinary course of business. While the results of litigation and claims cannot be predicted with certainty, Lifeway believes that no such matter is reasonably likely to have a material adverse effect on our financial position or results of operations.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are engaged in litigation matters arising in the ordinary course of business. While the results of litigation and claims cannot be predicted with certainty, Lifeway believes that no such matter is reasonably likely to have a material adverse effect on our financial position or results of operations. ITEM 4.
Added
MINE SAFETY DISCLOSURES Not applicable. 18 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is listed on the Nasdaq Global Market under the symbol “LWAY.” Trading commenced on March 29, 1988. As of March 7, 2025, there were approximately 53 shareholders of record of our common stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is listed on the Nasdaq Global Market under the symbol “LWAY.” Trading commenced on March 29, 1988. As of March 7, 2026, there were 49 shareholders of record of our common stock.
Dividend Policy Lifeway does not routinely declare and pay dividends. From time to time however our Board of Directors may declare and pay dividends depending on our operating cash flow, financial condition, capital requirements and such other factors as the Board of Directors may deem relevant. There were no dividends declared or paid in fiscal 2024 or 2023.
Dividend Policy Lifeway does not routinely declare and pay dividends. From time to time however our Board of Directors may declare and pay dividends depending on our operating cash flow, financial condition, capital requirements and such other factors as the Board of Directors may deem relevant. There were no dividends declared or paid in fiscal 2025 or 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis proactive planning has allowed the Company to meet increased demand. 21 Results of Operations Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023 (in thousands) The following table presents certain information concerning our financial results, including information presented as a percentage of consolidated net sales: Year Ended December 31, 2024 2023 $ % $ % Net sales 186,820 100.0% 160,123 100.0% Cost of goods sold 135,400 72.5% 115,060 71.9% Depreciation expense 2,846 1.5% 2,622 1.6% Total cost of goods sold 138,246 74.0% 117,682 73.5% Gross profit 48,574 26.0% 42,441 26.5% Selling expenses 14,743 7.9% 11,776 7.4% General & administrative expenses 19,439 10.4% 13,130 8.2% Amortization expense 540 0.3% 540 0.3% Total operating expenses 34,722 18.6% 25,446 15.9% Income from operations 13,852 7.4% 16,995 10.6% Other income (expense): Interest expense (105 ) (0.1% ) (384 ) (0.2% ) Gain (loss) on sale of property and equipment (8 ) 0.0% 34 0.0% Other income 230 0.1% 4 0.0% Total other income (expense) 117 0.0% (346 ) (0.2% ) Income before provision for income taxes 13,969 7.4% 16,649 10.4% Provision for income taxes 4,944 2.6% 5,282 3.3% Net income 9,025 4.8% 11,367 7.1% Net Sales Net sales were $186,820 for the year ended December 31, 2024, an increase of $26,697 or 16.7% versus prior year.
Biggest changeResults of Operations Comparison of Year Ended December 31, 2025 to Year Ended December 31, 2024 (in thousands) The following table presents certain information concerning our financial results, including information presented as a percentage of consolidated net sales: Year Ended December 31, 2025 2024 $ % $ % Net sales 212,496 100.0% 186,820 100% Cost of goods sold 150,850 71.0% 135,400 72.5% Depreciation expense 3,440 1.6% 2,846 1.5% Total cost of goods sold 154,290 72.6% 138,246 74.0% Gross profit 58,206 27.4% 48,574 26.0% Selling expense 19,891 9.4% 14,743 7.9% General & administrative expense 21,603 10.2% 19,439 10.4% Amortization expense 540 0.3% 540 0.3% Total operating expenses 42,034 19.9% 34,722 18.6% Income from operations 16,172 7.5% 13,852 7.4% Other income (expense): Interest expense (77 ) (0.0% ) (105 ) (0.1% ) Fair Value loss on investment (95 ) (0.0% ) – 0.0% Gain on sale of investment 3,407 1.6% – 0.0% Gain (loss) on sale of equipment – (0.0% ) (8 ) 0.0% Other income (expense), net 279 0.1% 230 0.1% Total other income (expense) 3,514 1.7% 117 0.0% Income before provision for income taxes 19,686 9.2% 13,969 7.4% Provision for income taxes 5,827 2.7% 4,944 2.6% Net income 13,859 6.5% 9,025 4.8% 22 Net Sales Net sales were $212,496 for the year ended December 31, 2025, an increase of $25,676 or 13.7% versus prior year.
Future business results may affect deferred tax liabilities or the valuation of deferred tax assets over time. Recent Accounting Pronouncements . See Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information regarding recent accounting pronouncements. ITEM 7A.
Future business results may affect deferred tax liabilities or the valuation of deferred tax assets over time. Recent Accounting Pronouncements . See Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information regarding recent accounting pronouncements. 27 ITEM 7A.
The Company’s most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, and income tax liabilities) as well as expenditures for property, plant, and equipment.
The Company’s most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, and tax liabilities) as well as expenditures for property, plant and equipment.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the financial condition and results of operations as of and for the years ended December 31, 2024 and 2023 should be read in conjunction with the audited consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the financial condition and results of operations as of and for the years ended December 31, 2025 and 2024 should be read in conjunction with the audited consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K.
Changes in managements estimate of the three-year cumulative milestone achievements are recognized as change in management estimate in a subsequent period. We do not estimate forfeitures in measuring the grant date fair value of RSUs and PSUs, but rather account for forfeitures as they occur. Forfeitures have historically been immaterial.
Changes in management’s estimate of the three-year cumulative milestone achievements are recognized as change in management estimate in a subsequent period. We do not estimate forfeitures in measuring the grant date fair value of RSUs and PSUs but rather account for forfeitures as they occur. Forfeitures have historically been immaterial.
Selling expenses as a percentage of net sales increased to 7.9% during the year ended December 31, 2024 from 7.4% during the same period in 2023. The increase is primarily a result of our continued investments in marketing activities to drive brand awareness and sales volumes.
Selling expenses as a percentage of net sales increased to 9.4% during the year ended December 31, 2025 from 7.9% during the same period in 2024. The increase is primarily a result of our continued investments in marketing activities to drive brand awareness and sales volumes.
The Company granted RSU and PSU awards during 2024 to employees. The PSU awards are contingent upon the achievement of strategic milestones during a three-year measurement period. The expense recognition of PSU awards therefore requires management to make judgements and estimates at the end of each reporting period as to the cumulative three-year milestone achievements.
The Company granted RSU and PSU awards during 2025 to employees. The PSU awards are contingent upon the achievement of strategic milestones during a three-year measurement period. The expense recognition of PSU awards therefore requires management to make judgements and estimates at the end of each reporting period as to the cumulative three-year milestone achievements.
Share-based compensation Certain employees and non-employee directors receive various forms of share-based payment awards, and we recognize compensation expense for these awards based on their grant date fair values. The grant date fair value of Restricted Stock Units (“RSUs”) and Performance Share Unit (“PSUs”) awards is equal to the Company’s closing stock price on the grant date.
Share-based compensation Certain members of management and non-employee directors receive various forms of share-based payment awards, and we recognize compensation expense for these awards based on their grant date fair values. The grant date fair value of Restricted Stock Units (“RSUs”) and Performance Share Unit (“PSUs”) awards is equal to the Company’s closing stock price on the grant date.
If additional borrowings are needed, $5,000 was available under the Revolving Credit Facility as of December 31, 2024 (see Note 7, Debt). We are in compliance with the terms of the Credit Agreement and expect to meet foreseeable financial requirements.
If additional borrowings are needed, $25,000 was available under the Revolving Credit Facility as of December 31, 2025 (see Note 7, Debt). We are in compliance with the terms of the Credit Agreement and expect to meet foreseeable financial requirements.
The process for analyzing trade promotion programs could impact our results of operations and trade spending accruals depending on how actual results of the programs compare to original estimates. As of December 31, 2024, we had $1,590 of accrued discounts and allowances.
The process for analyzing trade promotion programs could impact our results of operations and trade spending accruals depending on how actual results of the programs compare to original estimates. As of December 31, 2025, we had $1,730 of accrued discounts and allowances.
See Note 11 to our consolidated financial statements for further detail. 26 Income taxes We pay income taxes based on tax statutes, regulations, and case law of the various jurisdictions in which we operate. At any given time, multiple tax years are subject to audit by the various taxing authorities.
See Note 11 to our consolidated financial statements for further detail. Income taxes We pay income taxes based on tax statutes, regulations, and case law of the various jurisdictions in which we operate. At any given time, multiple tax years are subject to audit by the various taxing authorities. Income taxes are accounted for under the asset and liability method.
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse.
Deferred income tax assets and liabilities are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse.
As of December 31, 2024, the Company had $0 outstanding under the Revolving Credit Facility and note payable. The Company had $5,000 available for future borrowings under the Revolving Credit Facility as of December 31, 2024. All outstanding amounts under the loans bear interest at the Secured Overnight Financing Rate (“SOFR”), plus 2.07%. Interest is payable monthly in arrears.
As of December 31, 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 December 31, 2025. All outstanding amounts under the revolving line of credit bear interest at the Secured Overnight Financing Rate (“SOFR”), plus 1.75%. Interest is payable monthly in arrears.
Cash Flow The following table is derived from our Consolidated Statement of Cash Flows: Year Ended December 31, 2024 2023 Net Cash Flows Provided By (Used In): Operating activities $ 12,962 $ 16,941 Investing activities $ (6,682 ) $ (4,410 ) Financing activities $ (2,750 ) $ (3,777 ) Operating Activities Net cash provided by operating activities was $12,962 in 2024 compared to $16,941 in 2023.
Cash Flow The following table is derived from our Consolidated Statement of Cash Flows: Year Ended December 31, 2025 2024 Net Cash Flows Provided By (Used In): Operating activities $ 10,948 $ 12,962 Investing activities $ (22,040 ) $ (6,682 ) Financing activities $ (65 ) $ (2,750 ) Operating Activities Net cash provided by operating activities was $10,948 in 2025 compared to $12,962 in 2024.
The Company remains in a strong financial position, and while it has been impacted by the macroeconomic challenges with commodity inflation and other input cost increases, the Company believes that its cash flow from operations, revolving credit facility, and cash and cash equivalents will continue to provide sufficient liquidity for its working capital needs, capital resource requirements, and growth initiatives and to ensure the continuation of the Company as a going concern.
The Company remains in a strong financial position, and believes that its cash flow from operations, revolving credit facility, and cash and cash equivalents will continue to provide sufficient liquidity for its working capital needs, capital resource requirements, and growth initiatives and to ensure the continuation of the Company as a going concern.
The Company has one reporting unit within its single reportable segment. We review and evaluate our goodwill for potential impairment at a minimum annually, as of December 31, or more frequently if circumstances indicate that impairment is possible. We completed our annual goodwill impairment analysis as of December 31, 2024. Our assessment did not result in an impairment.
We review and evaluate our goodwill for potential impairment at a minimum annually, as of December 31, or more frequently if circumstances indicate that impairment is possible. We completed our annual goodwill impairment analysis as of December 31, 2025. Our assessment did not result in impairment.
Management has discussed the development and selection of these critical accounting policies, as well as our significant accounting policies (see Note 2 to the Consolidated Financial Statements), with the Audit and Corporate Governance Committee of our Board of Directors.
Management has discussed the development and selection of these critical accounting policies, as well as our significant accounting policies (see Note 2 to the Consolidated Financial Statements), with the Audit and Corporate Governance Committee of our Board of Directors. We have identified the policies described below as our critical accounting policies that require us to make subjective or complex judgments.
The Company paid the outstanding term loan balance of $2,250 in full during the second quarter of 2024. Debt Obligations 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.
Debt Obligations 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.
Our capital spending is focused in three core areas: growth, cost reduction, and facility improvements. Growth capital spending supports increased production capacity, new product innovation and enhancements. Cost reduction and facility improvements support manufacturing efficiency, safety, and productivity.
Our capital spending is focused in three core areas: growth, cost reduction, and facility improvements. Growth capital spending supports capacity expansion and new product innovation and enhancements. Cost reduction and facility improvements support manufacturing efficiency, safety, and productivity. We continue to make capital expenditures primarily to modernize manufacturing facilities and support productivity initiatives.
Income taxes are discussed in Note 10 in the Notes to the Consolidated Financial Statements. 23 Liquidity and Capital Resources Management assesses the Company’s liquidity in terms of its ability to generate cash to fund its operating, investing, and financing activities.
Liquidity and Capital Resources Management assesses the Company’s liquidity in terms of its ability to generate cash to fund its operating, investing, and financing activities.
Provision for Income Taxes The provision for income taxes includes federal, state and local income taxes. The provision for income taxes was $4,944 and $5,282 during the year ended December 31, 2024 and 2023, respectively. The effective income tax rate was 35.4% in 2024 compared to 31.7% in 2023.
The provision for income taxes was $5,827 and $4,944 during the year ended December 31, 2025, and 2024, respectively. The effective income tax rate was 29.6% in 2025 compared to 35.4% in 2024. The statutory federal and state tax rates remained consistent from 2024 to 2025.
Lifeway is also required to pay a quarterly unused line fee of 0.20% on the Revolving Credit Facility, and in conjunction with the issuance of any letters of credit, a letter of credit fee of 0.20%. The Company is in compliance with all applicable financial debt covenants as of December 31, 2024.
Lifeway is also required to pay a quarterly unused line fee of 0.25% on the Revolving Credit Facility, and in conjunction with the issuance of any letters of credit, a letter of credit fee of 1.00%.
The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with similar operating and investment characteristics. The Company also reconciles the fair value of its reporting unit to its current market capitalization, allowing for a reasonable control premium.
The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with similar operating and investment characteristics.
The decrease was primarily due to lower cash earnings driven by non-routine stockholder action, and the change in working capital. Investing Activities Net cash used in investing activities was $6,682 in 2024 compared to $4,410 in 2023. The increase in cash used reflects our planned capital spending increase during 2024 compared to 2023.
The decrease was primarily due to the change in working capital. 24 Investing Activities Net cash used in investing activities was $22,040 in 2025 compared to $6,682 in 2024. The increase in cash used reflects our planned capital spending increase during 2025 compared to 2024.
See Note 7 to our Consolidated Financial Statements for additional information regarding our indebtedness and related agreements. Off-Balance Sheet Arrangements We do not have any off-balance sheet financing arrangements as defined in Item 303(a)(4) of Regulation S-K.
The Company is in compliance with all applicable financial debt covenants as of December 31, 2025. See Note 7 to our Consolidated Financial Statements for additional information regarding our indebtedness and related agreements. 25 Off-Balance Sheet Arrangements We do not have any off-balance sheet financing arrangements.
Sales discounts & allowance We offer various trade promotions and sales incentive programs to customers and consumers. From time to time, we grant certain sales discounts to customers which are classified as a reduction in sales.
The Company also reconciles the fair value of its reporting unit to its current market capitalization, allowing for a reasonable control premium. 26 Sales discounts & allowance We offer various trade promotions and sales incentive programs to customers and consumers. From time to time, we grant certain sales discounts to customers which are classified as a reduction in sales.
The statutory Federal and state tax rates remained consistent from 2023 to 2024. The Company consistently reflects non-deductible items such as non-deductible officer compensation expense, non-deductible compensation expense related to equity incentive awards and separate state tax rates from year to year.
The Company consistently reflects non-deductible items such as non-deductible officer compensation expense, non-deductible compensation expense related to equity incentive awards, and separate state tax rates from year to year. Although similar items were reflected in 2025, the percentage effect is different primarily due to the decrease in certain non-deductible compensation in 2025 compared to 2024.
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 Fifth Modification. Products In October 2024, we began to roll out our first products with 100% lactose free labeling.
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.
The Credit Agreement provides for, among other things, a $5,000 term loan to be repaid in quarterly installments of principal and interest over a term of five years, a revolving line of credit up to a maximum of $5,000 (the “Revolving Credit Facility”) and an incremental facility not to exceed $5,000.
The Credit Agreement provides for, among other things, a revolving line of credit up to a maximum of $25,000 (the “Revolving Credit Facility”) and an incremental facility not to exceed $5,000. The termination date of the revolving credit facility is February 5, 2029, unless earlier terminated.
We have identified the policies described below as our critical accounting policies that require us to make subjective or complex judgments. 25 Goodwill impairment Goodwill totaled $11,704 as of December 31, 2024. Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill is not amortized.
Goodwill impairment Goodwill totaled $11,704 as of December 31, 2025. Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill is not amortized. The Company has one reporting unit within its single reportable segment.
The decrease versus the prior year was driven by the unfavorable impact of milk pricing, and to a lesser extent the increase in other input costs, partially offset by favorable transportation costs. Selling Expenses Selling expenses increased by $2,967 to $14,743 during the year ended December 31, 2024 from $11,776 during the same period in 2023.
The increase versus the prior year was driven by higher volumes of our branded products, which provided manufacturing efficiencies and the favorable impact of conventional milk pricing. Selling Expenses Selling expenses increased by $5,148 to $19,891 during the year ended December 31, 2025 from $14,473 during the same period in 2024.
Legal and professional fees associated with non-routine stockholder action and the Danone unsolicited purchase proposal, and the CEO retention bonus awarded in the fourth quarter of 2024, account for approximately 75% of the increase. General and administrative stock-based compensation expense increased $784 compared to the same period in 2023.
During 2024, the Company incurred approximately $4,500 of legal and professional fees associated with Danone’s unsolicited purchase proposal, non-routine stockholder action, and the CEO retention bonus awarded in the fourth quarter of 2024. Provision for Income Taxes The provision for income taxes includes federal, state and local income taxes.
On November 26, we announced additional information regarding the information the Board used to come to this determination. Debt Refinancing On February 5, 2025, the Company entered into the Fifth Modification to the Amended and Restated Loan and Security Agreement (the “Fifth Modification”) with its current lender.
The Company’s obligations under the Cooperation Agreement (other than the non-disparagement covenants) cease to apply after Danone and its affiliates cease to beneficially own any shares of Common Stock. Debt Refinancing On February 5, 2025, the Company entered into the Fifth Modification to the Amended and Restated Loan and Security Agreement (the “Fifth Modification”) with its current lender.
General and Administrative Expenses General and administrative expenses increased $6,309 to $19,439 during the year ended December 31, 2024 from $13,130 during the same period in 2023.
General and Administrative Expenses General and administrative expenses increased $2,164 to $21,603 during the year ended December 31, 2025 from $19,439 during the same period in 2024. The Company incurred approximately $6,200 of legal and professional fees associated with Danone’s unsolicited purchase proposal and non-routine stockholder action during 2025.
The Company records discrete income tax items such as enacted tax rate changes in the period in which they occur. Section 162(m) of the Internal Revenue Code (the “Code”) limits the deductibility of compensation paid to certain of our executives to the extent their total compensation exceeds $1 million in any taxable year.
Section 162(m) of the Internal Revenue Code (the “Code”) limits the deductibility of compensation paid to certain of our executives to the extent their total compensation exceeds $1 million in any taxable year. 23 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 results.
The net sales increase was primarily driven by higher volumes of our branded drinkable kefir. 22 Gross Profit Gross profit as a percentage of net sales decreased to 26.0% during the year ended December 31, 2024 from 26.5% during the same period in 2023.
On a comparable basis adjusting for these two factors, the Company’s net sales increased approximately 19% in the fiscal year 2025 compared to fiscal year 2024. Gross Profit Gross profit as a percentage of net sales increased to 27.4% during the year ended December 31, 2025 from 26.0% during the same period in 2024.
We continue to make capital expenditures primarily to modernize manufacturing facilities and support productivity initiatives. 24 Financing Activities Net cash used in financing activities was $2,750 in 2024 compared to $3,777 in 2023. The cash used represents the quarterly principal payments under the term loan.
Financing Activities Net cash used in financing activities was $65 in 2025 compared to $2,750 in 2024. The cash used in 2025 represents credit agreement amendment expenses incurred during the first quarter. The cash used in 2024 represented the quarterly principal payments under the term loan, which was paid in full during the second quarter of 2024.
Removed
We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future. 20 Recent Developments Unsolicited Proposal On November 5, 2024, we announced that our board of directors (our “Board”) determined, after careful and thorough consideration in consultation with the Company’s independent financial and legal advisors, that the unsolicited proposal made on September 23, 2024 by Danone North America PBC (“Danone”) to acquire all of the shares of the Company that it did not already own for $25.00 per share, substantially undervalued the Company and was not in the best interests of the Company or its stockholders or other stakeholders.
Added
We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future. 19 Recent Developments Cooperation Agreement On September 30, 2025, the Company and Danone entered into a Cooperation Agreement (the “Cooperation Agreement”) pursuant to which, among other things: · The Company refreshed its Board, electing four new directors (the “New Independent Directors”) selected in accordance with the Cooperation Agreement who are (1) independent under Nasdaq rules and (2) unaffiliated with Julie Smolyansky, the Company’s Chief Executive Officer, her spouse, Edward Smolyansky, Ludmila Smolyansky (the foregoing collectively, the “Smolyansky Family”), Danone, the Company and any director of the Company.
Removed
In connection with that determination, we entered into a Shareholder Rights Agreement with Computershare Trust Company, N.A., as rights agent (the “Rights Agreement”).
Added
Additionally, Jody Levy and Perfecto Sanchez, former members of the Board, resigned and Pol Sikar was not nominated to stand for re-election at the Company’s 2025 annual meeting of shareholders. Additional changes to the Board during the quarter ended December 31, 2025, include the appointment of Dorri McWhorter as Chairperson of the Board, resignation of Ms.
Removed
Pursuant to the Rights Agreement, our Board 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.
Added
McWhorter from the Compensation Committee of the Board, the appointment of Andee Harris as a member of the Audit and Corporate Governance Committee of the Board and the appointment of Susan Hultquist and Kirk Chartier to the Compensation Committee of the Board. · The Company and Danone jointly stayed the pending litigation relating to the Stockholders’ Agreement, dated October 1, 1999, by and among the Company, Danone Foods, Inc., Michael Smolyansky, Ludmila Smolyansky, Julie Smolyansky and Edward Smolyansky (as amended, the “Stockholders’ Agreement”). · Danone waived certain of its right under that certain Stockholders’ Agreement, including its right to Board representation, and agreed that its consent will not be required for the Company to issue bona fide equity-based compensation to members of management (excluding Julie Smolyansky, her immediate family and their affiliates) so long as the grants are on market terms and are approved by the Company’s Compensation Committee (a majority of which must be New Independent Directors); · The Company agreed to hold its 2026 annual meeting of shareholders on or before June 30, 2026 and to include as nominees for election a slate of seven individuals (unless the size of the Board is increased by adding any additional directors through the process required in the Cooperation Agreement) that includes the New Independent Directors and that excludes Jason Scher.
Removed
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.
Added
Danone has agreed to vote all of the shares of Common Stock it beneficially owns in favor of this slate if nominated in accordance with the Cooperation Agreement. · Danone agreed that if, at any time prior to June 30, 2026, Edward Smolyansky or Ludmila Smolyansky or any person with whom Edward Smolyansky or Ludmila Smolyansky has formed a group (as such term is defined under the Exchange Act, and the rules and regulations promulgated thereunder) calls a special meeting of the Company’s shareholders or commences a consent solicitation, Danone will vote or consent, as applicable, with respect to all shares of Common Stock it beneficially owns in accordance with the Board’s recommendations on all matters relating to Board composition and, with certain exceptions, the Company’s organizational documents. · The Company filed a “shelf” registration statement with the SEC covering the resale of all shares of Common Stock beneficially owned by Danone and its affiliates, which registration statement was declared effective by the SEC.
Removed
Rights also 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 Agreement.
Added
The Cooperation Agreement provides that Danone may not request more than (a) two underwritten offerings not involving any “road show,” which is commonly known as a “block trade” or (b) one underwritten offering that is not a block trade under the registration statement of which this prospectus forms a part in any 60-day period.
Removed
On November 15, 2024, Danone revised its offer to acquire all of the shares of the Company that it did not already own from $25.00 per share to $27.00 per share.
Added
The Company also agreed to use reasonable best efforts to take such further action as Danone may reasonably request, all to the extent required from time to time, to enable Danone to sell shares of Registrable Stock (as defined in the Stockholders’ Agreement) without registration under the Securities Act within the safe harbor provided by Rule 144 thereunder. · Both the Company and Danone, on behalf of themselves and their respective affiliates and representatives, agreed to mutual non-disparagement provisions, effective until two years after Danone and its affiliates cease to beneficially own any shares of Common Stock. 20 All of Danone’s obligations (other than the non-disparagement covenants) cease to apply upon certain “triggering events,” including breaches of the Cooperation Agreement by the Company or certain statements by the Company, Julie Smolyansky or any of their respective affiliates or representatives challenging the validity of the Cooperation Agreement or the Stockholders’ Agreement.
Removed
On November 20, 2024, we announced our Board’s determination that, after careful and thorough consideration in consultation with the Company’s independent financial and legal advisors, the revised unsolicited proposal substantially undervalued the Company and was not in the best interests of the Company or its stockholders or other stakeholders.
Added
Additionally, if Julie Smolyansky is deemed to have breached the Cooperation Agreement while she is Chief Executive Officer of the Company, such breach will be a triggering event under the Cooperation Agreement unless the Board terminates Julie Smolyansky for cause as a result of such breach within a specified time period.
Removed
Our products were already up to 99% lactose free, so we are pleased to further attract consumers with our new Organic Whole Milk Flavor Fusion items that have this added benefit, along with decreased sugar content. In demand flavors including Hot Honey, Matcha Latte, and Passionfruit Lychee are new additions to our portfolio.
Added
All of the Company’s obligations under the Stockholders’ Agreement (other than those relating to Danone’s registration rights and rights with respect to inspection of our books and records) cease to apply after Danone and its affiliates no longer collectively beneficially own at least 761,438 (as adjusted for any reverse stock split or similar recapitalization).
Removed
The entire lineup is loaded with high-quality bioavailable nutrients, and plays to our strengths, as our organic products have been incredibly successful to date. We expect health and wellness trends to continue to be a tailwind for our entire premium product portfolio.
Added
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 Fifth Modification. 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.
Removed
We plan to continue to invest behind our key products to capture more and more of this growing market, Distribution Strategy In September 2024, we announced our first expansion of Kefir distribution in the South African market. In November 2024, we announced our expansion within Dubai and the UAE.
Added
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.
Removed
The offering of 32oz Lifeway Kefir, 8oz Lactose-Free Lifeway Kefir, ProBugs and farmer cheese, exported from the United States, is expected to begin shipping in the first quarter of 2025 and will become available in supermarkets and hypermarkets in Dubai and across the Emirates.
Added
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.
Removed
We are taking a measured, and thoughtful approach to global expansion, as we seek markets that are primed for success and can be accessed without a major initial investment. Trends and Uncertainties Current Macroeconomic Environment We have not experienced significant supply chain disruptions or labor supply shortages and have continued to satisfy customer and consumer demand for our products.
Added
The Company purchased 799 mature dairy cows during 2025 for $2,870.
Removed
Management continues to proactively manage the supply and transportation of materials used to produce and package our products, staffing, and transportation of our products to customers.
Added
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.
Removed
Although similar items were reflected in 2024, the percentage effect is different primarily due to the increase in certain non-deductible compensation in 2024 compared to 2023. The increase is partially offset by the difference in pre-tax income in 2024 compared to 2023.
Added
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.
Removed
The termination date of the term loan is August 18, 2026, unless earlier terminated. The term loan was terminated during the second quarter of 2024 upon payment of the outstanding loan balance in full. The termination date of the revolving credit facility is June 30, 2025, unless earlier terminated.
Added
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.
Added
The Company has recorded $635 in prepaid and other current assets and $2,235 in other assets as of December 31, 2025 related to the herd agreement with no recorded gain or loss on sale.
Added
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. 21 Trends and Uncertainties Current Macroeconomic Environment We continue to monitor macroeconomic conditions and global trade developments, including inflation in key input costs, recently implemented tariffs, and the potential for additional or modified tariffs or export controls.
Added
These evolving global trade policies may contribute to increased supply chain complexity, commodity cost volatility, and broader economic uncertainty. We do not currently expect these conditions to have a material adverse impact on our operations or financial results. We are primarily a United States based manufacturer sourcing a vast majority of our inputs domestically.
Added
In addition, all our domestically produced products are sold to customers in the United States. We expect the accelerating consumer focus on health and wellness to drive increased demand for our products.
Added
The net sales increase was primarily driven by higher volumes of our branded drinkable kefir. The fiscal year 2024 benefited from a customer relationship we strategically exited in the third quarter of 2024, and a significant distributor shifting from Lifeway delivered to customer pick-up in late 2024, which resulted in lower net sales and lower freight out expense.
Added
The Company records discrete income tax items such as enacted tax rate changes in the period in which they occur.
Added
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).
Added
The OBBBA does not have a material impact on our estimated annual effective tax rate or cash flows in the current fiscal year. Income taxes are discussed in Note 10 in the Notes to the Consolidated Financial Statements.
Added
The increase in purchases of property and equipment is primarily driven by the expansion of manufacturing capacity and modernization of our Waukesha, Wisconsin facility. This project will enable Lifeway to meet increasing sales demand and will double the facility’s manufacturing capacity and improve packaging efficiency, as well as other operational improvements. The Company currently estimates investing approximately $48,000.
Added
As of December 31, 2025, $21,547 is included on the consolidated balance sheet in property, plant and equipment, with cumulative cash paid of $20,926. The project will be funded primarily through cash on-hand and cash flow from operations, with further requirements available under the Company’s revolving credit facility.
Added
The project is expected to be completed during the fourth fiscal quarter of 2026. The increase in cash used was partially offset by cash proceeds of $5,152 received in the first quarter and $54 in the second quarter of 2025 from the sale of our Simple Mills investment.
Added
The Credit Agreement includes customary representations, warranties, and covenants, including financial covenants requiring the Company to maintain a fixed charge coverage ratio of no less than 1.25 to 1.00, and a maximum cash flow leverage ratio of no greater than 2.00 to 1.00 for each fiscal quarter commencing with the fiscal quarter ending March 31, 2025.

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