#USA #Chicago #Lifeway Foods #Edward Smolyansky #Ludmila Smolyansky

Campaign Updates on Lifeway Foods

Edward and Ludmila Smolyansky, who hold a beneficial interest in about 27% of Lifeway Foods (NASDAQ: LWAY), recently expressed serious concerns about the company's governance and performance. In their statement, they emphasized issues following the Q1 2025 results, specifically pointing out a troubling trend in operational metrics.

Despite Lifeway reporting a notable year-over-year increase of 44% in GAAP earnings per share, Mr. Smolyansky clarified that this was primarily due to a one-off $3.4 million gain from an investment sale, not a direct result of progress in Lifeway's core kefir business. The couple has been particularly troubled by several key performance indicators:

• - Income from Operations: A staggering decline of nearly 55% compared to the previous year.
• - Operating Margin: This fell to 3.4%, down from 7.9% in Q1 2024, indicating a significant drop in operational efficiency.
• - Net Sales: There was only a marginal increase of 3.3% year-over-year, with a decrease of 1.8% sequentially from Q4 2024.
• - Glen Oaks Acquisition: Revenue from this company, acquired in 2021, has plummeted by around 50%. Notably, the Smolyanskys were the only directors to oppose this acquisition.
• - Selling Expenses: These surged by 27% year-over-year and 35% from the prior quarter, which did not correlate with any increase in sales.
• - Gross Margin: This contracted by 180 basis points to 24%, while selling, general, and administrative expenses increased to 20.2% of sales.
• - Insider Trading: Sales of shares by Director Pol Sikar and CEO Julie Smolyansky post-Earnings release have raised red flags concerning management's outlook on the company.

Furthermore, the Smolyanskys criticized the board's poor governance, pointing to examples such as the handling of a Danone offer, attempts to nullify the company's 1999 Stockholder Agreement with Danone, and the awarding of $8.5 million in cash and shares to CEO/Chair Julie Smolyansky shortly thereafter.

They argued that:

• - The dual role of CEO/Chair has created significant governance issues due to a lack of independent oversight.
• - The leadership's handling of Danone's offer—and attempts to sever ties—could have broader market implications that the Board seems to overlook.
• - The questionable compensation awarded to CEO/Chair was in stark contrast to shareholder sentiment expressed at the previous year's annual meeting.
• - They firmly believe that without a restructured board with an independent committee to explore strategic options, including possibly re-engaging with Danone, the chances of positive outcomes for shareholders are slim.

Mr. Smolyansky remarked, "After carefully considering our options, this consent path presents the quickest route to achieving our objectives." He expressed confidence, based on feedback from the investment community, that there is considerable support for essential changes.

This recent filing by the Smolyanskys represents an updated approach following their earlier preliminary consent statement submitted in August 2024 and subsequent filings. They are advocating for immediate action to instill operational discipline and restore alignment with shareholder interests to foster long-term value creation at Lifeway Foods.

For additional insights into the 2025 Lifeway Foods Proxy Campaign, nomination materials, and SEC filings, information can be accessed through FreeLifeway.com and Edward Smolyansky's LinkedIn profile.

Important Information Regarding the Campaign

This announcement does not solicit proxy votes or shareholder consent without a definitive statement. Upon filing a definitive proxy or consent statement, shareholders will receive all relevant documents. Lifeway shareholders are urged to read any future proxy or consent materials as they will contain critical information regarding the ongoing situation.