CWGL 10-K & 10-Q changes, risk factors and insider trading

The impact of U.S. and worldwide economic trends and financial market conditions could materially and adversely affect our business, liquidity, financial condition and results of operations. We are subject to risks associated with adverse economic conditions in the U.S. and globally, including an economic slowdown or recession, inflation, changes in prevailing interest rates, and the disruption, volatility and tightening of credit and capital markets. Unfavorable global or regional economic conditions could materially and adversely impact our business, liquidity, financial condition and results of operations. Various factors, including the potential impacts of geopolitical uncertainties and international conflicts, inflationary conditions and fluctuating interest rates, have caused disruptions in the U.S. and global economy, and uncertainty regarding general economic conditions, including concerns about a potential U.S. or global recession, may lead to decreased consumer spending on discretionary items, including wine. In general, positive conditions in the broader economy promote customer spending, while economic weakness generally results in a reduction of customer spending. Unemployment, tax increases, governmental spending cutscuts, prolonged government shutdowns, or a return to high levels of inflation could affect consumer spending patterns and purchases of our wines and other alcoholic beverage products. These conditions could also create or worsen credit issues, cash flow issues, access to credit facilities and other financial hardships for us and our suppliers, distributors, accounts and consumers. An inability of our suppliers, distributors and retailers to access liquidity could impact our ability to produce and distribute our wines.

We are dependent on certain key personnel. Our success depends to some degree upon the continued service of Jennifer L. Locke, our Chief Executive Officer; Adam D. Howell, our Chief Financial Officer; Nicolas M.E. Quillé, our Chief Operating OfficerWinemaking and ChiefOperations WinegrowerOfficer; and our winemakers at our various facilities. The loss of the services of one or more of our key employees could harm our business and our reputation and negatively impact our profitability, particularly if one or more of our key employees resigns to join a competitor or to form a competing company.

We compete for shelf space in retail stores and for marketing focus by our independent distributors, most of whom carry extensive product portfolios. In accordance with federal and state regulatory requirements, we sell our products nationwide primarily through independent distributors and brokers for resale to retail outlets, restaurants, hotels and private clubs across the U.S. and in some overseas markets. Sales to distributors are expected to continue to represent a substantial portion of our net revenues in the future. During 2024,2025, onetwo distributordistributors represented approximately 30%22% and 17% of our total net sales.sales, respectively. A change in our relationship with any of our significant distributors could harmhave a material impact on our business and reducehave a material impact on our sales. The laws and regulations of several states prohibit changes of distributors, except under certain limited circumstances, making it difficult to terminate a distributor for poor performance without reasonable cause, as defined by applicable statutes and regulations. Any difficulty or inability to replace distributors, poor performance of our major distributors or our inability to collect accounts receivable from our major distributors could harmhave a material impact on our business. There can be no assurance that the distributors and retailers we use will continue to purchase our products or provide our products with adequate levels of promotional support. Consolidation at the retail tier, among club and chain grocery stores in particular, can be expected to heighten competitive pressure to increase marketing and sales spending or constrain or reduce prices.

A reduction in consumer demand for wines could harm our business. There have been periods in the past in which there were substantial declines in the overall per capita consumption of wine products in our markets. Wine consumption in the United States has experienced a decline inover 2024the last several years and declines in future years are possible. A limited or general decline in consumption in one or more of our product categories could occur in the future due to a variety of factors, including: a general decline in economic conditions; changes in consumer spending habits and preferences in alcoholic beverage products; increased concern about the health consequences of consuming alcoholic beverage products and about drinking and driving; a trend toward a healthier diet including lighter, lower calorie beverages, such as diet soft drinks, juices and water products; the increased activity of anti-alcohol consumer groups; and increased federal, state or foreign excise and other taxes on alcoholic beverage products. Reductions in demand and revenues would reduce profitability and cash flows.

If our intangible assets or goodwill become impaired, we may be required to record significant charges to earnings. We have substantial intangible assets and goodwill on our consolidated balance sheet as a result of acquisitions we have completed, in particular the acquisition of Seghesio Family Vineyards. We review intangible assets and goodwill for impairment annually or more frequently if events or circumstances indicate that these assets might be impaired. Application of impairment tests requires judgment. A significant deterioration in a key estimate or assumption or a less significant deterioration to a combination of assumptions or the sale of a part of a reporting unit could result in an impairment charge in the future, which could have a significant adverse impact on our reported earnings.

Despite the systems and processes the Company has in place to monitor, detect, mitigate and remediate potential vulnerabilities, on June 30, 2024, the Company detected a cybersecurity incident in which an unauthorized third party gained access to certain information systems of the Company. Upon detection, the Company promptly initiated response protocols and began taking steps to contain, assess and remediate the cybersecurity incident, including launching an investigation with external cybersecurity experts. Although the Company believes that while the cybersecurity incident has not had a material impact on the Company’s overall financial condition or results of operations, its evaluation and response to this incident are ongoing, and the Company may discover other impacts or new events related to this incident that may occur that could affect the Company’s financial condition or results of operations. As of December 31, 2025, incurred cybersecurity expenses limited to the Company’s insurance deductibles are recorded and reflected within the Company’s consolidated financial statements and the Company believes such amounts are not material. The Company continues to evaluate additional measures to strengthen its surveillance of cybersecurity threats and to prevent unauthorized cybersecurity incidents on or conducted through its information systems and to strengthen its information backup protocols.

Any expansion of our existing facilities or development of new vineyards or wineries may be limited by present and future zoning ordinances, environmental restrictions and other legal requirements. In addition, new regulations or requirements, changes in trade and tariff policies, or increases in excise taxes, income taxes, and property and sales taxes, could affect our financial condition or results of operations. From time to time, many states consider proposals to increase, and some of these states have increased, state alcohol excise taxes. New or revised regulations or increased licensing fees, requirements or taxes could have a material adverse effect on our financial condition, results of operations or cash flows.

Our indebtedness could have a material adverse effect on our financial health. In March 2013, we entered into a revolving credit facility, comprised of a revolving loan facility and a term loan facility, with American AgCredit, FLCA (“American AgCredit”) and CoBank, FCB as joint lenders that is secured by certain real property. On June 15, 2023, we amended the revolving credit facility in order to, among other things, extend the termination date of the revolving loan and the term revolving loan to May 31, 2028 and amend provisions related to the interest rate applicable to the borrowings under the revolving credit facility to substitute the London Interbank Offered Rate with the Secured Overnight Financing Rate. Financing arrangements that bear interest at variable rates could increase our vulnerability to interest rate changes. We plan to rely upon the revolving credit facility for potential incremental capital project funding and in the future may use it for acquisitions. No amounts are currently outstanding under the revolving credit facility. In November 2015, our subsidiary, Pine Ridge Winery, LLC, entered into a senior secured term loan agreement with American AgCredit for an aggregate principal amount of $16.0 million. In June 2017, our subsidiary, Double Canyon Vineyards, LLC, entered into a senior secured term loan agreement with American AgCredit for an aggregate principal amount of $10.0 million. We are guarantor of the term loans entered into by our subsidiaries, Double Canyon Vineyards, LLC and Pine Ridge Winery, LLC, which are collateralized by certain real property. The term loans entered into by our subsidiaries, Double Canyon Vineyards, LLC and Pine Ridge Winery, LLC, and the revolving credit facility include covenants that require the maintenance of specified debt and equity ratios, limit the incurrence of additional indebtedness, limit dividends and other distributions to shareholdersstockholders and limit certain mergers, consolidations and sales of assets. If we are unable to comply with these covenants, outstanding amounts could become immediately due and/or there could be a substantial increase in the rate of borrowing.

Negative developments affecting the financial services industry could adversely affect our access to capital, liquidity, financial condition and results of operations. DuringWe 2023,often closuresmaintain ofour Siliconcash Valleyat Bank,financial Signatureinstitutions Bankin andbalances Firstthat Republic Bank and their placement into receivership withexceed the current Federal Deposit Insurance Corporation (“FDIC”) created bank-specific and broader financial institution liquidity risk concerns. The FDIC, the U.S. Federal Reserve and the U.S. Department of the Treasury jointly announced that depositors at Silicon Valley Bank, Signature Bank and First Republic Bank would have access to their funds, even those in excess of the standard FDIC insurance limits. Although we do not maintain any accounts with Silicon Valley Bank, Signature Bank, or First Republic, we do maintain our cash at other financial institutions, often in balances that exceed the current FDIC insurance limits. If any of our lenders or counterparties to any of our financial instruments were to be placed into receivership or become insolvent, our ability to access our capital and liquidity and process transactions could be impaired and could have a material adverse effect on our business, operations and financial condition. In addition, if any of our suppliers, customers or other parties with whom we conduct business are unable to access funds or lending arrangements with relevant financial institutions, such parties’ ability to pay their obligations to us or to enter into new arrangements with us could be adversely affected. In the event of any future closure of other banks or financial institutions, there is no guarantee that the FDIC, the U.S. Federal Reserve and the U.S. Department of the Treasury will provide access, on a timely basis or at all, to uninsured funds. We cannot predict the effects of future disruptions in the financial services industry on our financial condition and operations, nor that of our suppliers, vendors or customers.

Future sales of our shares could depress the market price of our common stock. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Any disposition by any of our large shareholdersstockholders of our common stock in the public market, or the perception that such dispositions could occur, could adversely affect prevailing market prices of our common stock.

The Company’s wines are primarily sold to distributors, who then sell to retailers and restaurants. AsWhere permitted under federal, state and local regulations,permitted, the Company has also beensells placing increased emphasis on generating revenue from direct salesdirectly to consumers which occur through wine clubs, at the wineries’ tasting rooms and through the Ecommerce channel. Direct sales to consumers are more profitable for the CompanyCompany. as it is able to sell its products at a price closer to retail prices rather than the wholesale price sold to distributors. From time to time, theThe Company may occasionally sell grapes or bulk wine becausewhenever such grapes or bulk wine does not meet the quality standards for the its products,standards, market conditions have changed resulting in reduced demand for certain products, or because the Company may have produced more of a particular varietal than it can use. When these sales occur, they may result in a loss.

Cost of sales includes grape and bulk wine costs, whether purchased or produced from the Company’s controlled vineyards, crush costs, winemaking and processing costs, bottling, packaging, warehousing and shipping and handling costs. For the Company’s produced grapes, grape costs include annual farming labor costs, harvest costs and depreciation of vineyard assets. For wines that age longer than one year, winemaking and processing costs continue to be incurred and capitalized to the cost of wine, which can range from three to 36 months. Reductions to the carrying value of inventories are also included in costscost of sales.

As discussed in Item 1. Business of this Report, the wine industry in general, historically experiences seasonal fluctuations in revenues and net income. The Company typically has lower net sales and net income during the first quarter and higher net sales and net income during the fourth quarter due to seasonal holiday buying as well as wine club shipment timing. The Company anticipates similar trends in the future.future but will monitor and provide updates if the acquisition of the Raeburn wine brand significantly impacts these trends in 2026 and beyond.

InflationInflation, Tariffs and Market Conditions

Inventory – Inventory consists of mainly bulk and bottled wine and is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out method. Costs associated with winemaking, and other costs associated with the manufacturing of products for resale, are recorded as inventory. In accordance with general practice within the wine industry, wine inventories are included in current assets, although a portion of such inventories may be aged for periods longer than one year. As required, the Company reduces the carrying value of inventories that are obsolete or in excess of estimated usage to estimated net realizable value. The Company’s estimates of net realizable value are based on analyses and assumptions including, but not limited to, historical usage, projected future demand and market requirements. Reductions to the carrying value of inventories are recorded in cost of sales. If future demand and/or profitability for the Company’s products are less than previously estimated, then the carrying value of the inventories may need to be reduced, resulting in additional expense and reduced profitability. The Company’s inventory write-downs may consist of reductions to bottled or bulk wine inventory. Crop insurance proceeds from farming losses may be recorded as offsets against previously recognized write-downs. Inventory write-downs of $2.1 million and $0.9 million were recorded during each of the years ended December 31, 20242025 and 2023.2024, respectively.

Vineyard Development Costs – The Company capitalizes internal vineyard development costs when developing new vineyards or replacing or improving existing vineyards. These costs consist primarily of the costs of the vines and expenditures related to labor and materials to prepare the land and construct vine trellises. Amortization of such costs is recorded on a straight-line basis over the estimated economic useful life of the vineyard, which can be up to 25 years. As circumstances warrant, the Company re-evaluates the recoverability of capitalized costs, and will record impairment charges if required. The Company recorded $1.1 million and $0.4 million of asset disposals related to vineyard development during each of the yearyears ended December 31, 20242025 and there2024, wererespectively. noAs significantpart assetof disposalsthe relatedCompany’s ongoing vineyard and production review process to vineyardalign developmentestate duringgrape sourcing with long-term strategic plans, and in a continued effort to support consistent wine quality and profitability, the yearCompany endedremoved Decembervineyard 31,acreage 2023.that was underperforming or did not align with long-term production plans.

Review of Intangible and Long-lived Assets for Impairment – For intangible assets with definite lives, impairment testing is required if conditions exist that indicate the carrying value may not be recoverable. For intangible assets with indefinite lives and for goodwill, impairment testing is required at least annually or more frequently if events or circumstances indicate that these assets might be impaired. Other than goodwill, the Company currently has no intangible assets with indefinite lives. All of the Company’s goodwill and substantially all definite-lived intangible assets resulted from the acquisitions of Seghesio Family Vineyards in May 2011 and Seven Hills Winery in January 2016. Amortization of definite-lived intangible assets is recorded on a straight-line basis over the estimated useful lives of the assets, which range from 10 to 20 years. The Company evaluates goodwill for impairment at the end of each year or more often if a triggering event occurs,occurs. and has concluded that goodwill was not impaired duringDuring the yearsCompany’s qualitative assessment for the year ended December 31, 20242025, it determined goodwill associated with these reporting units was more likely than not to be impaired. The persistent, multi-year downturn of the wine industry and 2023.declining market conditions for both consumption and production indicated a potential longer-term shift within the industry. In accordance with FASB ASC 350, the Company performed a quantitative impairment test as the considerations of these triggering events on the Company’s outlook of its financial performance lead management to believe goodwill is more likely than not to be impaired. Based on the results of the quantitative impairment test performed at Seghesio Family Vineyards and Seven Hills Winery, the Company concluded goodwill associated with both reporting units were fully impaired for the year ended December 31, 2025. The Company recorded $1.3 million of goodwill impairment for the year ended December 31, 2025. No goodwill impairment was recorded for the year ended December 31, 2024. For additional information, see Note 7 “Goodwill and Intangible and Other Non-Current Assets” included in Part IV, Item 15 of this Report.

Recoverability of long-lived assets is measured using a comparison of the carrying amount of an asset group to the fair value or future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company groups its long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (or asset group). This would typically be at the propertywine estate and brand level which is discussed in Item 1. Business of this Report.

The Company recorded no impairment charges for long-lived assets during the years ended December 31, 20242025 and 2023.2024.

Wholesale net sales increaseddecreased $0.2$5.6 million, or 1%,14%, in 20242025 as compared to 2023,2024, primarily driven by ana increasedecrease in domestic wine sales of $4.0 million and a decrease in export wine sales as a result of increased$1.6 shipments to key markets.million.

Direct to Consumer net sales increaseddecreased $0.5$1.5 million, or 2%,6%, in 20242025 as compared to 2023.2024. The increaseoverall decrease was primarily driven by salesa increasesdecrease in Ecommercesales from wine clubs and tasting rooms partiallyas offsetcompared byto 2024. The Company experienced a decrease in wine club salesmemberships asand comparedtasting toroom 2023. Current year promotions drove the increasevisitations in 2025. Ecommerce sales for 2025 were slightly above 2024, yielding positive momentum and higher visitations drove the increase of sales within tasting rooms. The decreasegrowth in wineconsecutive clubyears salesdespite ischallenging aindustry result of lower club memberships in the current year compared to 2023.conditions.

Other net sales, which include bulk wine and grape sales, custom winemaking services, event fees, tasting fees and non-wine retail sales, decreased $0.2$0.8 million, or 4%,20%, in 20242025 as compared to 2023.2024. The decrease was primarily driven by lower salesrevenue ofgenerated excessfrom custom winemaking services, bulk wine sales, and custom winemaking service revenues partially offset by higher sales generated from tasting fees and non-wine retail sales.revenue.

Wholesale gross profit increaseddecreased $1.3$2.2 million, or 8%,13%, in 20242025 as compared to 20232024 primarily driven by margina improvements.decrease in overall shipments. Wholesale gross margin percentage, which is defined as wholesale gross profit as a percentage of wholesale net sales, increasedfor 290the basiscurrent pointsyear drivenwas by sales mix of higher priced wines as well as lower cost vintages when comparedcomparable to 2023.2024.

Direct to Consumer gross profit decreased $0.7 million, or 4%, in 2025 as compared to 2024 wasprimarily comparabledriven toby 2023.a decrease in overall wine sales. Direct to Consumer gross margin percentage decreasedincreased 130100 basis points in 20242025 as compared to 2023,2024, primarily driven by channelsales mix of lowerhigher margin wines sold through wine club sales and higher Ecommerce sales.clubs.

“Other” includes gross profit (loss) on bulk wine and grape sales, custom winemaking services, event fees, tasting fees, non-wine retail sales, and inventory write-downs. OtherProfitability grossdecreased profit increased $0.1$1.4 million, or 18%,201%, in 20242025 as compared to 20232024, and is primarily driven by lowerhigher inventory write-downs.write-downs related to inventory expected to be sold at a loss due to current market conditions.

Sales and marketing expenses increaseddecreased $0.8$1.3 million, or 5%,7%, in 20242025 as compared to 20232024 primarily driven by increaseddecreased compensationspend expenses,on sales incentives,selling and marketingpromotional expenses.expenses in line with lower overall sales, product design, events, and other professional services.

Interest expense, net, in 2025 decreased slightly in 2024.comparison Theto decrease2024 wasdue primarily driven byto lower interest expense on declining principal balances on the 2015 Term Loan and 2017 Term Loans.Loan.

Other income, net, decreasedincreased $1.3$3.5 million, or 41%,191%, in 20242025 as compared to 20232024 primarily driven by a lower$2.5 million insurance settlement payout for $0.3 million received inwith the current year compared to the $1.9 million settlement payout received in the previous year from the Fire Victim Trust (formed in connection with PG&E Corporation and Pacific Gas and Electric Company’s joint plan of reorganization under Chapter 11)underwriters related to the 2017 wildfires.wildfires and a $1.6 million settlement with a utility company related to the 2020 wildfires, both of which impacted the Company’s operations and damaged its inventory. The overall net decreaseincrease was partially offset by increaseddecreased investment income correlateddriven withby a higherlower interest rate environment in the current year.

The Company’s effective income tax provisionrate decreasedwas $0.930.0% millionfor in 20242025 as compared to 2023.24.1% for 2024. The increase in the effective income tax rate was 24.1%primarily for 2024 as compareddue to 26.9%changes forin 2023.state apportionment during the prior year which yielded a larger tax benefit in the initial year of change. The difference between the consolidated effective income tax rate and the U.S. federal statutory rate for 20242025 and 20232024 was primarily attributable to state income taxes and other nondeductible items.

The Company’s principal sources of liquidity are its available cash and cash equivalents, investments in available for sale securities, funds generated from operations and bank borrowings. The Company’s primary cash needs are to fund working capital requirements and capital expenditures. The Company has maintained adequate liquidity to meet working capital requirements, fund capital expenditures, meet payroll, repay scheduled principal and interest payments on debt, and maintain compliance with debt covenants. The Company’s capital program is designed to operate within or near operating cash flow and may fluctuate with strategic initiatives and other factors impacting cash flow. The Company had an early start to the harvest season in 2024, leading to a significant number of grower payments to be made in the current year (i.e., 2024) instead of such payments being made in the subsequent year (i.e., 2025) as would have been typically expected. Adjusted for these grower payments, the Company’s operating cash flow fully funded its capital expenditures in 2024.

In response to the current macro-economic environment,environment and challenged markets within the wine industry, the Company continued to protect its financial position and liquidity as evidenced by the following items: the Company managed both operating expense and capital expenditure increases closely, limited discretionary spending, and actively managed its working capital, including supporting its business partners and closely monitoring its customers’ solvency and collectability. As a result, the Company believes that cash flows generated from operations and its cash, cash equivalents, and marketable securities balances, as well as its borrowing arrangements, will be sufficient to meet its presently anticipated cash requirements for capital expenditures, working capital, debt obligations and other commitments during the next twelve months. For additional information regarding the Company’s debt obligations and purchase contracts, refer to Note 9 “Debt” and, Note 14 “Commitments and Contingencies” and Note 16 “Subsequent Events” included in Part IV, Item 15, Exhibits and Financial Statement Schedules, of this Report. Any projections of future cash needs and cash flows beyond the next twelve months are subject to risks and uncertainties as discussed within Item 1A. Risk Factors of this Report, but the Company believes cash flows generated from operations combined with its sources of liquidity as discussed above will be sufficient to meet its long-term cash requirements.

In March 2013, Crimson and its subsidiaries entered into a $60.0 million revolving credit facility (the “Revolving Credit Facility”) with American AgCredit, as agent for the lenders. The Revolving Credit Facility is comprised of a revolving loan facility (the “Revolving Loan”) and a term revolving loan facility (the “Term Revolving Loan”), which together are secured by substantially all of Crimson’s assets. On June 15, 2023, the Company executed a fifth amendment to the Revolving Credit Facility with American AgCredit, which extended the termination date of the Revolving Loan and the Term Revolving Loan to May 31, 2028 along with updates to other terms of the Revolving Credit Facility. The Revolving Loan is for up to $10.0 million of availability in the aggregate for a five year term, and the Term Revolving Loan is for up to $50.0 million in the aggregate for a fifteen year term. In addition to unused line fees ranging from 0.125% to 0.225%, rates for the borrowings are priced based on a performance grid tied to certain financial ratios and the Term Secured Overnight Financing Rate. The Revolving Credit Facility can be used to fund acquisitions, capital projects and other general corporate purposes. Covenants include the maintenance of specified debt and equity ratios, limitations on the incurrence of additional indebtedness, limitations on dividends and other distributions to stockholders and restrictions on certain mergers, consolidations, and sales of assets. Crimson and its subsidiaries were in compliance with all debt covenants as of December 31, 2024.2025. NoAs of December 31, 2025, no amounts havehad been borrowed under the Revolving Credit FacilityFacility. toIn date.connection with the asset acquisition on February 9, 2026 as described below, we borrowed an aggregate of $29.0 million under the Revolving Credit Facility.

Net cash provided by operating activities was $6.0$1.4 million in 2023,2025, consisting primarily of $3.1$0.6 million of net income adjusted for $10.1$12.9 million of non-cash items and $7.2$12.1 million of net cash outflows related to changes in operating assets and liabilities. Adjustments for non-cash items primarily consist of depreciation, amortization, loss on the write-down of inventory, goodwill impairment, net loss on disposal of property and equipment, and deferred income taxes, and stock-based compensation.taxes. The change in operating assets and liabilities was primarily due to an increase in inventory, accounts receivable, and other current assets,assets partiallyand offset by an increasedecrease in accounts payable and customer deposits.payable.

In March 2023, the Company commenced the 2023 Repurchase Program that provided for the repurchase of up to 2,000,000 shares of outstanding common stock. Under the 2023 Repurchase Program, any repurchased shares are constructively retired. Effective March 21, 2025, upon approval of the Board of Directors, the Company suspended the 2023 Repurchase Program. The 2023 Repurchase Program expires on December 31, 2026. During the twelve months ended December 31, 2025 and prior to the suspension of the 2023 Repurchase Program, the Company repurchased 58,252 shares of its common stock at an average purchase price of $5.92 per share for an aggregate purchase price of $0.3 million. In 2024, the Company repurchased a total of 389,299 shares of its common stock at an average purchase price of $6.02 per share for an aggregate purchase price of $2.4 million. In 2023, the Company repurchased a total of 414,634 shares of its common stock at an average purchase price of $6.25 per share for an aggregate purchase price of $2.6 million. The Company’s sharerepurchase repurchases werewas funded through cash on hand, and the shares were retired.

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” of the 2025 Report, which could materially affect the Company’s business, results of operations or financial condition. The risks described in the 2025 Report are not the only risks it faces. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may eventually prove to materially and adversely affect its business, results of operations or financial condition.

Quantities or results referred to as “current quarter” and “current three-monththree and six-month period” refer to the three and six months ended MarchJune 31,30, 2026.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The unaudited interim condensed consolidated financial statements, which include results of Crimson Wine Group, Ltd. and all of its subsidiaries, collectively known as “we”, “Crimson”, “our”, “us”, or “the Company”, have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and with the general instruction for quarterly reports filed on Form 10-Q and Article 8 of Regulation S-X. All statements, other than statements of historical fact, regarding the Company’s strategy, future operations, financial position, prospects, plans, opportunities, and objectives, such as the Company’s statements regarding the acquisition of the Raeburn Assets providing the Company with a strategic opportunity to expand its portfolio,fact constitute “forward-looking statements.statements” and represent current expectations, estimates, assumptions, and projections of future events. The words “may,” “will,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “potential,” or “continue” and similar types of expressions identify such statements, although not all forward-looking statements contain these identifying words. Forward-looking statements includeinclude, but are not limited to, those relating to the Company’s financial condition,future results of operations, plans,financial objectives,condition and performance; plans; objectives; strategy; business; operations and facilities; seasonality; opportunities; and trends relating to the Company’s industry. Forward-looking statements also include expectations about the future performance,benefits andof business.the Company’s acquisitions, such as the expectation that the acquisition of the Raeburn Assets provide the Company with a strategic opportunity to expand its portfolio. These statements are based upon information that is currently available to the Company and its management’s current expectations speak only as of the date hereof and are subject to risks and uncertainties. The Company expressly disclaims any obligation, except as required by federal securities laws, or undertaking to update or revise any forward-looking statements contained herein to reflect any change or expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statements are based, in whole or in part. The Company’s actual results may differ materially from the results discussed in or implied by such forward-looking statements.

The Company’s wines are primarily sold to wholesale distributors, who then sell to retailers and restaurants. The Company sells wine (through distributors and directly) to restaurants, bars, and other hospitality locations (“On-Premise”). The Company also sells wine (through distributors and directly) to supermarkets, grocery stores, liquor stores, and other chains, third-party Ecommerce and independent stores (“Off-Premise”). As permitted under federal, state and local regulations, the Company has increased its emphasis on generating revenue from direct sales to consumers, which occur through wine clubs, at the wineries’ tasting rooms, and through the Ecommerce channel. Direct sales to consumers are more profitable for the Company as it is able to sell its products at a price closer to retail prices rather than the wholesale price sold to distributors. From time to time, the Company may sell grapes or bulk wine because the grapes or wine do not meet the quality standards for its products, market conditionscondition have changedchanges resulting in reduced demand for certain products, or because the Company may have produced more of a particular varietal than it can use. When these sales occur, they may result in a loss.

As of MarchJune 31,30, 2026, wine inventory included approximately 1.11.0 million cases of bottled wine and bulk wine, both in various stages of the aging process. Cased wine is expected to be sold over the next 12 to 36 months and generally before the release date of the next vintage.

Due to trade tensions between the U.S. and Canada, shipments of the Company’s wines were suspended to Canada from the end of the first quarter throughout the second quarter of 2025. While export wine sales began to slowly resume in certain Canadian markets during the second half of 2025, the Company cannot predict when trade tensions will be reduced andor whether demand will return to levels observed prior to 2025. See “We are subject to risks from changes to the trade policies, regulations, and tariffs of the U.S. and foreign governments” under Part I, “Item 1A. Risk Factors” of the 2025 Report.

The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments. As of the date of this Report, the Company was aware of ongoing negotiations bythat one of its key distributors exploringwas engaged in ongoing negotiations to explore divestiture options in key markets in which the Company operates. AmountsIn July 2026, the same distributor filed for voluntary chapter 11 bankruptcy to pursue potential sale transactions and implement an orderly wind down of its remaining operations. Certain joint ventures affiliated with this distributor in key markets are not included in the chapter 11 filing. As of June 30, 2026, amounts due from this distributor aretotaled approximately $4.0$2.3 million of net accounts receivablereceivable, aswhile ofamounts Marchowed 31,by 2026,the noneCompany ofto whichthe requiredistributor reservestotaled $1.1 million in accordanceaccounts withpayable and accrued liabilities. Based on the Company’s reserve policy.policy, Theno Companyreserve has notbeen experienced historical lossrecognized with this distributor. Despite the Company’s ongoing effortsrespect to mitigatethese potentialamounts. losses from this distributor, theThe Company cannot predict the outcome of the distributor'snegotiations marketwith negotiationsthe distributor and aany portionbankruptcy ofproceedings. Consequently, changes in the Company’s accounts receivable deemed uncollectiblecollectible or the net financial exposure from this distributor could have a material impact on the Company’s consolidated financial position, liquidity or results of operations.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Wholesale net sales increased $4.4$3.8 million, or 55%,38%, in the current quarter as compared to the same quarter in 2025, with domestic wine sales primarily driving this increase as export wine sales were comparable to the prior year quarter. The increase in domestic wine sales was due primarily to an increased shipments of Raeburn wines from nearly two months of sales in the current quarter as the Company acquired the Raeburn Assets on February 9, 2026. ThePartially net increase in shipments of all other brands, primarily withinoffsetting the Pine Ridge brand, accounted for the remainder of theoverall increase in domestic wine sales was a net decrease in shipments of other brands in the current quarter overversus the prior year quarter.quarter, related to timing of distributor orders and transitions.

Direct to Consumer net sales decreased $0.4$0.3 million, or 7%,5%, in the current quarter as compared to the same quarter in 2025. The overall decrease was driven by reduced memberships within the wine clubs and lower average spend per guest through the tasting roomrooms. visitationsPerformance andwithin clubthese memberships thatchannels remained challenged withamid decliningweakening market conditions forand bothcontinued consumptionpressure andon discretionary spendingconsumer as compared to the same quarter in 2025.spending.

Other net sales, which include bulk wine and grape sales, custom winemaking services, event fees, tasting fees and non-wine retail sales, decreased $0.1 million, or 23%,sales in the current quarter aswere comparedcomparable to the same quarter in 2025. The decrease was primarily driven by lower bulk wine and grape sales in the current quarter as compared to the same quarter in 2025.

Wholesale gross profit increased $1.4$1.2 million, or 43%,32%, in the current quarter as compared to the same quarter in 2025 driven by an increase in overall shipments. Wholesale gross margin percentage, which is defined as wholesale gross profit as a percentage of wholesale net sales, decreased 331173 basis points in the current quarter as compared to the same quarter in 2025 primarily driven by the step-up in cost basis for the acquired Raeburn inventory. TheDuring negativethe impactcurrent quarter, the step-up in cost basis recognized through cost of sales on current quarterthe sales of acquired Raeburn inventory accounted for 489 basis points ofreduced total wholesale margins.margins by 631 basis points. The increase in cost basis was a result of the purchase price allocation performed at acquisition and will continue to have a negative impact on wholesale margins until the Company sells through the acquired inventory. See Note 2, “Acquisition of Raeburn Assets,” included in Part I, Item 1 of this Report for additional information.

Direct to Consumer gross profit decreased $0.2$0.4 million, or 6%,10%, in the current quarter as compared to the same quarter in 2025 driven by a decrease in overall case volume. Direct to Consumer gross margin percentage increaseddecreased 81354 basis points due to aan favorableunfavorable sales mix acrossfor thewine variousclub channelsshipments in the current quarter as compared to the same quarter in 2025.

“Other” includes gross profit (loss) on bulk wine and grape sales, custom winemaking services, event fees, tasting fees, non-wine retail sales, and inventory write-downs. Losses decreased $0.1 million, or 8%,60%, in the current quarter as compared to the same quarter in 2025 and was primarily driven by aimproved decreaseprofitability inon inventorysales write-downs.of bulk wine.

General and administrative expenses increased $0.4 million, or 11%,12%, in the current quarter as compared to the same quarter in 2025 due primarily to nonrecurring expenses relatedrelating to the acquisitionintegration of the Raeburn Assets.Assets into the Company’s operations.

Interest expense, net in the current quarter increased in comparison to the same quarter in 2025 due to additional interest incurred on the $29.0 million borrowings against the Revolving Credit Facility asin partconnection ofwith the acquisition of the Raeburn Assets. See Note 9, “Debt,” included in Part I, Item 1 of this Report for additional information.

The Company’s effective tax rates for the three months ended MarchJune 31,30, 2026 and 2025 were 26.9%24.9% and 27.5%,45.3%, respectively. The differencedecrease betweenin the Company’s effective tax rate is primarily attributable to an immaterial change in the estimated 2025 annual effective income tax ratesrate washaving primarilyan attributableoutsized toadjusting stateimpact incomeon taxesthe andprior otheryear permanent items.quarter.

In March 2013, Crimson and its subsidiaries entered into a $60.0 million revolving credit facility (the “Revolving Credit Facility”) with American AgCredit, FLCA (“American AgCredit”), as agent for the lenders. The Revolving Credit Facility is comprised of a revolving loan facility (the “Revolving Loan”) and a term revolving loan facility (the “Term Revolving Loan”), which together are secured by substantially all of Crimson’s assets. On June 15, 2023, the Company executed a fifth amendment to the Revolving Credit Facility with American AgCredit, which extended the termination date of the Revolving Loan and the Term Revolving Loan to May 31, 2028 along with updates to other terms of the Revolving Credit Facility. The Revolving Loan is for up to $10.0 million of availability in the aggregate for a five year term, and the Term Revolving Loan is for up to $50.0 million in the aggregate for a fifteen year term. In addition to unused line fees ranging from 0.125% to 0.225%, rates for the borrowings are priced based on a performance grid tied to certain financial ratios and the Term Secured Overnight Financing Rate. The Revolving Credit Facility can be used to fund acquisitions, capital projects, and other general corporate purposes. Covenants include the maintenance of specified debt and equity ratios, limitations on the incurrence of additional indebtedness, limitations on dividends and other distributions to stockholders and restrictions on certain mergers, consolidations, and sales of assets. In connection with the acquisition of the Raeburn Assets in February 2026, the Company borrowed an aggregate of $29.0 million under the Revolving Credit Facility. Since then, the Company has paid down a total of $7.0 million through June 30, 2026. As of MarchJune 31,30, 2026, $29.0$22.0 million in borrowings remained outstanding under the Revolving Credit FacilityFacility. following the acquisition of the Raeburn Assets. As of March 31, 2026, the remainingThe available borrowing capacity was $31.0 million under the Revolving Credit Facility.Facility is $38.0 million as of June 30, 2026. The Company was in compliance with all existing debt covenants under the Revolving Credit Facility as of MarchJune 31,30, 2026.

(i) On November 10, 2015, Pine Ridge Winery, LLC (“PRW Borrower”), a wholly-owned subsidiary of Crimson, entered into a senior secured term loan agreement (the “2015 Term Loan”) with American AgCredit for an aggregate principal amount of $16.0 million. Amounts outstanding under the 2015 Term Loan bear a fixed interest rate of 5.24% per annum. Principal and interest are payable in quarterly installments. The 2015 Term Loan will mature on October 1, 2040. The 2015 Term Loan can be used to fund acquisitions, capital projects, and other general corporate purposes. As of MarchJune 31,30, 2026, $9.4$9.3 million in principal was outstanding on the 2015 Term Loan, and unamortized loan fees were less than $0.1 million.

(ii) On June 29, 2017, Double Canyon Vineyards, LLC (collectively with the PRW Borrower, the “BorrowerBorrowers”), a wholly-owned subsidiary of Crimson, entered into a senior secured term loan agreement (the “2017 Term Loan”) with American AgCredit for an aggregate principal amount of $10.0 million. Amounts outstanding under the 2017 Term Loan bear a fixed interest rate of 5.39% per annum. Principal and interest are payable in quarterly installments. The 2017 Term Loan will mature on July 1, 2037. The 2017 Term Loan can be used to fund acquisitions, capital projects, and other general corporate purposes. As of MarchJune 31,30, 2026, $5.8$5.6 million in principal was outstanding on the 2017 Term Loan, and unamortized loan fees were less than $0.1 million.

Borrower’sBorrowers’ obligations under the 2015 Term Loan and 2017 Term Loan are guaranteed by the Company. All obligations of Borrowerthe Borrowers under the 2015 Term Loan and 2017 Term Loan are collateralized by certain real property of the Company. Borrower’sBorrowers’ covenants include the maintenance of a specified fixed charge coverage ratio and certain customary affirmative and negative covenants, including limitations on the incurrence of additional indebtedness, limitations on distributions to stockholders, and restrictions on certain investments, the sale of assets, and merging or consolidating with other entities. The Company was in compliance with all debt covenants under the 2015 Term Loan and the 2017 Term Loan as of MarchJune 31,30, 2026.

The following table summarizes the Company’s cash flow activities for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Net cash provided by operating activities was $2.4$8.6 million for the threesix months ended MarchJune 31,30, 2026, consisting primarily of $0.6$1.0 million of net loss adjusted for $2.3$4.7 million of non-cash items and $0.6$4.9 million net cash inflow related to changes in operating assets and liabilities. Adjustments for non-cash items primarily consist of depreciation, amortization, loss on the write-down of inventory, and other offsetting items. The change in operating assets and liabilities was primarily due to a decrease in inventory (excluding inventory acquired in the Raeburn acquisition) and another increasecurrent in customer deposits,assets, partially offset by a decrease in accounts payable and accrued liabilities and an increase in otheraccounts current assets.receivable.

Net cash provided by operating activities was $0.1$0.7 million for the threesix months ended MarchJune 31,30, 2025, consisting primarily of $0.9$1.1 million of net loss adjusted for $2.5$5.1 million of non-cash items and $1.5$3.4 million net cash outflow related to changes in operating assets and liabilities. Adjustments for non-cash items primarily consist of depreciation, amortization, loss on the write-down of inventory, and other offsetting items. The change in operating assets and liabilities was primarily due to a decrease in accounts payable and accrued liabilities and an increase in inventory and other current assets,inventory, partially offset by a decrease in accounts receivable and another increasecurrent in customer deposits.assets.

Cash (used in) provided by investing activities

Net cash used in investing activities was $37.3$38.8 million for the threesix months ended MarchJune 31,30, 2026, consisting primarily of the cash used to fund the acquisition of Raeburn Assets totaling $36.8$37.5 million and capital expenditures of $0.5$1.3 million.

Net cash usedprovided inby investing activities was $7.8$1.5 million for the threesix months ended MarchJune 31,30, 2025, consisting primarily of the net purchasesredemptions of available for sale investments of $7.7$3.0 millionmillion, andpartially offset by capital expenditures of $0.2$1.6 million.

Net cash provided by financing activities was $28.7$21.4 million for the threesix months ended MarchJune 31,30, 2026, consisting of $29.0 million in proceeds drawn from the Revolving Credit Facility to fund a portion of the acquisition of Raeburn Assets, partially offset by $7.0 million in aggregate payments on the Revolving Credit Facility and scheduled principal payments on the Company’s2015 2015Term Loan and 2017 Term LoansLoan of $0.3$0.6 million.million in the aggregate.

Net cash used in financing activities was $0.6$0.9 million for the threesix months ended MarchJune 31,30, 2025, consisting of scheduled principal payments on the 2015 Term Loan and 2017 Term Loan of $0.6 million in the aggregate and the repurchase of shares of the Company’s common stock at an aggregate purchase price of $0.3 million and scheduled principal payments on the Company’s 2015 and 2017 Term Loans of $0.3$0.4 million.

In March 2023, the Company commenced the 2023 Repurchase Program that provided for the repurchase of up to 2,000,000 shares of outstanding common stock. Under the 2023 Repurchase Program, any repurchased shares are constructively retired. Effective March 21, 2025, upon approval of the Board of Directors, the Company suspended the 2023 Repurchase Program. Due to the suspension of the 2023 Repurchase Program, there were no repurchases of shares during the threesix months ended MarchJune 31,30, 2026. During the threesix months ended MarchJune 31,30, 2025, the Company repurchased 58,252 shares of its common stock at an average purchase price of $5.92 per share for an aggregate purchase price of $0.3 million. The Company’s repurchase was funded through cash on hand, and the shares were retired. The 2023 Repurchase Program is set to expire on December 31, 2026.