Edward Smolyansky Rebukes Lifeway Foods (NASDAQ: LWAY) 2024 Amended 10-K Filing

Rhea-AI Summary

Edward Smolyansky, who owns ~27% of Lifeway Foods (NASDAQ: LWAY) with Ludmila Smolyansky, criticizes the company's amended 2024 Annual Report and recent executive compensation decisions. The key concerns include: 1) Potential delay of the 2025 Annual Meeting beyond June 2, despite Edward's submission of Board nominees on March 13, 2) Questionable compensation awards to CEO Julie Smolyansky, including a $2 million retention bonus and $6.5 million equity grant despite a 20.6% earnings decline, 3) Over $1 million spent on dismissed legal actions against shareholders, 4) Governance issues regarding Jason Burdeen (CEO's husband) acting in legal matters without qualifications, receiving $313,800 in compensation in 2024. The statement questions the board's rejection of Danone's premium offer and criticizes the company's legal and regulatory dysfunction under current leadership.

Positive

• Edward and Ludmila Smolyansky own significant stake (27%) in the company, enabling strong shareholder activism
• Previous Danone offer represented significant premium to share price

Negative

• 20.6% decline in earnings for 2024
• Excessive executive compensation: $2M retention bonus and $6.5M equity grant to CEO despite poor performance
• Over $1M spent on unsuccessful legal actions against shareholders
• Potential governance issues with CEO's husband serving as Chief of Staff without legal qualifications
• No internal legal department since January 2020
• Board's apparent delay of 2025 Annual Meeting
• Rejection of Danone's premium offer raising shareholder concerns

Insights

Corporate Governance Expert

Edward Smolyansky's allegations expose significant governance concerns at Lifeway Foods, including potential meeting delays, questionable compensation decisions, and familial conflicts that merit shareholder attention.

This press release highlights what appears to be a contentious proxy battle brewing at Lifeway Foods. Edward Smolyansky, who along with Ludmila Smolyansky controls approximately 27% of outstanding shares, has submitted a rival slate of board nominees and claims the current board may be delaying the 2025 Annual Meeting beyond the bylaw-mandated June 2 date to avoid facing shareholders.

The most troubling allegations concern the board's governance practices. According to Smolyansky, the board rejected an acquisition offer from Danone that reportedly came at a significant premium to the then-current share price. This decision warrants scrutiny, as it was followed by what Smolyansky characterizes as excessive compensation awards to CEO Julie Smolyansky – specifically a $2 million retention bonus and $6.5 million equity grant in December 2024, despite a claimed 20.6% earnings decline that year.

Of particular governance concern is the apparent elimination of Lifeway's legal department, with the CEO's husband Jason Burdeen allegedly assuming legal oversight responsibilities without formal legal credentials while receiving $313,800 in compensation (a 30% year-over-year increase). The claim that Lifeway has spent over $1 million pursuing legal claims against Edward Smolyansky raises questions about resource allocation and potential conflicts of interest.

This situation exemplifies classic corporate governance challenges: family-controlled businesses with internal conflicts, questions about board independence, and potential misalignment between management and shareholder interests. Shareholders should monitor whether the annual meeting proceeds as scheduled and how the company responds to these serious allegations.

Financial Analyst

Allegations of excessive executive compensation, rejected premium acquisition offer, and wasteful legal spending suggest potential misalignment with shareholder interests.

The financial governance allegations raised by Edward Smolyansky deserve investor attention. According to the press release, Lifeway's board awarded CEO Julie Smolyansky a combined $8.5 million in compensation (retention bonus and equity grant) in December 2024, despite a purported 20.6% decline in earnings that year. If accurate, this compensation decision warrants explanation, particularly given the company's size and performance trajectory.

The most financially significant claim involves Danone's alleged acquisition offer at a "significant premium" to Lifeway's then-current share price. The board's reported rejection of this offer, followed by increased executive compensation and change-in-control protections (from 2x to 3x base salary), raises questions about whether shareholder value maximization was prioritized.

Resource allocation also appears concerning based on these allegations. The press release claims Lifeway has spent over $1 million on litigation against Edward and Ludmila Smolyansky "with no return for shareholders," while simultaneously increasing compensation for the CEO's husband (as "Chief of Staff") by 30% to $313,800 including a $100,000 bonus without formal employment structures.

While these remain allegations within an apparent family dispute over corporate control, investors should question whether current governance structures adequately protect their interests. The upcoming proxy contest, if it proceeds, would allow shareholders to evaluate competing visions for Lifeway's future. The combination of disputed acquisition rejection, litigation expenditures, and executive compensation decisions suggests potential governance issues that could impact shareholder returns.

CHICAGO, May 2, 2025 /PRNewswire/ -- Edward Smolyansky, who together with Ludmila Smolyansky, beneficially own approximately 27% of outstanding shares of Lifeway Foods common stock, today issued the following statement in response to Lifeway's amended 2024 Annual Report and its latest disclosures on executive and director compensation.

Apparent Delay of 2025 Annual Meeting of Shareholders

On March 13, Edward Smolyansky submitted a full slate of Board nominees for Lifeway's 2025 Annual Meeting. To date, Lifeway has yet to file a preliminary or definitive proxy statement setting forth its own slate.

"The filing of the amended 2024 Annual Report, and other steps taken recently by the Company, suggest to me that the Board is planning to delay the 2025 Annual Meeting of Shareholders past the June 2, 2025, date provided for in the bylaws," said Mr. Smolyansky. "I am prepared to make my case to our fellow shareholders - at the annual meeting or otherwise - and it is disappointing that the Board is not prepared to do the same."

Any attempt to delay the annual meeting or sidestep the proxy contest would reflect yet another act of hostility toward shareholders, led by CEO/Chair Julie Smolyansky and endorsed by an entrenched and ineffective Board.

The Company is clearly at an inflection point as shareholders rightly question whether the Board's rejection of Danone's offer – at a significant premium to the then-current share price – served the interests of directors and executives over those of shareholders, especially given the hostile actions toward Danone and the exorbitant compensation awarded to Julie Smolyansky in the immediate aftermath.

In December 2024, the Board awarded Ms. Smolyansky a $2 million retention bonus and a $6.5 million equity grant¹ without providing any rationale in Lifeway's updated compensation disclosures. It also quietly increased her change-in-control severance multiple from 2x to 3x her base salary. These rewards came in a year when Lifeway's earnings declined by 20.6%.

Legal and Regulatory Dysfunction

Under Ms. Smolyansky's leadership, Lifeway has initiated multiple lawsuits against its largest shareholders, including Edward and Ludmila Smolyansky. These legal actions raise questions about governance, internal controls, and the misuse of shareholder funds. They also potentially undermine Lifeway's standing and influence in future court proceedings.

The company has been embroiled in multiple legal disputes, including a federal trade infringement lawsuit against former executives Edward and Ludmila Smolyansky along with their new venture, Pure Culture Organics™ that was dismissed with prejudice, permanently barring Lifeway from bringing the same claim again. Perhaps more troubling, Burdeen's multiple false declarations in the case have eroded Lifeway's credibility in court, while his broader involvement has significantly weakened the company's legal and strategic standing.

"Julie would rather spend her time – and shareholders' dollars – suing her own family than leading Lifeway through today's volatile economy," said Edward Smolyansky. "Every lawsuit filed against me has either been dismissed, dropped, or defeated. The Board should not be enabling such meritless, retaliatory legal actions."

To date, Lifeway has spent over $1 million pursuing legal claims against Edward Smolyansky, with no return for shareholders – an expense that calls into question the Board's legal oversight and risk management processes.

No Legal Department – But a "Chief of Staff" Acting as One

In January 2020, Lifeway eliminated its entire internal legal department, including the senior position of General Counsel. Since then, the company has relied exclusively on outside counsel for its aggressive legal efforts – again, at great cost to shareholders.

With no legal team in place, Jason Burdeen, CEO Julie Smolyansky's husband and Chief of Staff, has assumed wide-ranging control over legal matters. Burdeen holds no law degree, no legal training, and no relevant background in compliance or corporate governance. Despite this, he has exercised influence over nearly every aspect of Lifeway's operations, including its legal strategy, personnel decisions, and internal oversight.

According to Lifeway's 10-K/A filed April 29, despite not holding a formal employment agreement, Burdeen received a total compensation package of $313,800 in 2024 – 30% more than the year before. This included a $100,000 "short-term incentive cash bonus." Lifeway has neglected to explain what warranted that bonus.

"Shareholders deserve to know whether that bonus was awarded for performance, or for consolidating control and absorbing responsibilities once held by Lifeway's former General Counsel and Senior EVP of Sales," said Edward Smolyansky.

Ironically, Lifeway's own governance policy instructs employees to report concerns to the General Counsel or legal department, neither of which currently exists.

Warranted Change is Imminent

While the Board continues to stall and evade accountability, Edward and Ludmila Smolyansky are determined to continue pressing Lifeway to immediately set a date for the 2025 Annual Meeting and proceed with director elections as required.

For more information about the 2025 Lifeway Foods Proxy Campaign, follow Edward Smolyansky on LinkedIn or visit FreeLifeway.com, which provides details on the nomination letter and associated SEC filings.

1 Disclosure of CEO Equity Award, 12/19/2024, CEO Retention Bonus 12/23/2024

View original content:https://www.prnewswire.com/news-releases/edward-smolyansky-rebukes-lifeway-foods-nasdaq-lway-2024-amended-10-k-filing-302445177.html

SOURCE Edward and Ludmila Smolyansky

FAQ

What are the main concerns raised about Lifeway Foods (LWAY) management in May 2025?

The main concerns include excessive executive compensation despite declining earnings, spending over $1M on dismissed lawsuits against shareholders, potential delay of the 2025 Annual Meeting, and governance issues with the CEO's husband acting in legal matters without qualifications.

How much compensation did Lifeway Foods CEO Julie Smolyansky receive in December 2024?

Julie Smolyansky received a $2 million retention bonus and a $6.5 million equity grant in December 2024, despite the company's earnings declining by 20.6%.

What percentage of Lifeway Foods (LWAY) is owned by Edward and Ludmila Smolyansky?

Edward and Ludmila Smolyansky beneficially own approximately 27% of outstanding shares of Lifeway Foods common stock.

What compensation did Jason Burdeen receive at Lifeway Foods in 2024?

Jason Burdeen, CEO's husband and Chief of Staff, received total compensation of $313,800 in 2024, including a $100,000 short-term incentive cash bonus, representing a 30% increase from the previous year.

What happened to Lifeway Foods' legal department?

In January 2020, Lifeway eliminated its entire internal legal department, including the General Counsel position, and has since relied exclusively on outside counsel.