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Stock-based and Other Compensation
 3 Months Ended
Mar. 31, 2025
Share-Based Payment Arrangement [Abstract]  
Stock-based and Other Compensation

Note 11 – Stock-based and Other Compensation

 

Employee Incentive and Non-Employee Director Plans

 

The Board of Directors adopted, and the Company’s stockholders approved, the “Lifeway Foods, Inc. 2022 Omnibus Incentive Plan” (the “Plan”). Under the Plan, the Compensation Committee may grant awards of various types of compensation, including nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards to qualifying employees. The maximum number of shares authorized to be awarded under the Plan is 3.25 million. As of March 31, 2025, 2.62 million shares remain available to award under the Plan.

 

Lifeway stockholders approved the 2022 Non-Employee Director Equity and Deferred Compensation Plan (the “2022 Director Plan”), which authorizes the grant of restricted stock units. The maximum aggregate number of shares that may be issued under the 2022 Director Plan is 500 thousand. As of March 31, 2025, 392 thousand shares remain available to award under the 2022 Director Plan.

 

Total compensation expense related to stock-based payments and the related income tax benefit recognized in net income are as follows:

          
   Three Months Ended 
   March 31, 
   2025   2024 
   (In Thousands) 
Compensation expense related to stock-based payments  $326   $673 
Related income tax benefit   91    65 

 

Stock Options

 

The following table summarizes stock option activity during the three months ended March 31, 2025:

                               
    Options     Weighted
average
exercise price		     Weighted
average
remaining contractual life		     Aggregate
intrinsic value		  
    (In thousands)                    
Outstanding at December 31, 2024     30     $ 10.42       1.21     $ 426  
Granted     –       –       –       –  
Exercised     –       –       –       –  
Forfeited     –       –       –       –  
Outstanding at March 31, 2025     30     $ 10.42       0.96     $ 416  
Exercisable at March 31, 2025     30     $ 10.42       0.96     $ 416  

 

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.

 

The following table summarizes restricted stock unit activity during the three months ended March 31, 2025.

          
  

Restricted

Stock Units

   Weighted Average Grant Date Fair Value 
   (In thousands)      
Outstanding at December 31, 2024   190   $8.77 
Granted   18    24.53 
Shares issued upon vesting   (11)   13.73 
Forfeited   (8)   8.47 
Outstanding at March 31, 2025   189   $10.00 
Vested and deferred at March 31, 2025   73   $7.88 

 

Unrecognized compensation expense related to nonvested restricted stock units was $887 as of March 31, 2025 and will be recognized over a weighted average period of 1.3 years. The grant date fair value of the awards is equal to the Company’s closing price on the grant date.

 

Performance Units

 

Performance unit awards are granted to certain members of management. These awards include both service and performance conditions.

 

For performance unit awards granted in fiscal years 2023 through 2025, 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 number of performance unit awards are weighted 50% on net revenue and 50% on adjusted EBITDA. Participants may earn more or less than the target number of units, and are bound by minimum and maximum thresholds of net revenue and adjusted EBITDA. The PSU awards will be earned and will vest, if at all, after the end of the three-year measurement period. These awards will be converted to stock upon vesting.

 

The following table summarizes performance unit activity during the three months ended March 31, 2025.

        
   Performance
Units		   Weighted Average Grant Date Fair Value 
   (In thousands)      
Nonvested at December 31, 2024   306   $8.08 
Granted (1)   91    13.45 
Shares issued upon vesting   (168)   6.25 
Forfeited   (30)   8.01 
Nonvested at March 31, 2025   199   $12.10 

 

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

 

Unrecognized compensation expense related to nonvested performance units is estimated to be approximately $2,076 as of March 31, 2025 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.

  

Retirement Benefits

 

Lifeway has a defined contribution plan which is available to substantially all full-time employees. Under the terms of the plan, the Company matches employee contributions under a prescribed formula. For the three months ended March 31, 2025 and 2024, total contribution expense recognized in the consolidated statements of operations was $261 and $193, respectively.