falseQ22022000156215112/31P15Y00015621512022-01-012022-06-3000015621512022-08-05xbrli:shares00015621512022-06-30iso4217:USD00015621512021-12-31iso4217:USDxbrli:shares00015621512022-04-012022-06-3000015621512021-04-012021-06-3000015621512021-01-012021-06-3000015621512020-12-3100015621512021-06-300001562151us-gaap:CommonStockMember2022-03-310001562151us-gaap:AdditionalPaidInCapitalMember2022-03-310001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001562151us-gaap:RetainedEarningsMember2022-03-3100015621512022-03-310001562151us-gaap:RetainedEarningsMember2022-04-012022-06-300001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001562151us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001562151us-gaap:CommonStockMember2022-04-012022-06-300001562151us-gaap:CommonStockMember2022-06-300001562151us-gaap:AdditionalPaidInCapitalMember2022-06-300001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001562151us-gaap:RetainedEarningsMember2022-06-300001562151us-gaap:CommonStockMember2021-03-310001562151us-gaap:AdditionalPaidInCapitalMember2021-03-310001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001562151us-gaap:RetainedEarningsMember2021-03-3100015621512021-03-310001562151us-gaap:RetainedEarningsMember2021-04-012021-06-300001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001562151us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001562151us-gaap:CommonStockMember2021-04-012021-06-300001562151us-gaap:CommonStockMember2021-06-300001562151us-gaap:AdditionalPaidInCapitalMember2021-06-300001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001562151us-gaap:RetainedEarningsMember2021-06-300001562151us-gaap:CommonStockMember2021-12-310001562151us-gaap:AdditionalPaidInCapitalMember2021-12-310001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001562151us-gaap:RetainedEarningsMember2021-12-310001562151us-gaap:RetainedEarningsMember2022-01-012022-06-300001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-06-300001562151us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-300001562151us-gaap:CommonStockMember2022-01-012022-06-300001562151us-gaap:CommonStockMember2020-12-310001562151us-gaap:AdditionalPaidInCapitalMember2020-12-310001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001562151us-gaap:RetainedEarningsMember2020-12-310001562151us-gaap:RetainedEarningsMember2021-01-012021-06-300001562151us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-06-300001562151us-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-300001562151us-gaap:CommonStockMember2021-01-012021-06-30cwgl:winery0001562151cwgl:WholesaleDistributorSalesMembersrt:MinimumMember2022-01-012022-06-300001562151srt:MaximumMembercwgl:WholesaleDistributorSalesMember2022-01-012022-06-300001562151cwgl:BulkWineSalesMember2022-01-012022-06-300001562151us-gaap:RealEstateLoanMember2021-06-30utr:acre0001562151us-gaap:RealEstateLoanMember2021-06-012021-06-30xbrli:purecwgl:payment0001562151cwgl:EquipmentLoanMember2021-06-300001562151us-gaap:LandAndLandImprovementsMember2022-06-300001562151us-gaap:LandAndLandImprovementsMember2021-12-310001562151srt:MinimumMemberus-gaap:BuildingAndBuildingImprovementsMember2022-01-012022-06-300001562151srt:MaximumMemberus-gaap:BuildingAndBuildingImprovementsMember2022-01-012022-06-300001562151us-gaap:BuildingAndBuildingImprovementsMember2022-06-300001562151us-gaap:BuildingAndBuildingImprovementsMember2021-12-310001562151srt:MinimumMemberus-gaap:MachineryAndEquipmentMember2022-01-012022-06-300001562151srt:MaximumMemberus-gaap:MachineryAndEquipmentMember2022-01-012022-06-300001562151us-gaap:MachineryAndEquipmentMember2022-06-300001562151us-gaap:MachineryAndEquipmentMember2021-12-310001562151cwgl:VineyardsAndVineyardImprovementsMembersrt:MinimumMember2022-01-012022-06-300001562151cwgl:VineyardsAndVineyardImprovementsMembersrt:MaximumMember2022-01-012022-06-300001562151cwgl:VineyardsAndVineyardImprovementsMember2022-06-300001562151cwgl:VineyardsAndVineyardImprovementsMember2021-12-310001562151cwgl:CavesMembersrt:MinimumMember2022-01-012022-06-300001562151srt:MaximumMembercwgl:CavesMember2022-01-012022-06-300001562151cwgl:CavesMember2022-06-300001562151cwgl:CavesMember2021-12-310001562151us-gaap:AssetUnderConstructionMember2022-06-300001562151us-gaap:AssetUnderConstructionMember2021-12-310001562151us-gaap:ConstructionInProgressMember2022-06-300001562151us-gaap:ConstructionInProgressMember2021-12-310001562151us-gaap:CertificatesOfDepositMember2022-01-012022-06-300001562151us-gaap:CertificatesOfDepositMember2022-06-300001562151us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2022-06-300001562151us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel2Member2022-06-300001562151us-gaap:CertificatesOfDepositMember2021-01-012021-12-310001562151us-gaap:CertificatesOfDepositMember2021-12-310001562151us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2021-12-310001562151us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel2Member2021-12-310001562151cwgl:AmericanAgcreditFlcaMember2022-06-300001562151cwgl:AmericanAgcreditFlcaSecondTermLoanMember2022-06-300001562151srt:MinimumMembercwgl:BrandMember2022-01-012022-06-300001562151srt:MaximumMembercwgl:BrandMember2022-01-012022-06-300001562151cwgl:BrandMember2022-06-300001562151cwgl:BrandMember2021-12-310001562151us-gaap:DistributionRightsMembersrt:MinimumMember2022-01-012022-06-300001562151us-gaap:DistributionRightsMembersrt:MaximumMember2022-01-012022-06-300001562151us-gaap:DistributionRightsMember2022-06-300001562151us-gaap:DistributionRightsMember2021-12-310001562151cwgl:LegacyPermitsMember2022-01-012022-06-300001562151cwgl:LegacyPermitsMember2022-06-300001562151cwgl:LegacyPermitsMember2021-12-310001562151us-gaap:TrademarksMember2022-01-012022-06-300001562151us-gaap:TrademarksMember2022-06-300001562151us-gaap:TrademarksMember2021-12-310001562151cwgl:AmericanAgcreditFlcaMemberus-gaap:RevolvingCreditFacilityMember2022-06-300001562151cwgl:AmericanAgcreditFlcaMemberus-gaap:RevolvingCreditFacilityMember2021-12-310001562151cwgl:AmericanAgcreditFlcaMember2021-12-310001562151cwgl:AmericanAgcreditFlcaSecondTermLoanMember2021-12-310001562151us-gaap:RevolvingCreditFacilityMember2022-06-300001562151us-gaap:RevolvingCreditFacilityMember2022-01-012022-06-300001562151cwgl:RevolvingCreditFacilityBMember2022-06-300001562151cwgl:RevolvingCreditFacilityBMember2022-01-012022-06-300001562151srt:MinimumMember2022-01-012022-06-300001562151srt:MaximumMember2022-01-012022-06-3000015621512021-05-242021-05-240001562151cwgl:A2022RepurchaseProgramMember2022-03-310001562151cwgl:A2022RepurchaseProgramMember2022-01-012022-06-300001562151us-gaap:EmployeeStockOptionMembercwgl:A2013PlanMember2013-02-280001562151cwgl:A2022PlanMemberus-gaap:EmployeeStockOptionMemberus-gaap:SubsequentEventMember2022-07-3100015621512019-12-012019-12-3100015621512021-07-012021-07-31cwgl:increment00015621512022-03-012022-03-31cwgl:tranche0001562151cwgl:AwardDateOneMember2022-06-300001562151cwgl:AwardDateTwoMember2022-06-300001562151cwgl:AwardDateThreeMember2022-06-300001562151cwgl:AwardDateOneMember2022-01-012022-06-300001562151cwgl:AwardDateTwoMember2022-01-012022-06-300001562151srt:MinimumMembercwgl:AwardDateThreeMember2022-01-012022-06-300001562151srt:MaximumMembercwgl:AwardDateThreeMember2022-01-012022-06-300001562151cwgl:AwardDateThreeMember2022-01-012022-06-30cwgl:segment0001562151cwgl:WholesalersMemberus-gaap:OperatingSegmentsMember2022-04-012022-06-300001562151cwgl:WholesalersMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300001562151cwgl:DirectToConsumersMemberus-gaap:OperatingSegmentsMember2022-04-012022-06-300001562151cwgl:DirectToConsumersMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300001562151cwgl:CorporateAndReconcilingItemsMember2022-04-012022-06-300001562151cwgl:CorporateAndReconcilingItemsMember2021-04-012021-06-300001562151cwgl:WholesalersMemberus-gaap:OperatingSegmentsMember2022-01-012022-06-300001562151cwgl:WholesalersMemberus-gaap:OperatingSegmentsMember2021-01-012021-06-300001562151cwgl:DirectToConsumersMemberus-gaap:OperatingSegmentsMember2022-01-012022-06-300001562151cwgl:DirectToConsumersMemberus-gaap:OperatingSegmentsMember2021-01-012021-06-300001562151cwgl:CorporateAndReconcilingItemsMember2022-01-012022-06-300001562151cwgl:CorporateAndReconcilingItemsMember2021-01-012021-06-3000015621512021-01-012021-12-310001562151us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001562151us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001562151us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001562151us-gaap:EmployeeStockOptionMember2021-01-012021-06-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to 
Commission File Number 000-54866

CRIMSON WINE GROUP, LTD.
(Exact name of registrant as specified in its Charter)
Delaware
(State or Other Jurisdiction of
13-3607383
(I.R.S. Employer
Incorporation or Organization)Identification Number)
5901 Silverado Trail, Napa, California
(Address of Principal Executive Offices)
94558
(Zip Code)
(800)  486-0503
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
______________________
Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
YesX  No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).       
YesX  No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  
 
Accelerated filer  
Non-accelerated filer    
Smaller reporting company  
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   NoX 

On August 5, 2022 there were 22,360,558 outstanding shares of the Registrant’s Common Stock, par value $0.01 per share.



CRIMSON WINE GROUP, LTD.
TABLE OF CONTENTS
Page Number
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)

CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts and par value)
(Unaudited)
June 30, 2022December 31, 2021
Assets  
Current assets:  
Cash and cash equivalents$39,196 $32,732 
Investments available for sale8,961 12,493 
Accounts receivable, net5,594 6,572 
Inventory46,736 52,548 
Other current assets1,626 1,456 
Total current assets102,113 105,801 
Property and equipment, net110,397 111,439 
Goodwill1,262 1,262 
Intangible and other non-current assets, net7,660 8,322 
Total non-current assets119,319 121,023 
Total assets$221,432 $226,824 
Liabilities  
Current liabilities:  
Accounts payable and accrued liabilities$8,756 $13,171 
Customer deposits625 366 
Current portion of long-term debt, net of unamortized loan fees1,128 1,128 
Total current liabilities10,509 14,665 
Long-term debt, net of current portion and unamortized loan fees18,235 18,799 
Deferred tax liability, net798 748 
Other non-current liabilities9 9 
Total non-current liabilities19,042 19,556 
Total liabilities29,551 34,221 
Commitments and contingencies (Note 13)
Stockholders’ Equity  
Common shares, par value $0.01 per share, authorized 150,000,000 shares; 22,389,463 and 22,524,185 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
224 225 
Additional paid-in capital277,877 277,719 
Accumulated other comprehensive (loss) income(23)2 
Accumulated deficit(86,197)(85,343)
Total stockholders’ equity191,881 192,603 
Total liabilities and stockholders’ equity$221,432 $226,824 

See accompanying notes to unaudited interim condensed consolidated financial statements.
1


CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net sales$18,082 $17,391 $36,705 $31,972 
Cost of sales9,729 9,051 21,257 17,991 
Gross profit8,353 8,340 15,448 13,981 
Operating expenses:    
Sales and marketing4,543 3,750 8,282 6,795 
General and administrative3,263 3,256 6,561 6,714 
Total operating expenses7,806 7,006 14,843 13,509 
Net loss (gain) on disposal of property and equipment107 (31)127 (27)
Income from operations440 1,365 478 499 
Other (expense) income:    
Interest expense, net(94)(181)(377)(431)
Gain on extinguishment of debt 3,863  3,863 
Other income, net99 208 126 258 
Total other income (expense), net5 3,890 (251)3,690 
Income before income taxes445 5,255 227 4,189 
Income tax expense127 537 66 318 
Net income$318 $4,718 $161 $3,871 
Basic weighted-average shares outstanding22,450 22,943 22,486 23,092 
Fully diluted weighted-average shares outstanding22,450 22,947 22,487 23,092 
Basic and fully diluted earnings per share$0.01 $0.21 $0.01 $0.17 

See accompanying notes to unaudited interim condensed consolidated financial statements.

2


CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net income$318 $4,718 $161 $3,871 
Other comprehensive loss:
Net unrealized holding losses on investments arising during the period, net of tax(19)(1)(25)(6)
Comprehensive income$299 $4,717 $136 $3,865 


See accompanying notes to unaudited interim condensed consolidated financial statements.

3


CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
20222021
Net cash flows from operating activities:  
Net income$161 $3,871 
Adjustments to reconcile net income to net cash provided by operations: 
Depreciation and amortization of property and equipment2,976 3,240 
Amortization of intangible assets643 643 
Loss on write-down of inventory926 711 
Net loss (gain) on disposal of property and equipment127 (27)
Provision for deferred income taxes66 314 
   Stock-based compensation158 14 
   Gain on extinguishment of debt (3,863)
Net change in operating assets and liabilities:  
Accounts receivable978 1,407 
Inventory4,886 4,432 
Other current assets(170)833 
Other non-current assets19 (48)
Accounts payable and accrued liabilities(4,825)(2,175)
Customer deposits265 164 
Other non-current liabilities (83)
Net cash provided by operating activities6,210 9,433 
Net cash flows from investing activities:  
Purchase of investments available for sale(5,750)(8,000)
Redemptions of investments available for sale9,250 6,750 
Acquisition of property and equipment(1,678)(1,269)
Proceeds from disposals of property and equipment18 143 
Net cash provided by (used in) investing activities1,840 (2,376)
Net cash flows from financing activities:  
Principal payments on long-term debt(570)(285)
Repurchase of common stock(1,016)(6,240)
Net cash used in financing activities(1,586)(6,525)
Net increase in cash and cash equivalents6,464 532 
Cash and cash equivalents - beginning of period32,732 29,314 
Cash and cash equivalents - end of period$39,196 $29,846 
Supplemental disclosure of cash flow information:  
Cash paid during the period for:  
Interest, net of capitalized interest$568 $301 
Income tax payments, net$ $ 
Non-cash investing and financing activity:  
Unrealized holding losses on investments, net of tax$(25)$(6)
Acquisition of property and equipment accrued but not yet paid$401 $116 

See accompanying notes to unaudited interim condensed consolidated financial statements.
4


CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(In thousands, except share amounts)
(Unaudited)
Accumulated
AdditionalOther
Common StockPaid-InComprehensiveAccumulated
SharesAmountCapital(Loss) IncomeDeficitTotal
Three Months Ended June 30, 2022
Balance, March 31, 202222,516,882 $225 $277,776 $(4)$(85,559)$192,438 
Net income— — — — 318 318 
Other comprehensive loss— — — (19)— (19)
Stock-based compensation— — 101 — — 101 
Repurchase of common stock(127,419)(1)— — (956)(957)
Balance, June 30, 202222,389,463 $224 $277,877 $(23)$(86,197)$191,881 
Three Months Ended June 30, 2021
Balance, March 31, 202123,243,476 $232 $277,557 $8 $(83,122)$194,675 
Net income— — — — 4,718 4,718 
Other comprehensive loss— — — (1)— (1)
Stock-based compensation— — 7 — — 7 
Repurchase of common stock(719,291)(7)— — (6,233)(6,240)
Balance, June 30, 202122,524,185 $225 $277,564 $7 $(84,637)$193,159 
Six Months Ended June 30, 2022
Balance, December 31, 202122,524,185 $225 $277,719 $2 $(85,343)$192,603 
Net income— — — — 161 161 
Other comprehensive loss— — — (25)— (25)
Stock-based compensation— — 158 — — 158 
Repurchase of common stock(134,722)(1)— — (1,015)(1,016)
Balance, June 30, 202222,389,463 $224 $277,877 $(23)$(86,197)$191,881 
Six Months Ended June 30, 2021
Balance, December 31, 202023,243,476 $232 $277,550 $13 $(82,275)$195,520 
Net income— — — — 3,871 3,871 
Other comprehensive loss— — — (6)— (6)
Stock-based compensation— — 14 — — 14 
Repurchase of common stock(719,291)(7)— — (6,233)(6,240)
Balance, June 30, 202122,524,185 $225 $277,564 $7 $(84,637)$193,159 

See accompanying notes to unaudited interim condensed consolidated financial statements.

5

Table of Contents
CRIMSON WINE GROUP, LTD.
Notes to Unaudited Interim Condensed Consolidated Financial Statements

1. Background and Basis of Presentation

Background

Crimson Wine Group, Ltd. and its subsidiaries (collectively, “Crimson” or the “Company”) is a Delaware corporation that has been conducting business since 1991. Crimson is in the business of producing and selling luxury wines (i.e., wines that retail for over $16 per 750ml bottle). Crimson is headquartered in Napa, California and through its subsidiaries owns seven primary wine estates and brands: Pine Ridge Vineyards, Archery Summit, Chamisal Vineyards, Seghesio Family Vineyards, Double Canyon, Seven Hills Winery and Malene Wines.

Financial Statement Preparation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. The unaudited interim condensed consolidated financial statements, which reflect all adjustments (consisting of normal recurring items or items discussed herein) that management believes necessary to fairly state results of interim operations, should be read in conjunction with the Notes to Consolidated Financial Statements (including the Significant Accounting Policies and Recent Accounting Pronouncements) included in the Company’s audited consolidated financial statements for the year ended December 31, 2021, as filed with the SEC on Form 10-K (the “2021 Report”). Results of operations for interim periods are not necessarily indicative of annual results of operations. The unaudited condensed consolidated balance sheet at December 31, 2021 was extracted from the audited annual consolidated financial statements and does not include all disclosures required by GAAP for annual financial statements.

Significant Accounting Policies

There were no changes to the Company’s significant accounting policies during the six months ended June 30, 2022. See Note 2 of the 2021 Report for a description of the Company’s significant accounting policies.

Recent Accounting Pronouncements

Subsequent to the filing of the 2021 Report, the Company evaluated Accounting Standards Update (“ASU”) 2022-01 through 2022-03 issued by the Financial Accounting Standards Board (“FASB”) and concluded none of the accounting pronouncements would have a material effect or are applicable to Crimson’s unaudited interim condensed consolidated financial statements.


2.Revenue

Revenue Recognition

Revenue is recognized once performance obligations under the terms of the Company’s contracts with its customers have been satisfied; this occurs at a point in time when control of the promised product or service is transferred to customers. Generally, the majority of the Company’s contracts with its customers have a single performance obligation and are short term in nature. Revenue is measured in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company accounts for shipping and handling activities as costs to fulfill its promise to transfer the associated products. Accordingly, the Company records amounts billed for shipping and handling costs as a component of net sales, and classifies such costs as a component of cost of sales. The Company’s products are generally not sold with a right of return unless the product is spoiled or damaged. Historically, returns have not been material to the Company.

6

Table of Contents
Wholesale Segment

The Company sells its wine to wholesale distributors under purchase orders. The Company transfers control and recognizes revenue for these orders upon shipment of the wine from the Company’s third-party warehouse facilities. Payment terms to wholesale distributors typically range from 30 to 120 days. The Company pays depletion allowances to its wholesale distributors based on their sales to their customers. The Company estimates these depletion allowances and records such estimates in the same period the related revenue is recognized, resulting in a reduction of wholesale product revenue and the establishment of a current liability. Subsequently, wholesale distributors will bill the Company for actual depletions, which may be different from the Company’s estimate. Any such differences are recognized in sales when the bill is received. The Company has historically been able to estimate depletion allowances without significant differences between actual and estimated expense.

Direct to Consumer Segment

The Company sells its wine and other merchandise directly to consumers through wine club memberships, at the wineries’ tasting rooms and through its website (http://www.crimsonwinegroup.com), third-party websites, direct phone calls, and other online sales (“Ecommerce”).

Wine club membership sales are made under contracts with customers, which specify the quantity and timing of future wine shipments. Customer credit cards are charged in advance of quarterly wine shipments in accordance with each contract. The Company transfers control and recognizes revenue for these contracts upon shipment of the wine to the customer.

Tasting room and Ecommerce wine sales are paid for at the time of sale. The Company transfers control and recognizes revenue for this wine when the product is either received by the customer (on-site tasting room sales) or upon shipment to the customer (“Ecommerce sales”).

Other

From time to time, the Company sells grapes or bulk wine because the grapes or wine do not meet the quality standards for the Company’s products, 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. Grape and bulk sales are made under contracts with customers which include product specification requirements, pricing and payment terms. Payment terms under grape contracts are generally structured around the timing of the harvest of the grapes and are generally due 30 days from the time the grapes are delivered. Payment terms under bulk wine contracts are generally 30 days from the date of shipment and may include an upfront payment upon signing of the sales agreement. The Company transfers control and recognizes revenue for grape sales when product specification has been met and title to the grapes has transferred, which is generally on the date the grapes are harvested, weighed and shipped. The Company transfers control and recognizes revenue for bulk wine contracts upon shipment.

The Company provides custom winemaking services at Double Canyon, Chamisal, and Pine Ridge’s winemaking facilities. Custom winemaking services are made under contracts with customers which include specific protocols, pricing, and payment terms and generally have a duration of less than one year. The customer retains title and control of the wine during the winemaking process. The Company recognizes revenue when contract specific performance obligations are met.

Estates hold various public and private events for customers and their wine club members. Upfront consideration received from the sale of tickets or under private event contracts for future events is recorded as deferred revenue. The balance of payments are due on the date of the event. The Company recognizes event revenue on the date the event is held.

Other revenue also includes tasting fees and retail merchandise sales, which are paid for and received or consumed at the time of sale. The Company transfers control and recognizes revenue at the time of sale.

Refer to Note 12, “Business Segment Information,” for revenue by sales channel amounts for the three and six months ended June 30, 2022 and 2021.

Contract Balances

When the Company receives payments from customers prior to transferring goods or services under the terms of a contract, the Company records deferred revenue, which it classifies as customer deposits on its unaudited condensed consolidated balance sheets, and represents a contract liability. Customer deposits are liquidated when revenue is recognized. Revenue that was included in the contract liability balance at the beginning of each of the 2022 and 2021 years consisted primarily of wine club
7

Table of Contents
revenue, grape and bulk sales and event fees. Changes in the contract liability balance during the six-month periods ended June 30, 2022 and 2021, were not materially impacted by any other factors.

The outstanding contract liability balance was $0.6 million at June 30, 2022 and $0.4 million at December 31, 2021. Of the amounts included in the opening contract liability balances at the beginning of each period, approximately $0.3 million and $0.2 million were recognized as revenue during the six month periods ended June 30, 2022 and 2021, respectively.

Accounts Receivable

Accounts receivable are reported at net realizable value. Credit is extended based on an evaluation of the customer’s financial condition. Accounts are charged against the allowance for bad debt as they are deemed uncollectible based on a periodic review of the accounts. In evaluating the collectability of individual receivable balances, the Company considers several factors, including the age of the balance, the customer’s historical payment history, its current credit worthiness and current economic trends. The Company’s accounts receivable balance is net of an allowance for doubtful accounts of $0.2 million at both June 30, 2022 and December 31, 2021.


3.Notes Receivable

Notes receivable consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022December 31, 2021
Notes receivable, current (1)
$36 $36 
Notes receivable, non-current (2)
396 405 
Total$432 $441 
__________________________________________
(1) Reported within other current assets of the unaudited interim condensed consolidated balance sheets
(2) Reported within other non-current assets of the unaudited interim condensed consolidated balance sheets

In June 2021, the Company closed on the sale of 36 acres of fallow apple orchards located in Umatilla County, Oregon for an aggregate sale price of $0.6 million. Per the sales agreement, approximately $0.1 million was paid in cash at the closing of the asset sale with the Company financing the remainder of the purchase price in the form of a promissory note in the aggregate principal amount of $0.5 million. The note earns interest at a rate per annum of 5.00% with monthly principal and interest payments commencing July 2021. The note contains an arrangement for two balloon payments with the first balloon payment paid to the Company in December 2021 and the final balloon payment due to the Company on or before June 1, 2024.

In June 2021, per the Company’s leasing agreement of its restaurant space in Walla Walla, Washington, the Company agreed to finance the incoming tenant’s purchase of restaurant equipment from the prior tenant. Therefore, a promissory note in the aggregate principal amount of approximately $0.1 million was issued to the Company. The note is due in June 2026 and earns interest at a rate per annum of 5.00% with annual principal and interest payments commencing on September 1, 2021.

8

Table of Contents
4.Inventory

A summary of inventory at June 30, 2022 and December 31, 2021 is as follows (in thousands):
June 30, 2022December 31, 2021
Finished goods$19,518 $26,362 
In-process goods25,886 25,450 
Packaging and bottling supplies1,332 736 
Total inventory$46,736 $52,548 

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 be required 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 as well as crop insurance proceeds from farming losses recorded as offsets against previously recognized write-downs.

Inventory write-downs of $0.2 million and $0.1 million were recorded during the three month periods ended June 30, 2022 and 2021, respectively. Inventory write-downs of $0.9 million and $0.7 million were recorded during the six month periods ended June 30, 2022 and 2021, respectively. The Company’s inventory balances are presented at the lower of cost or net realizable value.


5.Property and Equipment

A summary of property and equipment at June 30, 2022 and December 31, 2021, and depreciation and amortization for the three and six months ended June 30, 2022 and 2021, is as follows (in thousands):

Depreciable Lives
(in years)June 30, 2022December 31, 2021
Land and improvementsN/A$44,912 $44,912 
Buildings and improvements
20-40
60,548 59,529 
Winery and vineyard equipment
3-25
33,921 33,744 
Vineyards and improvements
7-25
34,411 34,331 
Caves
20-40
5,639 5,639 
Vineyards under developmentN/A1,554 1,224 
Construction in progressN/A2,608 4,229 
Total183,593 183,608 
Accumulated depreciation and amortization(73,196)(72,169)
Total property and equipment, net$110,397 $111,439 

Three Months Ended June 30,Six Months Ended June 30,
Depreciation and amortization:2022202120222021
Capitalized into inventory$1,110 $1,213 $2,234 $2,435 
Expensed to general and administrative377 403 742 805 
Total depreciation and amortization$1,487 $1,616 $2,976 $3,240 



9

Table of Contents
6.Financial Instruments

The Company’s material financial instruments include cash and cash equivalents, investments classified as available for sale, and short-term and long-term debt. Investments classified as available for sale are the only assets or liabilities that are measured at fair value on a recurring basis.

All of the Company’s investments mature within two years or less. The par value, amortized cost, gross unrealized gains and losses, and estimated fair value of investments classified as available for sale as of June 30, 2022 and December 31, 2021 are as follows (in thousands):
June 30, 2022Par ValueAmortized CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Level 1Level 2Total Fair Value
Measurements
Certificates of Deposit$9,000 $9,000 $1 $(40)$ $8,961 $8,961 
December 31, 2021Par ValueAmortized CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Level 1Level 2Total Fair Value
Measurements
Certificates of Deposit$12,500 $12,500 $ $(7)$ $12,493 $12,493 

Gross unrealized losses on available for sale securities were less than $0.1 million as of June 30, 2022. The Company believes the gross unrealized losses are temporary as it does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities before the recovery of their amortized cost basis.

As of June 30, 2022 and December 31, 2021, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis. For cash and cash equivalents, the carrying amounts of such financial instruments approximate their fair values. For short-term debt, the carrying amounts of such financial instruments approximate their fair values. As of June 30, 2022, the Company has estimated the fair value of its outstanding debt to be approximately $16.7 million compared to its carrying value of $19.5 million, based upon discounted cash flows with Level 3 inputs, such as the terms that management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and other factors. Level 3 inputs include market rates obtained from American AgCredit, FLCA (“Lender”) as of June 30, 2022 of 6.78% and 6.68% for the 2015 Term Loan and 2017 Term Loan, respectively, as further discussed in Note 9, “Debt.”

The Company does not invest in any derivatives or engage in any hedging activities.


10

Table of Contents
7.Intangible and Other Non-Current Assets

A summary of intangible and other non-current assets at June 30, 2022 and December 31, 2021, and amortization expense for the three and six months ended June 30, 2022 and 2021, is as follows (in thousands):
June 30, 2022December 31, 2021
Amortizable lives
(in years)
Gross carrying amountAccumulated amortizationNet book valueGross carrying amountAccumulated amortizationNet book value
Brand
15-17
$18,000 $(11,624)$6,376 $18,000 $(11,092)$6,908 
Distributor relationships
10-14
2,700 (2,122)578 2,700 (2,025)675 
Legacy permits14250 (198)52 250 (189)61 
Trademark20200 (138)62 200 (133)67 
Total$21,150 $(14,082)$7,068 $21,150 $(13,439)$7,711 
Other non-current assets592 611 
Total intangible and other non-current assets, net$7,660 $8,322 
Three Months Ended June 30,Six Months Ended
June 30,
Amortization expense2022202120222021
Total amortization expense$322 $322 $643 $643 

The estimated aggregate future amortization of intangible assets as of June 30, 2022 is identified below (in thousands):
Amortization
Remainder of 2022$643 
20231,286 
20241,286 
20251,168 
20261,073 
Thereafter1,612 
Total$7,068 



8.Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Accounts payable and accrued grape liabilities$2,311 $5,689 
Accrued compensation related expenses2,136 2,881 
Sales and marketing633 1,434 
Acquisition of property and equipment407 649 
Accrued interest258 268 
Depletion allowance1,613 1,300 
Production and farming602 445 
Other accrued expenses796 505 
Total accounts payable and accrued liabilities $8,756 $13,171 


11

Table of Contents
9.Debt

A summary of debt at June 30, 2022 and December 31, 2021 is as follows (in thousands):

June 30, 2022December 31, 2021
Revolving Credit Facility (1)
$ $ 
Senior Secured Term Loan Agreement due 2040,
   with an interest rate of 5.24% (2)
11,840 12,160 
Senior Secured Term Loan Agreement due 2037,
   with an interest rate of 5.39% (3)
7,625 7,875 
Unamortized loan fees(102)(108)
Total debt19,363 19,927 
Less current portion of long-term debt1,128 1,128 
Long-term debt due after one year, net$18,235 $18,799 
______________________________________
(1)    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. 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 0.15% to 0.25%, rates for the borrowings are priced based on a performance grid tied to certain financial ratios and the London Interbank Offered Rate.
(2)    Pine Ridge Winery, LLC, a wholly-owned subsidiary of Crimson, is party to a senior secured term loan agreement due on October 1, 2040 (the “2015 Term Loan”). Principal and interest are payable in quarterly installments.
(3)    Double Canyon Vineyards, LLC, a wholly-owned subsidiary of Crimson, is party to a senior secured term loan agreement due on July 1, 2037 (the “2017 Term Loan”). Principal and interest are payable in quarterly installments.

Debt covenants include the maintenance of specified debt and equity ratios, a specified debt service coverage ratio, and certain customary affirmative and negative covenants, including limitations on the incurrence of additional indebtedness, limitations on dividends and other distributions to shareholders and restrictions on certain investments, certain mergers, consolidations and sales of assets. The Company was in compliance with all existing debt covenants as of June 30, 2022.

A summary of debt maturities as of June 30, 2022 is as follows (in thousands):
Principal due the remainder of 2022$570 
Principal due in 20231,140 
Principal due in 20241,140 
Principal due in 20251,140 
Principal due in 20261,140 
Principal due thereafter14,335 
Total$19,465 


10. Stockholders' Equity and Stock-Based Compensation
Share Repurchase

On May 24, 2021, with the unanimous written consent of the Board of Directors, the Company repurchased an aggregate of 719,291 shares of its common stock at a purchase price of $8.65 per share for an aggregate purchase price of $6.2 million. The Company’s repurchase was funded through cash on hand, and the shares were retired.

In March 2022, the Company commenced a share repurchase program (the “2022 Repurchase Program”) that provided for the repurchase of up to $4.0 million of outstanding common stock. Under the 2022 Repurchase Program, any repurchased shares are constructively retired. During the six months ended June 30, 2022, the Company repurchased 134,722 shares of its common stock at an average purchase price of $7.52 per share for an aggregate purchase price of $1.0 million.

12

Table of Contents
Stock-Based Compensation

In February 2013, the Company adopted the 2013 Omnibus Incentive Plan (the "2013 Plan"), which provides for the granting of up to 1,000,000 stock options or other common stock-based awards. In July 2022, upon the approval of the Company's Board of Directors and shareholders, the Company adopted the 2022 Omnibus Incentive Plan ("the 2022 Plan") to supersede and replace the 2013 Plan. The 2022 Plan provides for the granting of up to 678,000 stock options or other common stock-based awards. The terms of awards that may be granted, including vesting and performance criteria, if any, will be determined by the Company’s Board of Directors.

In December 2019, under the Company’s 2013 Omnibus Incentive Plan, option grants for 89,000 shares were issued. The options vest annually over five years and expire seven years from the date of grant. In July 2021, stock option awards for an additional 233,000 shares were issued to certain members of management. Subject to the terms of the respective option award agreements, the options vest in four equal increments on each of January 4, 2022, January 4, 2023, January 4, 2024 and January 4, 2025, and the options will expire seven years from the date of grant. In March 2022, stock option awards for an additional 500,000 shares were issued. The options for the aggregate of 500,000 shares are divided into four tranches, subject to both performance-based vesting requirements and time-based vesting requirements and expire ten years from the date of grant. The performance-based vesting requirements are tied to annual or cumulative Adjusted EBITDA targets, as defined within the underlying option award agreement. The Company believes it will achieve these targets and has recorded the related stock-based compensation expense for the three and six months ended June 30, 2022. The exercise price for all respective options was the closing price on the date of grant.

Estimates of stock-based compensation expense require a number of complex and subjective assumptions, including the selection of an option pricing model. The Company determined the grant date fair value of the awards using the Black-Scholes-Merton option-pricing valuation model, with the following assumptions and values:
December 2019 GrantsJuly 2021 GrantsMarch 2022 Grants
Shares issued89,000 233,000 500,000 
Expected term5.00 years4.75 years
6.90 - 8.40 years
Expected dividend yield % % %
Risk-free interest rate1.60 %0.76 %2.01 %
Expected stock price volatility22 %31 %
27 - 28%
Stock price$6.90 $8.88 $7.50 
Weighted-average grant date fair value$1.58 $2.47 
$ 2.54 - 2.73
Grant date fair value (in thousands)$141 $575 $1,331 
As of June 30, 2022, options in respect of all 822,000 shares remained outstanding with no stock option exercises or expirations during the quarter. The stock-based compensation expense for these grants is based on the grant date fair value, which will be recorded over the vesting period. $102 thousand and $159 thousand were recorded as stock-based compensation expense for the three and six months ended June 30, 2022, respectively. $7 thousand and $14 thousand were recorded as stock-based compensation expense for the three and six months ended June 30, 2021, respectively. Stock-based compensation expense was recorded to general and administrative expense in the unaudited interim condensed consolidated statements of operations.

11.Income Taxes
The consolidated income tax expense for the three and six months ended June 30, 2022 and 2021, was determined based upon the Company’s estimated consolidated effective income tax rates calculated without discrete items for the years ending December 31, 2022 and 2021, respectively.
The Company’s effective tax rates for the three months ended June 30, 2022 and 2021 were 28.9% and 10.2%, respectively. The increase in the effective tax rate for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 was primarily due to the income exclusion of PPP loan forgiveness for federal income taxes during the three months ended June 30, 2021. The Company’s effective tax rates for the six months ended June 30, 2022 and 2021 were 29.1% and 7.6%, respectively. The increase in the effective tax rate for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 was primarily due to the income exclusion of PPP loan forgiveness for federal income taxes during the six months ended June 30, 2021.
The difference between the consolidated effective income tax rate and the U.S. federal statutory rate for the three and six months ended June 30, 2022 was primarily attributable to state income taxes and other permanent items.
13

Table of Contents
12.Business Segment Information

The Company has identified two operating segments, Wholesale net sales and Direct to Consumer net sales, which are reportable segments for financial statement reporting purposes, based upon their different distribution channels, margins and selling strategies. Wholesale net sales include all sales through a third party where prices are given at a wholesale rate, whereas Direct to Consumer net sales include retail sales in tasting rooms, remote sites and on-site events, wine club sales, direct phone sales, Ecommerce sales, and other sales made directly to the consumer without the use of an intermediary.

The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segments. Selling expenses that can be directly attributable to the segment are allocated accordingly. However, centralized selling expenses and general and administrative expenses are not allocated between operating segments. Therefore, net income information for the respective segments is not available. Based on the nature of the Company’s business, revenue generating assets are utilized across segments. Therefore, discrete financial information related to segment assets and other balance sheet data is not available and that information continues to be aggregated.

The following tables outline the net sales, cost of sales, gross profit (loss), directly attributable selling expenses and operating income (loss) for the Company’s reportable segments for the three and six months ended June 30, 2022 and 2021, and also includes a reconciliation of consolidated income (loss) from operations. Other/Non-allocable net sales and gross profit include bulk wine and grape sales, event fees, tasting fees and non-wine retail sales. Other/Non-allocable expenses include centralized corporate expenses not specific to an identified reporting segment. Sales figures are net of related excise taxes.

Three Months Ended June 30,
WholesaleDirect to ConsumerOther/Non-AllocableTotal
(in thousands)20222021202220212022202120222021
Net sales$9,423 $9,727 $7,494 $6,635 $1,165 $1,029 $18,082 $17,391 
Cost of sales6,194 5,844 2,630 2,440 905 767 9,729 9,051 
Gross profit3,229 3,883 4,864 4,195 260 262 8,353 8,340 
Operating expenses:
Sales and marketing1,465 1,142 1,965 1,530 1,113 1,078 4,543 3,750 
General and administrative    3,263 3,256 3,263 3,256 
Total operating expenses1,465 1,142 1,965 1,530 4,376 4,334 7,806 7,006 
Net loss (gain) on disposal of property and equipment    107 (31)107 (31)
Income (loss) from operations$1,764 $2,741 $2,899 $2,665 $(4,223)$(4,041)$440 $1,365 

Six Months Ended June 30,
WholesaleDirect to ConsumerOther/Non-AllocableTotal
(in thousands)20222021202220212022202120222021
Net sales$20,973 $17,917 $13,721 $12,602 $2,011 $1,453 $36,705 $31,972 
Cost of sales14,107 11,153 4,735 4,791 2,415 2,047 21,257 17,991 
Gross profit (loss)6,866 6,764 8,986 7,811 (404)(594)15,448 13,981 
Operating expenses:
Sales and marketing2,806 2,264 3,648 2,854 1,828 1,677 8,282 6,795 
General and administrative    6,561 6,714 6,561 6,714 
Total operating expenses2,806 2,264 3,648 2,854 8,389 8,391 14,843 13,509 
Net loss (gain) on disposal of property and equipment    127 (27)127 (27)
Income (loss) from operations$4,060 $4,500 $5,338 $4,957 $(8,920)$(8,958)$478 $499 




14

Table of Contents
13.Commitments and Contingencies

Litigation

The Company and its subsidiaries may become parties to legal proceedings that are considered to be either ordinary, routine litigation incidental to their business or not significant to the Company’s consolidated financial position or liquidity. The Company does not believe that there is any pending litigation that could have a significant adverse impact on its consolidated financial position, liquidity or results of operations.

2017 and 2020 Wildfires

In October 2017, significant wildfires impacted the Company's operations and damaged its inventory. The Company has settled on several insurance claims since the time of the wildfires but anticipates additional settlements for insurance proceeds for amounts that cannot be reasonably estimated at this time.

In August and September 2020, a series of major wildfires broke out in regions across the Western United States, including Napa and Sonoma counties in California, as well as Umatilla and Yamhill Counties in Oregon. The wildfires and ensuing smoke caused damage to grapes at the vineyard properties and traffic reduction at the Company’s tasting rooms. Some of the inventory losses and smoke damage to grapes were partially covered under existing crop insurance policies. During 2021, the Company settled and recognized a total of $0.8 million from crop insurance proceeds related to loss claims for the 2020 wildfires and recorded the proceeds as an offset against inventory losses, which are reductions to cost of sales.


14.Earnings Per Share

The following table reconciles the weighted-average common shares outstanding used in the calculations of the Company's basic and diluted earnings per share:
Three Months Ended
June 30,
Six Months Ended
June 30,
($ and shares in thousands, except per share amounts)2022202120222021
Net income$318 $4,718 $161 $