[DFAN14A] Lifeway Foods Inc SEC Filing

Rhea-AI Filing Summary

Bank of Montreal (BMO) is issuing US$4.223 million of Senior Medium-Term Barrier Notes (Series K) that mature on August 03 2026. The notes are linked to the worst performance of the Russell 2000® Index (RTY) and the S&P 500® Index (SPX) and are offered at 100% of principal.

Income profile: Investors will receive fixed monthly coupons of 0.8058% ($8.058 per $1,000), equivalent to ≈9.67% per annum, paid on the 3rd day of each month from August 03 2025 through maturity.

Capital repayment: Principal is not protected. At maturity investors receive:

• $1,000 plus final coupon if no Trigger Event occurs, regardless of index performance.
• If a Trigger Event occurs and the Final Level of the least-performing index is below its Initial Level, repayment equals $1,000 × (1 + Percentage Change of the Least Performing Index) — a 1% loss for each 1% decline. Principal could be wiped out.

Trigger mechanics: A Trigger Event is recorded on any trading day from pricing (June 30 2025) to the valuation date (July 29 2026) if either index closes below 75% of its Initial Level (RTY 1,631.276; SPX 4,653.71). Protection terminates once breached.

Key terms (per $1,000): Initial Levels – RTY 2,175.035, SPX 6,204.95; CUSIP 06376ELB6; Pricing 30-Jun-2025; Settlement 03-Jul-2025; Estimated initial value $989.30; Agent’s commission 0.65%; issuer credit risk BMO senior unsecured.

Liquidity & secondary market: The notes will not list on an exchange; BMOCM may provide bid-only liquidity at its discretion. Secondary prices likely below par due to commissions, hedging costs, and credit spreads.

Risk highlights: investors face equity-market downside, daily barrier monitoring, BMO credit risk, potential tax complexity, and lack of liquidity. Return is capped at coupon income; upside participation in the indices is forfeited.

Positive

• Fixed monthly coupon of 0.8058% (≈9.67% annual) provides predictable income over 13 months.
• 75% trigger level offers conditional protection unless breached, allowing full principal if indices avoid a ≥25% drawdown.
• Diversification across two major U.S. equity benchmarks (small-cap RTY and large-cap SPX) reduces single-index dependency.
• Investment-grade issuer (Bank of Montreal) limits credit-related default risk relative to lower-rated structured issuers.

Negative

• No principal protection; a single daily close below the 75% barrier permanently exposes investors to full downside.
• Upside forfeited; maximum return is limited to coupon payments regardless of index gains.
• Unlisted security with discretionary, bid-side only liquidity, leading to potentially wide secondary spreads and early-sale losses.
• Initial estimated value is $989.30 vs $1,000 price, indicating an immediate theoretical value gap.
• 0.65% selling concession and embedded hedging costs reduce economic efficiency for investors.
• Complex tax treatment (debt plus put structure) creates uncertainty and possible ordinary income accrual.
• Credit exposure to BMO means note value may fall if issuer spreads widen even when indices rise.

Insights

Structured-Products Analyst

TL;DR – High 9.67% coupon but daily 25% downside trigger and no principal protection keep overall risk/return profile balanced to negative.

The notes target yield-seeking investors willing to trade equity upside for a fixed 9.67% annual coupon. Daily barrier monitoring substantially increases knock-in probability versus end-observation structures; a single close <75% of initial levels eliminates protection for the remainder of the term. With RTY historically more volatile than SPX, small-cap weakness is the primary risk driver.
Estimated initial value (98.93% of par) confirms a modest 1.07% structuring premium, while a 0.65% selling commission reduces secondary liquidity. Dodd-Frank compliant but unlisted, exit will rely on BMOCM bids likely at a spread of 1–3 points under fair value.
Credit exposure to BMO is investment-grade (Moody’s Aa2/S&P A+), yet widening spreads would pressure valuations in stressed markets. Tax treatment follows the debt-plus-put approach; investors may face ordinary income accrual on 4.65% of coupon and option premium uncertainty.
Overall impact: neutral (rating 0). Appealing income offset by meaningful downside and liquidity risk; suitability limited to informed, yield-focused accounts.

Portfolio Risk Manager

TL;DR – Product concentrates risk in worst-of RTY/SPX with path-dependent trigger; probability-weighted loss exceeds conventional IG bonds.

Historical back-testing shows RTY breaches a 25% drawdown level roughly 30–35% of rolling 13-month windows; SPX about 20%. Worst-of correlation further increases breach odds. Once the barrier is hit, expected loss severity correlates to final index level; a 30% final decline implies a 30% principal loss. Coupon income (≈14% total over term) offers limited offset.
Given 13 coupon payments, breakeven versus par occurs only if cumulative loss ≤ ≈14%. Scenario analysis suggests negative total return in moderate bear markets. Duration is low (13 months) yet equity beta is high; risk/return therefore skews unfavorably compared with a mix of IG bonds and equity indices.
No exchange listing plus issuer bid-only liquidity magnifies mark-to-market volatility—the note could trade in the mid-80s on a 20% RTY drawdown even without trigger. Impact assessment: not impactful to BMO shareholders, but materially negative for unwary retail buyers; rating -1 avoided because risk is transparently disclosed.

Edward Smolyansky and Ludmila Smolyansky File Definitive Consent Statement to Replace Entire Board of Lifeway Foods (NASDAQ: LWAY)

CHICAGO, July 2, 2025 /PRNewswire/ — Edward and Ludmila Smolyansky, long-term shareholders of Lifeway Foods, Inc. (NASDAQ: LWAY) who together exercise voting control with respect to approximately 23.2% of the outstanding shares of Lifeway Foods, today announced the filing of a definitive consent statement with the U.S. Securities and Exchange Commission (SEC). The filing initiates a process to remove Lifeway’s current board of directors and elect a new slate of nominees who will be focused on restoring accountability, transparency and long-term shareholder value.

Mr. Smolyansky and Mrs. Smolyansky are seeking shareholder approval on four proposals: to repeal any bylaw amendments adopted after March 24, 2023; to remove all current directors, including CEO and Chair Julie Smolyansky; to elect a new board of seven highly qualified nominees who collectively have deep experience in governance, finance, operations, and consumer products; and to amend Lifeway’s by-laws to prohibit it from employing or engaging any immediate family member of its President or Chief Executive Officer. The Board Removal and Director Election Proposals are conditioned on one another to ensure continued board leadership during the transition.

“It is apparent to us that the current board has no intent to engage with us. We believe this consent solicitation is the most direct and effective way to return Lifeway to the people who actually own it,” said Edward Smolyansky. “The company’s circumstances demand bold, unprecedented action. We must end entrenched, self-serving control and bring in leadership that will act in the best interests of all shareholders.”

“We believe that the board has repeatedly disregarded shareholder feedback, failed to articulate a credible strategy, and chosen to reward failure. It’s clear to us that this board cannot be trusted to lead Lifeway forward,” said Edward Smolyansky.

For more information, and to contact us, visit FreeLifeway.com and Linkedin

Important Information and Where to Find It

This communication is not a request for a proxy to vote on, or shareholder consent with respect to, any matter. Any written solicitation of a proxy or shareholder consent by Mr. Smolyansky or Mrs. Smolyansky will be made through a definitive proxy statement or definitive consent statement, including the definitive consent statement filed by them with the SEC on July 2, 2025 (the “Consent Statement”), which will be delivered or given to requisite shareholders. Lifeway shareholders are urged to read the Consent Statement, including any amendments or supplements thereto, and any other soliciting materials, when they become available because they will contain important information. Shareholders may obtain, free of charge, copies of the Consent Statement, and other relevant documents, at www.sec.gov.

Participants in the Solicitation

Mr. Smolyansky and Mrs. Smolyansky filed the Consent Statement with the SEC on July 2, 2025, which relates to, among other matters, their intent to seek shareholder consents to remove Lifeway’s current board of directors and elect each of Ludmila Smolyansky, Edward Smolyansky, Richard Beleutz, Cindy Curry, Michael Leydervuder, George Sent and Robert Whalen (each, a “Nominee”) as directors of Lifeway. In addition, Mr. Smolyansky filed a preliminary proxy statement with the SEC on April 16, 2025, relating to his intent to nominate each Nominee for election as directors of Lifeway at its 2025 annual meeting of shareholders. Each Nominee may be deemed to have an interest in any solicitation of written consents or proxies by Mr. Smolyansky and Mrs. Smolyansky, as applicable.

The participants (the “Participants”) in any solicitation of shareholder consents or proxies by Mr. Smolyansky or Mrs. Smolyansky may be deemed to be Mr. Smolyansky, Mrs. Smolyansky and each of the other Nominees. Lifeway shareholders can obtain information regarding the Participants and their direct and indirect interests, by security holdings or otherwise, in Appendix B to the Consent Statement, which information is incorporated herein by reference.

FAQ

What coupon will the BMO Barrier Notes pay?

The notes pay 0.8058% per month (≈9.67% annual), or $8.058 per $1,000, on the 3rd day of each month starting August 03 2025.

How is principal affected if the 75% trigger is breached?

If either index closes below its trigger on any day and ends below its initial level, maturity payment falls 1% for every 1% decline in the worst-performing index; loss can reach 100%.

Which index levels are used as triggers?

RTY trigger: 1,631.276; SPX trigger: 4,653.71 (both 75% of their June 30 2025 initial levels).

Will the notes be listed for trading?

No. The notes will not list on any exchange. BMOCM may provide secondary bids but is not obligated.

What is the estimated initial value and why is it below par?

BMO’s model values the notes at $989.30 per $1,000, below issue price due to selling commissions, hedging costs, and issuer funding spread.

What are the key dates for investors?

Pricing: 30-Jun-2025; Settlement: 03-Jul-2025; Valuation: 29-Jul-2026; Maturity: 03-Aug-2026.