Lifeway Foods, Inc. (Nasdaq: LWAY) announced its financial results for the second quarter and six month period ended June 30, 2000. Revenues for the quarter increased to $2.3 million, a 12 percent gain over $2.0 million revenues in the same quarter last year. Revenues for the first six months rose sharply to $4.6 million, up 17 percent from revenues of $3.9 million for the same period a year ago.

Net income for the quarter was $184,290, or $0.04 per share, compared to $270,446, or $0.07 per share for the second quarter last year. Six month net income was $373,156, or $0.09 per share, versus $479,602, or $0.13 per share. During the quarter the Company incurred approximately $180,000 in extraordinary expenses through two separate one-time costs. The first expense was for the initial listing fees and legal costs associated with the Company listing on the Nasdaq National Market System during the quarter. The second expense was for legal fees used to successfully block the infringement of the Company’s trademark in Federal District Court.

“While these expenditures along with additional advertising costs associated with our national marketing campaign have prevented us from achieving record earnings this quarter, we remain steadfast in our convictions to maximize shareholder value, protect our trademarks and to enhance our sales and distribution network ” stated Michael Smolyansky, President and CEO. “We believe these short-term investments will reap rich returns for Lifeway and its shareholders in the long-term.”

“Sales were up sharply for the Company in the second quarter and first half continuing the strong trend we experienced since we began our national marketing campaign. Sales of our fine Kefir product line remains strong, as we continued to experience better than expected sales of our Soy Treat during the quarter. We expect this strong trend to continue in the second half of the year and for 2000 to be another year of record sales and earnings for Lifeway.”

Lifeway is a manufacturer of cultured, probiotic and functional food products in the health food industry, 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. The Company recently introduced 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), the Company is entering into the soy milk market.

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

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This press release contains “forward-looking statement” 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 reports filed with the Securities and Exchange Commission.

Lifeway Foods, Inc.
Condensed Consolidated Statement of Income

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999

Sales $2,287,222 $2,039,861 4,560,008 $3,893,188

Cost of Goods Sold 1,288,341 1,018,346 2,425,097 1,903,009

Gross Profit 998,881 1,021,515 2,134,911 1,990,179

Operating Expenses 882,750 567,393 1,792,368 1,176,991

Pre-tax income 300,778 441,459 609,044 782,799

Income taxes 116,488 171,013 235,888 303,197

Net income 184,290 270,446 373,156 479,602

Per Share Earnings $0.04 $0.07 $0.09 $0.13

Wtd. Avg. Shares 4,318,444 3,813,577 4,318,444 3,813,577

Balance Sheet
Three Months Ended
June 30, June 30,
2000 1999
Current Assets $7,938,858 $3,284,080
Current Liabilities 633,861 908,929
Long-term Debt 1,188,013 1,277,354
Stockholders Equity 10,657,834 5,117,371
Total Assets $12,743,381 $7,465,614