Lifeway Foods, Inc. (Nasdaq: LWAY) announced its financial results for the second quarter and six month period ended June 30, 2001. Revenues of the quarter increased to $2.75 million, a 20 percent gain over $2.287 million revenues in the same quarter last year. Revenues for the first six months rose sharply to $5.382 million, up 18 percent from revenues of $4.560 million for the same period a year ago.

Net income for the quarter was $232,243, or $0.05 per share, compared to $184,290, or $0.04 per share for the second quarter last year. Six month net income was $560,956, or $0.13 per share, up 44 percent from $373,156, or $0.9 per share for the same period a year ago.

Michael Smolyansky, President and CEO commented, “Sales continued to climb in the second quarter furthering the strong trend we experienced since the first half of the year. Sales of our Kefir product line remains strong, as we continued to experience better than expected sales of our SoyTreat(TM) during the quarter. We expect this strong trend to carry forward in the second half of the year and for 2001 to be another year of record sales and earnings for Lifeway. We also expect substantially increased sales of our new Lifeway Organic(TM) line of products during the second half of this year.”

Lifeway is a manufacturer of cultured, probiotic and functional food products and is America’s leading supplier of the cultured dairy product known as kefir. The Company markets 12 flavors of kefir and does a successful business exporting its products to Eastern Europe and Canada. The Company continues to market a dairy based immune-supporting dietary supplement beverage called Basics Plus(TM), as well as Kefir Starter for consumers to make kefir at home or in travel. With the recent introduction of America’s first non-dairy soy kefir called SoyTreat (TM), as well as Lifeway Organic(TM) the Company is entering into the organic and soy milk market.

For more information, contact Michael Smolyansky, President, Lifeway Foods, Inc. at 847-967-1010 or e-mail at or visit .

This press release contains “forward-looking statements” Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risk and uncertainties including, but not limited to, competitive pressures and other important factors detailed in the Company’s annual reports on Form 10-K filed with the Securities and Exchange Commission.

                             Lifeway Foods, Inc.
Condensed Consolidated Statement of Income

Three Months Ended Six Months Ended

June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
Sales $2,749,719 $2,287,222 $5,382,418 $4,560,008
Cost of
Goods Sold 1,644,786 1,288,341 3,192,013 2,425,097
Gross Profit 1,104,933 998,881 2,190,405 2,134,911
Operating Expenses 773,467 882,750 1,426,945 1,792,368
Pre-tax income 381,306 300,778 945,368 609,044
Income taxes 149,063 116,488 384,412 235,888
Net income 232,243 184,290 560,956 373,156

Per Share Earnings $0.05 $0.04 $0.13 $0.09

Wtg. Ave.
Shares 4,318,444 4,318,444 4,318,444 4,318,444

Balance Sheet

Three Months Ended
June 30, 2001 June 30, 2000

Current Assets $ 8,765,912 $7,938,858
Current Liabilities 1,559,814 633,861
Long-term Debt 516,536 1,188,013
Stockholders Equity 11,314,995 10,657,834
Total Assets $13,774,197 $12,743,381