Mr. Andrew Howard reports

DIAMOND ESTATES WINES & SPIRITS REPORTS Q2 2026 FINANCIAL RESULTS

Diamond Estates Wines & Spirits Inc. has released its financial results of position for the six months ended Sept. 30, 2025 (Q2 2026).

Q2 2026 summary:

• Revenue for Q2 2026 was $8.5-million, an increase of $800,000 from $7.7-million in Q2 2025. The Winery division experienced an increase in sales of $900,000 driven by grocery and big-box stores as well as changes to the VQA support program. The organic growth of the winery division is lapping a very strong Q2 a year ago due to the LCBO strike and the expansion of the retail channel. The agency division experienced a decrease of $100,000 primarily driven by the sale of Western Canada agency operations to Renaissance which has been partly offset by the acquisition of Perigon Beverage Group.
• Gross margin for Q2 2026 was $5.9-million, an increase of $1.7-million, from $4.2-million in Q2 2025. Gross margin as a percentage of revenue grew to 69.8 per cent for Q2 2026 compared with 53.8 per cent in Q2 2025. The change in gross margin came from the winery division experiencing an increase of $1.7-million while the agency division remained flat. The gross margin improvement in the winery division was driven by the increase in sales volumes in the grocery and convenience channels as well as enhancements in the VQA and wine sector support programs.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased by $1.3-million to $1.8-million in Q2 2026 from $500,000 in Q2 2025. The adjusted EBITDA increase is attributed to improving gross margins in the winery division offset by an overall increase in SG&A (selling, general and administrative) expenses of $400,000 compared with the prior year.
• EBITDA decreased by $100,000 to $900,000 in Q2 2026 from $1.0-million in Q2 2025. The year-over-year variance between EBITDA and adjusted EBITDA primarily reflects non-operational items in the prior year related to the gain on sale of the Western Canada agency to Renaissance and lower share-based compensation, as well as one-time costs in the current year associated with regulatory compliance initiatives and severance expenses.
• Net income decreased from $200,000 in Q2 2025 to nil in Q2 2026, primarily due to the same non-operational and one-time items that impacted EBITDA.

During Q2 2026, on July 22, 2025, the company also issued an aggregate of 764,917 common shares at a price of 21 cents per share as part of the contingent consideration payable associated with the acquisition of Perigon Beverage Group based upon the achievement of gross margin targets.

Deferred share units

As previously announced, the company issued an aggregate of 248,683 DSUs (deferred share units) in October, 2025, in settlement of $47,250 of previously accrued deferred directors compensation.

Stock option grant

As previously announced, the company granted a total of 1.25 million options in October, 2025, at a strike price of 19 cents per stock option to an officer of the company. Each stock option is exercisable for the purchase of one common share of the company for up to five years from the date of issuance, at which time they expire. The stock options are being issued under the company's stock option plan and vest at the rate of 25 per cent on each anniversary of the issuance date.

Security-based compensation plan amendments

At the annual general and special meeting of shareholders held on Oct. 30, 2025, the shareholders approved certain amendments to the company's stock option plan and DSU plan, including the following notable changes:

• Converting both plans into fixed up to 20-per-cent plans as defined under Policy 4.4 of the TSX-V. As a result, the maximum number of shares which may be issued under all of the company's security-based compensation arrangements shall now be a maximum of 13,376,703 common shares, or such additional amount as may be approved from time to time by the shareholders of the company;
• The DSU plan was amended to allow deferred share units reflecting each director's quarterly retainer to be automatically credited on the last day of each fiscal quarter.

BMO SARCA amendments

On Nov. 7, 2025, the company agreed to the seventh amendment to its second amended and restated credit agreement with Bank of Montreal that featured the following notable changes:

• Maturity date extended to March 27, 2026;
• A temporary bulge in the revolving line of credit in the amount of $3.6-million due no later than the maturity date;
• An increase of the interest rate during the period of the temporary bulge to prime plus 2.65 per cent from prime plus 2.40 per cent.

Debentures payable

The company has obtained a 60-day forbearance on most of the convertible debentures and related accrued coupon interest, otherwise due on Nov. 9, 2025. Management expects the majority of the debenture holders to agree to a rollover under similar but updated terms, with the obligations to the remaining debenture holders in the range of $100,000 being settled in cash and/or shares.

President's message

"Q2 marks another very strong quarter. The company's performance reflects the success of our turnaround initiatives and investment decisions, with rapidly improving financial results that demonstrate real progress and momentum. The results are particularly encouraging given we are lapping a very strong Q2 a year ago where the LCBO strike and retail expansion contributed to 50-per-cent revenue growth. We see continued opportunity through our strengthened portfolio, our strategic investment in the retail sales team, broad growth in our agency brands and our continued focus to deliver significant growth of our VQA products -- which receive the highest levels of government support and deliver meaningful benefits to the local economy. Our industry is also benefitting from a strong 'buy local' movement, a trend we expect to persist over the long term," said Andrew Howard, president and chief executive officer.

Other matters

The company also announces that, pursuant to the engagement letter it entered into with 2RL Capital Inc. dated Sept. 12, 2024 (the engagement letter), in connection with the Perigon acquisition and the continuing services to be provided by 2RL Capital to the company, the company issued 270,270 common shares to the principals of 2RL Capital on June 20, 2025, at a deemed issuance price of 18.5 cents per common share. This disclosure should have been included in the Q1 press release or issued as a separate release.

About Diamond Estates Wines and Spirits Inc.

Diamond Estates Wines and Spirits is a producer of high-quality wines and ciders as well as a sales agent for over 120 beverage alcohol brands across Canada. The company operates four production facilities, three in Ontario and one in British Columbia, that produce predominantly VQA wines under such well-known brand names as 20 Bees, Creekside, D'Ont Poke the Bear, EastDell, Lakeview Cellars, Mindful, Shiny Apple Cider, Fresh Wines, Red Tractor, Seasons, Serenity and Backyard Vineyards.

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