----

----

| Delaware                                                       | 13-3607383                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |

| Large accelerated filer                                        [    ] | Accelerated filer                                  [    ] |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Non-accelerated filer                                           [ x ]      | Smaller reporting company                [    ]                                                                                                     |

----

----

----

----

|                                                 |   | Harvest Year |    |
|------------------------------------------------------|--------|--------------|---------|
|                                                 |   | 2012         |    |   | 2011 |   |   | 2010 |   |
|                                                 |   |         |    |   |   |   |   |   |   |
| Estate Grapes (1):                                   |   |         |    |   |   |   |   |   |   |
|   Producing acres                          |   |         | 622     |   |   |   | 616 |   |   |   | 339 |   |
|   Tons harvested                           |   |         | 2,554   |   |   |   | 1,655 |   |   |   | 1,039 |   |
|   Tons per acre                            |   |         | 4.1     |   |   |   | 2.7 |   |   |   | 3.1 |   |
| All grapes and purchased juice (in equivalent tons): |   |         |    |   |   |   |   |   |   |   |   |   |
|   Estate grapes                            |   |         | 2,554   |   |   |   | 1,655 |   |   |   | 1,039 |   |
|   Purchased grapes and juice               |   |         | 3,921   |   |   |   | 3,051 |   |   |   | 1,250 |   |
| Total                                                |   |         | 6,475   |   |   |   | 4,706 |   |   |   | 2,289 |   |
|                                                 |   |         |    |   |   |   |   |   |   |   |   |   |
| Total cases produced                                 |   |         | 277,000 |   |   |   | 257,000 |   |   |   | 124,000 |   |

| (1)   | Excludes acres and tons produced from Double Canyon Vineyards. |
|-----------------|----------------------------------------------------------------|

----

----

----

----

----

----

----

| Item 5. | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
|---------|-------------------------------------------------------------------------------------------------------------------------|

|                                                                     |   | High   |   |   | Low    |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                     |   |   |   |   |   |   |
| 2013                                                                     |   |   |   |   |   |   |
| First quarter (from February 25, 2013 through  March 19, 2013) |   | $      | 10.55  |   |   | $      | 7.29 |   |

----

|                                        |   | Year Ended December 31,                  |   |
|---------------------------------------------|--------|------------------------------------------|--------|
|                                        |   |                                     |   |   |   |   |   |   |   |   |   |   |   | (Unaudited) |   |
|                                        |   | 2012                                     |   |   | 2011 |   |   | 2010 |   |   | 2009 |   |   | 2008 |   |
|                                        |   | (In thousands, except per share amounts) |   |
|                                        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SELECTED INCOME STATEMENT DATA:             |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Revenues                        |   | $                                        | 48,774 |   |   | $ | 39,306 |   |   | $ | 23,762 |   |   | $ | 21,700 |   |   | $ | 22,803 |   |
|   Gross profit                    |   |                                     | 24,090 |   |   |   | 15,861 |   |   |   | 9,144 |   |   |   | 5,115 |   |   |   | 11,265 |   |
|   Income (loss) from operations   |   |                                     | 5,365  |   |   |   | (123 | ) |   |   | (812 | ) |   |   | (4,177 | ) |   |   | 911 |   |
|   Net income (loss)               |   |                                     | 211    |   |   |   | (4,310 | ) |   |   | (4,318 | ) |   |   | (7,260 | ) |   |   | (4,383 | ) |
|   Net income (loss) per share (a) |   |                                     | 0.01   |   |   |   | (0.18 | ) |   |   | (0.18 | ) |   |   | (0.30 | ) |   |   | (0.18 | ) |

|                                                     |   | At December 31, |    |
|----------------------------------------------------------|--------|-----------------|---------|
|                                                     |   |            |    |   |   |   |   |   |   |   | (Unaudited) |   |
|                                                     |   | 2012            |    |   | 2011 |   |   | 2010 |   |   | 2009 |   |   | 2008 |   |
|                                                     |   | (In thousands)  |    |
|                                                     |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |
| SELECTED BALANCE SHEET DATA:                             |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |
|   Current assets                               |   | $               | 54,138  |   |   | $ | 49,922 |   |   | $ | 30,724 |   |   | $ | 30,502 |   |   | $ | 32,984 |   |
|   Property and equipment                       |   |            | 108,986 |   |   |   | 110,783 |   |   |   | 64,263 |   |   |   | 66,924 |   |   |   | 69,341 |   |
|   Goodwill and intangible assets               |   |            | 21,079  |   |   |   | 22,593 |   |   |   | 177 |   |   |   | 187 |   |   |   | 197 |   |
|   Total assets                                 |   |            | 184,203 |   |   |   | 183,298 |   |   |   | 95,164 |   |   |   | 97,613 |   |   |   | 102,682 |   |
|   Due to Leucadia and its affiliates           |   |            | 152,183 |   |   |   | 151,441 |   |   |   | 103,421 |   |   |   | 101,660 |   |   |   | 98,482 |   |
|   Long-term debt, including current maturities |   |            | – |   |   |   | – |   |   |   | 66 |   |   |   | 224 |   |   |   | 371 |   |
|   Equity                                       |   |            | 25,833  |   |   |   | 25,622 |   |   |   | (11,224 | ) |   |   | (6,906 | ) |   |   | 354 |   |
|   Book value per share (a)                     |   |            | 1.06    |   |   |   | 1.05 |   |   |   | (0.46 | ) |   |   | (0.28 | ) |   |   | (0.01 | ) |

|   |   |
|--------|--------|

| (a)   | After the Distribution, there were 24,458,368 common shares outstanding.  As appropriate, amounts presented in this Report give retroactive effect to the Distribution for all periods presented, including net income (loss) per share, book value per share and shares outstanding.  Both before and after the Distribution, there were no dilutive or complex equity instruments or securities outstanding at any time. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| UNAUDITED PRO FORMA FINANCIAL DATA:       |   |   |    |
|-------------------------------------------|--------|--------|---------|
|   Equity (a)               |   |   | 192,191 |   |
|   Book value per share (b) |   | $      | 7.86    |   |

| (a)   | Pro forma equity reflects the contribution to capital of $14,175,000 in cash and of the due to Leucadia and its affiliates balance as of December 31, 2012. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | Pro forma book value per share reflects pro forma equity divided by common shares outstanding after the Distribution. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------|

----

----

| Inventory                         |   | $      | 11,826,000 |   |
|-----------------------------------|--------|--------|------------|--------|
| All other current assets          |   |   | 3,181,000  |   |
| Property, plant and equipment     |   |   | 48,503,000 |   |
| Goodwill and intangible assets    |   |   | 23,303,000 |   |
| Other assets                      |   |   | 82,000     |   |
|   Total assets acquired |   |   | 86,895,000 |   |
| Current liabilities acquired      |   |   | 877,000    |   |
|   Net assets acquired   |   | $      | 86,018,000 |   |

|                                     |   | Payments Due by Period (in thousands) |    |
|------------------------------------------|--------|---------------------------------------|---------|
|  Contractual Cash Obligations       |   | Total                                 |    |   | Less than 1 Year |   |   |  1-3 Years |   |   | 4-5 Years |   |   | After 5 Years |   |
|                                     |   |                                  |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Due to Leucadia and its affiliates       |   | $                                     | 152,183 |   |   | $ | 152,183 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Grape purchase contracts                 |   |                                  | 19,377  |   |   |   | 6,439 |   |   | $ | 8,024 |   |   |   | 2,600 |   |   | $ | 2,314 |   |
| Operating Leases, net of sublease income |   |                                  | 127     |   |   |   | 21 |   |   |   | 56 |   |   |   | 29 |   |   |   | 21 |   |
|                                     |   |                                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Contractual Cash Obligations       |   | $                                     | 171,687 |   |   | $ | 158,643 |   |   | $ | 8,080 |   |   | $ | 2,629 |   |   | $ | 2,335 |   |

----

|                                                               |   | 2012   |   |   | 2011   |   |   | 2010   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |   |   |   |
| Revenues:                                                          |   |   |   |   |   |   |   |   |   |
|   Wholesalers                                            |   | $      | 27,015 |   |   | $      | 20,431 |   |   | $ | 9,335 |   |
|   Direct to consumers                                    |   |   | 18,113 |   |   |   | 15,363 |   |   |   | 12,383 |   |
|   Bulk wine and grape sales, event fees and retail sales |   |   | 3,646  |   |   |   | 3,512  |   |   |   | 2,044 |   |
|                                                          |   | $      | 48,774 |   |   | $      | 39,306 |   |   | $ | 23,762 |   |
| Gross profit:                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|   Wholesalers                                            |   | $      | 13,163 |   |   | $      | 6,555  |   |   | $ | 3,150 |   |
|   Direct to consumers                                    |   |   | 10,598 |   |   |   | 9,075  |   |   |   | 7,545 |   |
|   Bulk wine and grape sales, event fees and retail sales |   |   | 379    |   |   |   | 282    |   |   |   | (38 | ) |
|   Inventory write-down                                   |   |   | (50    | )      |   |   | (51    | )      |   |   | (1,513 | ) |
|                                                               |   |   | 24,090 |   |   |   | 15,861 |   |   |   | 9,144 |   |
| Expenses:                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|   Sales and marketing expenses                           |   |   | 11,452 |   |   |   | 9,280  |   |   |   | 6,474 |   |
|   General and administrative expenses                    |   |   | 7,273  |   |   |   | 6,704  |   |   |   | 3,482 |   |
| Income (loss) from operations                                      |   | $      | 5,365  |   |   | $      | (123   | )      |   | $ | (812 | ) |

----

----

----

----

----

----

| Summary Compensation Table                |   |
|-------------------------------------------|--------|
| Name and Principal                        |   |   |   |   |   |   |   |   | All Other |   |   |   |   |
| Position                                  | Year   |   | Salary |   |   | Bonus |   |   | Compensation |   |   | Total |   |
|                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Erle Martin,                              | 2012   |   | $ | 405,781 |   |   | $ | 300,000 |   |   | $ | 4,718 |   |   | $ | 710,499 |   |
|    President and Chief     | 2011   |   | $ | 374,400 |   |   | $ | 200,000 |   |   | $ | 1,012 |   |   | $ | 575,412 |   |
|     Executive Officer |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Patrick M. DeLong,                        | 2012   |   | $ | 266,731 |   |   | $ | 162,500 |   |   | $ | 4,718 |   |   | $ | 433,949 |   |
|   Chief Financial &         | 2011   |   | $ | 225,000 |   |   | $ | 100,000 |   |   | $ | 1,552 |   |   | $ | 326,552 |   |
|    Operating Officer       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mike S. Cekay,                            | 2012   |   | $ | 195,673 |   |   | $ | - |   |   | $ | 12,277 |   |   | $ | 207,950 |   |
|   Senior Vice President         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    of Sales                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

| Name and Address of Beneficial Owner                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | Number of Sharesand Nature ofBeneficial Ownership |      | Percentof Class |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|-----------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                              |      |            |   |   |   |
| Douglas M. Carlson                                                                                                  |   |                                              | –   |            |   |   |   | – |   |
| Mike S. Cekay                                                                                                       |   |                                              | –   |            |   |   |   | – |   |
| Ian M. Cumming                                                                                                      |   |                                              | 2,135,930 |            | (a)    |   |   | 8.7 | % |
| John D. Cumming                                                                                                     |   |                                              | 25,833    |            |   |   |   | 0.1 | % |
| Patrick M. DeLong                                                                                                   |   |                                              | –   |            |   |   |   | – |   |
| Erle Martin                                                                                                         |   |                                              | –   |            |   |   |   | – |   |
| Avraham M. Neikrug                                                                                                  |   |                                              | 30        |            |   |   |   | * |   |
| Joseph S. Steinberg                                                                                                 |   |                                              | 2,351,345 |            | (b)    |   |   | 9.6 | % |
| Craig D. Williams                                                                                                   |   |                                              | –   |            |   |   |   | – |   |
| Cumming Foundation                                                                                                  |   |                                              | 18,321    |            | (c)    |   |   | * |   |
| Cumming Philanthropic Organization                                                                                  |   |                                              | 10,166    |            | (d)    |   |   | * |   |
| John D. Cumming Family Foundation                                                                                   |   |                                              | 9,166     |            | (e)    |   |   | * |   |
| Joseph S. and Diane H. Steinberg 1992 Charitable Trust                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                              | 33,000    |            | (f)    |   |   | 0.1 | % |
| All directors and executive officers as a group (11 persons)                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                              | 4,513,138 |            | (g)    |   |   | 18.5 | % |

|   |
|--------|

|   | (a) | Includes 21,600 (less than .1%) common shares beneficially owned by Mr. Cumming’s wife, as to which Mr. Cumming may be deemed to be the beneficial owner. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Includes 13,920 (less than .1%) shares of common stock beneficially owned by Mr. Steinberg’s wife and daughter, 1,876,239 (7.7%) shares of common stock held by corporations that are wholly owned by Mr. Steinberg, or held by corporations that are wholly owned by family trusts as to which Mr. Steinberg has sole voting and dispositive control, or held by such trusts, 233,970 (1.0%) shares of common stock held in a trust for the benefit of Mr. Steinberg’s children as to which Mr. Steinberg may be deemed to be the beneficial owner. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Mr. Ian Cumming is a trustee and President of the Cumming Foundation, a private charitable foundation, and disclaims beneficial ownership of the shares of common stock held by the foundation. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Mr. Ian Cumming is a director and President of Cumming Philanthropic Organization, a Wyoming nonprofit corporation established by Mr. Cumming, and disclaims beneficial ownership of the shares of common stock held by the organization. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Mr. John D. Cumming is President and a director of the John D. Cumming Family Foundation, a private charitable foundation, and disclaims beneficial ownership of the shares of common stock held by the foundation. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Mr. Steinberg and his wife are the trustees of the charitable trust.  Mr. Steinberg and his wife disclaim beneficial ownership of the common shares held by the charitable trust. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g) | Includes 30 shares of common stock owned of record by Mr. Neikrug’s minor son. |
|--------|-----|--------------------------------------------------------------------------------------|

----

----

----

|                                                                                                                                                                                                                                                                                                                                 |   | Fiscal Year Ended December 31, |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                 |   | 2012                                |    |   | 2011 |   |
|                                                                                                                                                                                                                                                                                                                                 |   |                                |    |   |   |   |
| Audit Fees                                                            |   | $                                   | 334,500 |   |   | $ | 61,000 |   |
| Audit Related Fees                                                    |   |                                | 5,600   |   |   |   | 5,400 |   |
| Tax Fees                                                              |   |                                | 30,600  |   |   |   | 19,300 |   |
|                                                                                                                                                                                                                                                                                                                                 |   | $                                   | 370,700 |   |   | $ | 85,700 |   |

----

| (a)(1) | Financial Statements. |
|--------|-----------------------|

| Report of Independent Registered Public Accounting Firm                                           | F-1    |
|---------------------------------------------------------------------------------------------------|--------|
|                                                                                              |   |
| Consolidated Balance Sheets at December 31, 2012 and 2011                                         | F-2    |
|                                                                                              |   |
| Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010        | F-3    |
|                                                                                              |   |
| Consolidated Statements of Changes in Equity for the years ended December 31, 2012, 2011 and 2010 | F-4    |
|                                                                                              |   |
| Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010        | F-5    |
|                                                                                              |   |
| Notes to Consolidated Financial Statements                                                        | F-6    |

|   | Schedules are omitted because they are not required or are not applicable or the required information is shown in the financial statements or notes thereto. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a)(3) | See item 15(b) below for a complete list of Exhibits to this Report including Executive Compensation Plans and Arrangements. |
|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | We will furnish any exhibit upon request made to our Corporate Secretary, 5901 Silverado Trail, Napa, CA 94558.  We charge $.50 per page to cover expenses of copying and mailing. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.1 | Separation Agreement, dated February 1, 2103, between Crimson Wine Group, Ltd. and Leucadia National Corporation (filed as Exhibit 2.1 to the Company’s Form 8K, filed on February 23, 2013 (the “February 23, 2013 Form 8-K”) (No. 000-54866)).* |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.1  | Certificate of Incorporation (filed as Exhibit 3.1 to Amendment No. 1 to the Company’s Registration Statement on Form 10-12G (“Amendment No. 1”) (No. 000-54866)).* |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Certificate of Amendment to Certificate of Incorporation, effective November 16, 2007 (filed as Exhibit 3.2 to Amendment No. 1).* |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

| 3.3 | Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the February 23, 2013 Form 8-K).* |
|-----|--------------------------------------------------------------------------------------------------------------|

| 3.4 | Bylaws (filed as Exhibit 3.4 to Amendment No. 1).* |
|-----|----------------------------------------------------|

| 3.5 | Amended and Restated Bylaws (filed as Exhibit 3.2 to the February 23, 2013 Form 8-K).* |
|-----|----------------------------------------------------------------------------------------|

| 4.1 | Form of Specimen Stock Certificate (filed as Exhibit 4.1 to Amendment No. 2 to the Company’s Registration Statement on Form 10-12G).* |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | Employment Agreement between Leucadia Cellars & Estates, LLC and Patrick M. DeLong, dated June 19, 2007 (filed as Exhibit 10.1 to Amendment No. 1).*+ |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 | Employment Agreement between Crimson Wine Group, Ltd. and Mike S. Cekay, dated March 26, 2012 (filed as Exhibit 10.2 to Amendment No. 1).*+ |
|------|---------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.3 | Tax Matters Agreement dated February 1, 2013, between Crimson Wine Group, Ltd. and Leucadia National Corporation (filed as Exhibit 10.1 to the February 23, 2013 Form 8-K).* |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.4 | Administrative Services Agreement dated February 23, 2013, between Crimson Wine Group, Ltd. and Leucadia National Corporation (filed as Exhibit 10.2 to the February 1, 2013 Form 8-K).* |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.5 | Crimson Wine Group, Ltd. 2013 Omnibus Incentive Plan (filed as Exhibit 10.3 to the February 23, 2013 Form 8-K).* + |
|------|--------------------------------------------------------------------------------------------------------------------|

| 10.6 | Credit Agreement dated as of March 22, 2013 among Crimson Wine Group, Ltd., Pine Ridge Winery, LLC, Chamisal Vineyards, LLC and Double Canyon Vineyards, LLC, and American AgCredit, FLCA, as Agent for the Lenders and for itself as a Lender. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 21.1 | List of Subsidiaries of Crimson Wine Group, Ltd. (filed as Exhibit 10.5 to the Company’s Registration Statement on Form 10-12G).* |
|------|-----------------------------------------------------------------------------------------------------------------------------------------|

| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|---------------------------------------------------------------------------------------------------------|

| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|---------------------------------------------------------------------------------------------------------|

| 32.1 | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
|------|-----------------------------------------------------------------------------------------------------------|

| 32.2 | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
|------|-----------------------------------------------------------------------------------------------------------|

| 101 | Financial statements from the Annual Report on Form 10-K of Crimson Wine Group, Ltd. for the year ended December 31, 2012; (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | * | Incorporated by reference. |
|--------|---|----------------------------|

|   | + | Management Employment Contract or Compensatory Plan/Arrangement. |
|--------|---|------------------------------------------------------------------|

----

|                       | CRIMSON WINE GROUP, LTD. |                                                                                                                                                |
|----------------------------|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                     |                                                                                                                                                |   |
| Date:  March 28, 2013 | By:                      | /s/             Patrick M. DeLong                                                       |   |
|                       |                     | Name:       Patrick M. DeLong                                                                                         |   |
|                       |                     | Title:         Chief Financial & Operating Officer                                                 |   |
|                       |                     |                   (Principal Financial and Accounting Officer) |   |

| Date           | Signature                                                     | Title                                                   |
|----------------|---------------------------------------------------------------|---------------------------------------------------------|
|           |                                                          |                                                    |
| March 28, 2013 | By /s/      Ian M. Cumming      | Chairman of the Board and Director                      |
|           |  Ian M. Cumming                                          |                                                    |
|           |                                                          |                                                    |
| March 28, 2013 | By /s/      Joseph S. Steinberg | Director                                                |
|           |  Joseph S. Steinberg                                     |                                                    |
|           |                                                          |                                                    |
| March 28, 2013 | By /s/      Erle Martin         | Director, President & Chief Executive Officer       |
|           |  Erle Martin                                             |                                                    |
|           |                                                          |                                                    |
| March 28, 2013 | By /s/      Patrick M. DeLong   | Vice President, Chief Financial & Operating Officer |
|           |  Patrick M. DeLong                                       | (Principal Financial and Accounting Officer)            |
|           |                                                          |                                                    |
| March 28, 2013 | By /s/      John D. Cumming     | Director                                                |
|      |  John D. Cumming                                         |                                                    |
|           |                                                          |                                                    |
| March 28, 2013 | By /s/      Avraham M. Neikrug  | Director                                                |
|           |  Avraham M. Neikrug                                      |                                                    |
|           |                                                          |                                                    |
| March 28, 2013 | By /s/      Douglas M. Carlson  | Director                                                |
|           |  Douglas M. Carlson                                      |                                                    |
|           |                                                          |                                                    |
| March 28, 2013 | By /s/      Craig D. Williams   | Director                                                |
|           |  Craig D. Williams                                       |                                                    |

----

----

|                                                             |   | 2012   |    |   | 2011   |   |
|------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| ASSETS                                                           |   |   |    |   |   |   |
| Current assets:                                                  |   |   |    |   |   |   |
| Cash and cash equivalents                                        |   | $      | 5,704   |   |   | $      | 5,631 |   |
| Accounts receivable, net                                         |   |   | 4,501   |   |   |   | 4,606 |   |
| Inventory                                                        |   |   | 43,061  |   |   |   | 39,006 |   |
| Other current assets                                             |   |   | 872     |   |   |   | 679 |   |
| Total current assets                                             |   |   | 54,138  |   |   |   | 49,922 |   |
|                                                             |   |   |    |   |   |   |   |   |
| Property and equipment, net                                      |   |   | 108,986 |   |   |   | 110,783 |   |
| Goodwill                                                         |   |   | 1,053   |   |   |   | 1,053 |   |
| Other intangible assets, net                                     |   |   | 20,026  |   |   |   | 21,540 |   |
| Total                                                            |   | $      | 184,203 |   |   | $      | 183,298 |   |
|                                                             |   |   |    |   |   |   |   |   |
| LIABILITIES                                                      |   |   |    |   |   |   |   |   |
| Current liabilities:                                             |   |   |    |   |   |   |   |   |
| Accounts payable                                                 |   | $      | 1,279   |   |   | $      | 2,518 |   |
| Accrued expenses                                                 |   |   | 4,679   |   |   |   | 3,389 |   |
| Customer deposits                                                |   |   | 229     |   |   |   | 328 |   |
| Due to Leucadia National Corporation and its affiliates          |   |   | 152,183 |   |   |   | 106,441 |   |
| Total current liabilities                                        |   |   | 158,370 |   |   |   | 112,676 |   |
| Due to Leucadia National Corporation                             |   |   | -       |   |   |   | 45,000 |   |
| Total liabilities                                                |   |   | 158,370 |   |   |   | 157,676 |   |
|                                                             |   |   |    |   |   |   |   |   |
| Commitments and contingencies (Notes 12 and 13)                  |   |   |    |   |   |   |   |   |
|                                                             |   |   |    |   |   |   |   |   |
| EQUITY                                                           |   |   |    |   |   |   |   |   |
| Common shares, par value $0.01 per share, authorized 150,000,000 |   |   |    |   |   |   |   |   |
| shares; 24,458,368 shares issued and outstanding                 |   |   | 245     |   |   |   | 245 |   |
| Additional paid-in capital                                       |   |   | 112,302 |   |   |   | 112,302 |   |
| Retained deficit                                                 |   |   | (86,714 | )      |   |   | (86,925 | ) |
| Total equity                                                     |   |   | 25,833  |   |   |   | 25,622 |   |
| Total                                                            |   | $      | 184,203 |   |   | $      | 183,298 |   |

----

|                              |   | 2012   |   |   | 2011   |   |   | 2010   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                              |   |   |   |   |   |   |   |   |   |
| Net sales                         |   | $      | 48,774 |   |   | $      | 39,306 |   |   | $ | 23,762 |   |
| Cost of sales                     |   |   | 24,684 |   |   |   | 23,445 |   |   |   | 14,618 |   |
| Gross profit                      |   |   | 24,090 |   |   |   | 15,861 |   |   |   | 9,144 |   |
|                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:               |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing               |   |   | 11,452 |   |   |   | 9,280  |   |   |   | 6,474 |   |
| General and administrative        |   |   | 7,273  |   |   |   | 6,704  |   |   |   | 3,482 |   |
| Total operating expenses          |   |   | 18,725 |   |   |   | 15,984 |   |   |   |  9,956 |   |
|                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from operations     |   |   | 5,365  |   |   |   | (123   | )      |   |   | (812 | ) |
|                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):           |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                  |   |   | (5,192 | )      |   |   | (4,495 | )      |   |   | (3,479 | ) |
| Other income (expense), net       |   |   | 49     |   |   |   | 311    |   |   |   | (24 | ) |
| Total other income (expense)      |   |   | (5,143 | )      |   |   | (4,184 | )      |   |   | (3,503 | ) |
|                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes |   |   | 222    |   |   |   | (4,307 | )      |   |   | (4,315 | ) |
|                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax provision              |   |   | 11     |   |   |   | 3      |   |   |   | 3 |   |
|                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                 |   | $      | 211    |   |   | $      | (4,310 | )      |   | $ | (4,318 | ) |

| Basic and fully diluted weighted-average shares outstanding |   |   | 24,458 |   |   |   | 24,458 |   |   |   | 24,458 |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|

| Basic and fully diluted net income (loss) per share |   | $ | 0.01 |   |   | $ | (0.18 | ) |   | $ | (0.18 | ) |
|-----------------------------------------------------|--------|---|------|--------|--------|---|-------|---|--------|---|-------|---|

| The accompanying notes are an integral part of these consolidated financial statements. |
|-----------------------------------------------------------------------------------------|

----

|                                                                                                                  |   | 2012   |      |   | 2011   |   |        | 2010   |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-------------|--------|--------|
|                                                                                                                  |   |   |      |   |   |   |        |   |   |
| Net cash flows from operating activities:                                                                             |   |   |      |   |   |   |        |   |   |
| Net income (loss)                                                                                                     |   | $      | 211       |   |   | $      | (4,310      | )      |   | $ | (4,318 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by                                                    |   |   |      |   |   |   |        |   |   |   |   |   |
|   operations:                                                                                               |   |   |      |   |   |   |        |   |   |   |   |   |
|   Depreciation and amortization of property and equipment                                                   |   |   | 5,444     |   |   |   | 4,977       |   |   |   | 3,572 |   |
|   Leucadia National Corporation and its affiliates interest expense added to principal                      |   |   | 3,823     |   |   |   | 3,522       |   |   |   | 2,087 |   |
|   Loss on write-down of inventory                                                                           |   |   | 50        |   |   |   | 51          |   |   |   | 1,513 |   |
|   Amortization of intangible assets                                                                         |   |   | 1,514     |   |   |   | 887         |   |   |   | 10 |   |
|   Provision for doubtful accounts                                                                           |   |   | 21        |   |   |   | 74          |   |   |   | – |   |
|   Net loss (gain) related to disposals of property and equipment                                            |   |   | 262       |   |   |   | 51          |   |   |   | (19 | ) |
|   Net change in:                                                                                            |   |   |      |   |   |   |        |   |   |   |   |   |
| Receivables                                                                                                           |   |   | 84        |   |   |   | (775        | )      |   |   | (486 | ) |
| Inventory                                                                                                             |   |   | (4,105    | )      |   |   | (1,389      | )      |   |   | (205 | ) |
| Other current assets                                                                                                  |   |   | (193      | )      |   |   | (45         | )      |   |   | (77 | ) |
| Accounts payable, expense accruals and due to Leucadia National Corporation    and its affiliates |   |   |  (39 | )      |   |   |  1,946 |   |   |   |  (152 | ) |
| Customer deposits                                                                                                     |   |   | (99       | )      |   |   | 9           |   |   |   | (56 | ) |
| Income taxes payable                                                                                                  |   |   | 9         |   |   |   | –     |   |   |   | 148 |   |
| Net cash provided by operating activities                                                                             |   |   | 6,982     |   |   |   | 4,998       |   |   |   | 2,017 |   |
|                                                                                                                  |   |   |      |   |   |   |        |   |   |   |   |   |
| Net cash flows from investing activities:                                                                             |   |   |      |   |   |   |        |   |   |   |   |   |
| Acquisition of property and equipment                                                                                 |   |   | (3,946    | )      |   |   | (3,407      | )      |   |   | (2,498 | ) |
| Proceeds from disposals of property and equipment                                                                     |   |   | 37        |   |   |   | 269         |   |   |   | 1,611 |   |
| Acquisition of Seghesio, net of cash acquired                                                                         |   |   | –   |   |   |   | (86,018     | )      |   |   | – |   |
| Net cash used for investing activities                                                                                |   |   | (3,909    | )      |   |   | (89,156     | )      |   |   | (887 | ) |
|                                                                                                                  |   |   |      |   |   |   |        |   |   |   |   |   |
| Net cash flows from financing activities:                                                                             |   |   |      |   |   |   |        |   |   |   |   |   |
| Capital contribution                                                                                                  |   |   | –   |   |   |   | 41,156      |   |   |   | – |   |
| Issuance of debt to Leucadia National Corporation                                                                     |   |   | –   |   |   |   | 45,000      |   |   |   | – |   |
| Reduction of debt                                                                                                     |   |   | (3,000    | )      |   |   | (66         | )      |   |   | (158 | ) |
| Net cash provided by (used for) financing activities                                                                  |   |   | (3,000    | )      |   |   | 86,090      |   |   |   | (158 | ) |
| Net increase in cash and cash equivalents                                                                             |   |   | 73        |   |   |   | 1,932       |   |   |   | 972 |   |
| Cash and cash equivalents at January 1,                                                                               |   |   | 5,631     |   |   |   | 3,699       |   |   |   | 2,727 |   |
|                                                                                                                  |   |   |      |   |   |   |        |   |   |   |   |   |
| Cash and cash equivalents at December 31,                                                                             |   | $      | 5,704     |   |   | $      | 5,631       |   |   | $ | 3,699 |   |
|                                                                                                                  |   |   |      |   |   |   |        |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                                    |   |   |      |   |   |   |        |   |   |   |   |   |
| Cash paid during the year for:                                                                                        |   |   |      |   |   |   |        |   |   |   |   |   |
| Interest                                                                                                              |   | $      | 1,500     |   |   | $      | 973         |   |   | $ | 1,392 |   |
| Income tax payments (refunds), net                                                                                    |   | $      | 1         |   |   | $      | 1           |   |   | $ | (147 | ) |
| Non-cash financing activity:Conversion of accrued interest to long-term debt                                          |   | $      | 3,823     |   |   | $      | 3,522       |   |   | $ | 2,087 |   |

----

|                       |   |            |   |   |            |   |    |     |   |   |    |   |
|----------------------------|--------|-----------------|--------|--------|-----------------|--------|---------|----------|--------|--------|---------|--------|
|                       |   | Common Shares   |   |   | Additional      |   |    | Retained |   |   |    |   |
|                       |   | $0.01 Par Value |   |   | Paid-In Capital |   |    | Deficit  |   |   | Total   |   |
|                       |   |            |   |   |            |   |    |     |   |   |    |   |
| Balance, January 1, 2010   |   | $               | 245    |   |            | $      | 71,146  |     |   | $      | (78,297 | )      |   | $ | (6,906 | ) |
| Net loss                   |   |            |   |   |            |   |    |     |   |   | (4,318  | )      |   |   | (4,318 | ) |
|                       |   |            |   |   |            |   |    |     |   |   |    |   |   |   |   |   |
| Balance, December 31, 2010 |   |            | 245    |   |            |   | 71,146  |     |   |   | (82,615 | )      |   |   | (11,224 | ) |
| Net loss                   |   |            |   |   |            |   |    |     |   |   | (4,310  | )      |   |   | (4,310 | ) |
| Capital contribution       |   |            |   |   |            |   | 41,156  |     |   |   |    |   |   |   | 41,156 |   |
| Balance, December 31, 2011 |   |            | 245    |   |            |   | 112,302 |     |   |   | (86,925 | )      |   |   | 25,622 |   |
| Net income                 |   |            |   |   |            |   |    |     |   |   | 211     |   |   |   | 211 |   |
|                       |   |            |   |   |            |   |    |     |   |   |    |   |   |   |   |   |
| Balance, December 31, 2012 |   | $               | 245    |   |            | $      | 112,302 |     |   | $      | (86,714 | )      |   | $ | 25,833 |   |

----

| 1.   | Explanatory Note: |
|----------------|-------------------|

| 2.   | Nature of Operations: |
|----------------|-----------------------|

----

| 3.   | Significant Accounting Policies: |
|----------------|----------------------------------|

----

----

----

----

| 4.   | Acquisitions: |
|----------------|---------------|

| Inventory                      |   | $      | 11,826 |   |
|--------------------------------|--------|--------|--------|--------|
| All other current assets       |   |   | 3,181  |   |
| Property and equipment         |   |   | 48,503 |   |
| Goodwill and intangible assets |   |   | 23,303 |   |
| Other assets                   |   |   | 82     |   |
|                           |   |   | 86,895 |   |
| Current liabilities acquired   |   |   | 877    |   |
|                           |   | $      | 86,018 |   |

|                                    |   |   |   |   | Amortization |   |
|-----------------------------------------|--------|--------|--------|--------|--------------|--------|
|                                    |   | Amount |   |   | Years        |   |
|                                    |   |   |   |   |         |   |
| Brand                                   |   | $      | 17,500 |   |         |   | 17 |   |
| Distributor relationships               |   |   | 2,600  |   |         |   | 14 |   |
| Customer relationships                  |   |   | 1,900  |   |         |   | 7 |   |
| Legacy permits                          |   |   | 250    |   |         |   | 14 |   |
|   Subtotal, intangible assets |   |   | 22,250 |   |         |   |   |   |
| Goodwill                                |   |   | 1,053  |   |         |   |   |   |
|   Total                       |   | $      | 23,303 |   |         |   |   |   |

----

|                      |   | 2011   |   |   | 2010   |   |
|---------------------------|--------|--------|--------|--------|--------|--------|
|                      |   |   |   |   |   |   |
| Revenues and other income |   | $      | 47,028 |   |   | $      | 39,936 |   |
| Net loss                  |   | $      | (1,890 | )      |   | $      | (4,232 | ) |

| 5.   | Inventory: |
|----------------|------------|

|                            |   | 2012   |   |   | 2011   |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |
| Case wine                       |   | $      | 21,583 |   |   | $      | 20,744 |   |
| Bulk wine                       |   |   | 21,090 |   |   |   | 18,169 |   |
| Packaging and bottling supplies |   |   | 388    |   |   |   | 93 |   |
|                            |   | $      | 43,061 |   |   | $      | 39,006 |   |

| 6.   | Property and Equipment: |
|----------------|-------------------------|

|                                      |   | Depreciable |   |   |   |   |    |   |   |
|-------------------------------------------|--------|-------------|--------|--------|--------|--------|---------|--------|--------|
|                                      |   | Lives       |   |   |   |   |    |   |   |
|                                      |   | (in years)  |   |   | 2012   |   |    | 2011   |   |
|                                      |   |        |   |   |   |   |    |   |   |
| Land and improvements                     |   |        | N/A    |   |   | $      | 42,192  |   |   | $ | 42,230 |   |
| Buildings and improvements                |   |        | 20-40  |   |   |   | 40,624  |   |   |   | 40,247 |   |
| Vineyards and improvements                |   |        | 7-25   |   |   |   | 35,838  |   |   |   | 34,342 |   |
| Winery and vineyard equipment             |   |        | 3-25   |   |   |   | 21,959  |   |   |   | 20,865 |   |
| Caves                                     |   |        | 20-40  |   |   |   | 5,638   |   |   |   | 5,638 |   |
| Vineyards under development               |   |        | N/A    |   |   |   | 812     |   |   |   | 2,056 |   |
| Construction in progress                  |   |        | N/A    |   |   |   | 1,301   |   |   |   | 320 |   |
|                                      |   |        |   |   |   |   | 148,364 |   |   |   | 145,698 |   |
| Accumulated depreciation and amortization |   |        |   |   |   |   | (39,378 | )      |   |   | (34,915 | ) |
|                                      |   |        |   |   |   | $      | 108,986 |   |   | $ | 110,783 |   |

----

| 7.   | Intangible Assets: |
|----------------|--------------------|

|                                                                        |   | 2012   |   |   | 2011   |   |
|-----------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                        |   |   |   |   |   |   |
| Brand, net of accumulated amortization of $1,630 and $601                   |   | $      | 15,870 |   |   | $      | 16,899 |   |
| Distributor relationships, net of accumulated amortization of $294 and $108 |   |   | 2,306  |   |   |   | 2,492 |   |
| Customer relationships, net of accumulated amortization of $429 and $158    |   |   | 1,471  |   |   |   | 1,742 |   |
| Legacy permits, net of accumulated amortization of $28 and $10              |   |   | 222    |   |   |   | 240 |   |
| Other, net of accumulated amortization of $43 and $33                       |   |   | 157    |   |   |   | 167 |   |
|                                                                        |   | $      | 20,026 |   |   | $      | 21,540 |   |

| 8.   | Due to Leucadia and its Affiliates: |
|----------------|-------------------------------------|

----

| 9.   | Stockholder’s Equity and Equity Incentive Plan: |
|----------------|-------------------------------------------------------|

| 10.   | Revenues and Gross Profit: |
|-----------------|----------------------------|

|                                                               |   | 2012   |   |   | 2011   |   |   | 2010   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |   |   |   |
| Revenues:                                                          |   |   |   |   |   |   |   |   |   |
|   Sales to wholesalers                                   |   | $      | 27,015 |   |   | $      | 20,431 |   |   | $ | 9,335 |   |
|   Direct to consumers                                    |   |   | 18,113 |   |   |   | 15,363 |   |   |   | 12,383 |   |
|   Bulk wine and grape sales, event fees and retail sales |   |   | 3,646  |   |   |   | 3,512  |   |   |   | 2,044 |   |
|                                                               |   | $      | 48,774 |   |   | $      | 39,306 |   |   | $ | 23,762 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit:                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|   Sales to wholesalers                                   |   | $      | 13,163 |   |   | $      | 6,555  |   |   | $ | 3,150 |   |
|   Direct to consumers                                    |   |   | 10,598 |   |   |   | 9,075  |   |   |   | 7,545 |   |
|   Bulk wine and grape sales, event fees and retail sales |   |   | 379    |   |   |   | 282    |   |   |   | (38 | ) |
|   Inventory write-down                                   |   |   | (50    | )      |   |   | (51    | )      |   |   | (1,513 | ) |
|                                                               |   | $      | 24,090 |   |   | $      | 15,861 |   |   | $ | 9,144 |   |

| 11.   | Income Taxes: |
|-----------------|---------------|

----

|                                       |   | 2012   |   |   | 2011   |   |   | 2010   |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                       |   |   |   |   |   |   |   |   |   |
| State income taxes                         |   | $      | 11     |   |   | $      | 3      |   |   | $ | 3 |   |
| Federal income taxes:                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                    |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Deferred, reduction in valuation allowance |   |   |   |   |   |   |   |   |   |   |   |   |
|   for use of NOL                 |   |   | -      |   |   |   | -      |   |   |   | - |   |
|                                       |   | $      | 11     |   |   | $      | 3      |   |   | $ | 3 |   |

|                                |   | 2012   |    |   | 2011   |   |
|-------------------------------------|--------|--------|---------|--------|--------|--------|
| Deferred Tax Asset:                 |   |   |    |   |   |   |
| Federal NOL carryover               |   | $      | 27,704  |   |   | $      | 29,013 |   |
| California  NOL carryover |   |   | 2,207   |   |   |   | 2,383 |   |
| Intangible assets, net and goodwill |   |   | 118     |   |   |   | 146 |   |
| Other                               |   |   | 191     |   |   |   | 167 |   |
|                                |   |   | 30,220  |   |   |   | 31,709 |   |
| Valuation allowance                 |   |   | (25,636 | )      |   |   | (26,888 | ) |
|                                |   |   | 4,584   |   |   |   | 4,821 |   |
| Deferred Tax Liability:             |   |   |    |   |   |   |   |   |
| Property and equipment              |   |   | (756    | )      |   |   | (3,716 | ) |
| Inventory                           |   |   | (3,828  | )      |   |   | (1,105 | ) |
|                                |   |   | (4,584  | )      |   |   | (4,821 | ) |
| Net deferred tax asset              |   | $      | -       |   |   | $      | - |   |

----

|       |   | State  |    |
|------------|--------|--------|---------|
|       |   |   |    |
| 2013       |   | $      | 1,397   |   |
| 2014       |   |   | 5,970   |   |
| 2015       |   |   | – |   |
| 2016       |   |   | 8,181   |   |
| 2017       |   |   | 6,483   |   |
| 2018       |   |   | 3,954   |   |
| Thereafter |   |   | 12,419  |   |
|       |   | $      | 38,404  |   |

|                                                          |   | 2012   |   |   | 2011   |   |   | 2010   |   |
|---------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                          |   |   |   |   |   |   |   |   |   |
|   Expected federal income tax expense (benefit)     |   | $      | 78     |   |   | $      | (1,507 | )      |   | $ | (1,510 | ) |
|   State income tax expense                          |   |   | 11     |   |   |   | 3      |   |   |   | 3 |   |
|   Use of fully reserved net operating loss          |   |   | (78    | )      |   |   | -      |   |   |   | - |   |
|   Tax benefit of current year losses fully reserved |   |   |   |   |   |   |   |   |   |   |   |   |
|    in valuation allowance                      |   |   | -      |   |   |   | 1,507  |   |   |   | 1,510 |   |
|    Total                                       |   | $      | 11     |   |   | $      | 3      |   |   | $ | 3 |   |

| 12.   | Employee Benefit Plan: |
|-----------------|------------------------|

| 13.   | Commitments: |
|-----------------|--------------|

| 2013       |   | $      | 21  |   |
|------------|--------|--------|-----|--------|
| 2014       |   |   | 28  |   |
| 2015       |   |   | 28  |   |
| 2016       |   |   | 20  |   |
| 2017       |   |   | 9   |   |
| Thereafter |   |   | 21  |   |
|       |   | $      | 127 |   |

----

|       |   | Third Party |   |   | Related Party |   |
|------------|--------|-------------|--------|--------|---------------|--------|
|       |   |        |   |   |          |   |
| 2013       |   | $           | 5,880  |   |          | $      | 559 |   |
| 2014       |   |        | 4,820  |   |          |   | 212 |   |
| 2015       |   |        | 2,780  |   |          |   | 212 |   |
| 2016       |   |        | 1,512  |   |          |   | - |   |
| 2017       |   |        | 1,088  |   |          |   | - |   |
| Thereafter |   |        | 2,314  |   |          |   | - |   |
|       |   | $           | 18,394 |   |          | $      | 983 |   |

| 14.   | Litigation: |
|-----------------|-------------|

| 15.   | Selected Quarterly Financial Data (Unaudited): |
|-----------------|------------------------------------------------|

|                                                         |   | First                                    |   |   | Second  |   |   | Third   |   |   | Fourth  |   |
|--------------------------------------------------------------|--------|------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                         |   | Quarter                                  |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |
|                                                         |   | (In thousands, except per share amounts) |   |
|                                                         |   |                                     |   |   |    |   |   |    |   |   |    |   |
| 2012                                                         |   |                                     |   |   |    |   |   |    |   |   |    |   |
| Net sales                                                    |   | $                                        | 10,134 |   |    | $      | 11,616 |    |   | $      | 12,520  |   |   | $ | 14,504 |   |
| Gross profit                                                 |   | $                                        | 5,160  |   |    | $      | 5,724  |    |   | $      | 6,912   |   |   | $ | 6,294 |   |
| Income from operations                                       |   | $                                        | 845    |   |    | $      | 1,034  |    |   | $      | 2,607   |   |   | $ | 879 |   |
| Net income (loss)                                            |   | $                                        | (376   | )      |    | $      | (145   | )       |   | $      | 1,304   |   |   | $ | (572 | ) |
| Basic and fully diluted earnings (loss) per common share (a) |   | $                                        | (0.02  | )      |    | $      | (0.01  | )       |   | $      | $ 0.05  |   |   | $ | (0.02 | ) |
| Number of shares used in calculation                         |   |                                     | 24,458 |   |    |   | 24,458 |    |   |   | 24,458  |   |   |   | 24,458 |   |
|                                                         |   |                                     |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
|                                                         |   |                                     |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| 2011                                                         |   |                                     |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Net sales                                                    |   | $                                        | 7,182  |   |    | $      | 7,666  |    |   | $      | 10,578  |   |   | $ | 13,880 |   |
| Gross profit                                                 |   | $                                        | 3,070  |   |    | $      | 3,572  |    |   | $      | 5,076   |   |   | $ | 4,143 |   |
| Income (loss) from operations                                |   | $                                        | 312    |   |    | $      | (207   | )       |   | $      | 901     |   |   | $ | (1,129 | ) |
| Net loss                                                     |   | $                                        | (427   | )      |    | $      | (1,259 | )       |   | $      | (324    | )      |   | $ | (2,300 | ) |
| Basic and fully diluted loss per common share (a)            |   | $                                        | (0.02  | )      |    | $      | (0.05  | )       |   | $      | (0.01   | )      |   | $ | (0.09 | ) |
| Number of shares used in calculation                         |   |                                     | 24,458 |   |    |   | 24,458 |    |   |   | 24,458  |   |   |   | 24,458 |   |

|   | (a) | For 2012 and 2011, the total of quarterly per share amounts does not equal the annual per share amount due to rounding. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------|

| 16.   | Subsequent events: |
|-----------------|--------------------|

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