Diamond Estates Wines & Spirits Announces Replacement of Previously Issued Convertible Debentures

THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S. WIRE SERVICES

NIAGARA-ON-THE-LAKE, Ontario, January 18, 2024--(BUSINESS WIRE)--Diamond Estates Wines & Spirits Inc. (TSXV: DWS) ("Diamond Estates" or the "Company") announces the replacement of $4.884 million aggregate principal amount of 10.0% unsecured convertible debentures of the Company, which includes the $2,850,000 aggregate principal amount of 10.0% unsecured convertible debentures of the Company issued to 3346625 Canada Inc. ("Lassonde Holding") and the $500,000 aggregate principal amount of 10.0% unsecured convertible debentures of the Company issued to Lassonde Industries Inc. ("Lassonde Industries", a joint actor of Lassonde Holding and together with Lassonde Holding, the "Lassonde Group") (the "2022 Debentures") with new debentures (the "2023 Replacement Debentures") maturing on November 9, 2024, the whole in accordance with the terms of the 2022 Debentures.

The 2022 Debentures were issued in connection with the previously announced non-brokered private placement of debentures of the Company for gross proceeds of $4.884 million which closed on November 9, 2022. The 2022 Debentures carried interest from the date of issue at 10.0% per annum, calculated monthly, in arrears, and matured on November 9, 2023. The 2022 Debentures were convertible at the holder’s option into common shares of the Company ("Common Shares") from the date of issuance at a conversion price of $0.80.

The material terms of the 2023 Replacement Debentures, including their principal amounts, are the same as the 2022 Debentures, other than (i) the conversion price, which is now $0.30, and (ii) the maturity date, which is now November 9, 2024.

The interests payable on the 2022 Debentures have not been rolled into the principal amount of the 2023 Replacement Debentures and will remain outstanding, payable and convertible pursuant to the terms of the 2023 Replacement Debentures, and interests will continue to accrue on the 2023 Replacement Debentures in accordance with their terms.

Insiders of the Company subscribed for an aggregate of $3,350,000 in principal amount of 2022 Debentures. The issuance of the 2023 Replacement Debentures to such insiders (the "Insider Issuance") may be considered related party transactions within the meaning of TSXV Policy 5.9 and Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61?101"). As the Company’s securities are listed on the TSXV, the Insider Issuance is exempt from the formal valuation requirements of MI 61-101. All of the Company’s directors, including all of the Company’s "independent directors" (as determined in accordance with Part 7 of MI 61-101), have unanimously determined that the Insider Issuance is advisable and in the best interests of the Company, that the terms of the Insider Issuance are reasonable in the circumstances of the Company and that the Insider Issuance should be exempt from the minority shareholder approval requirements of MI 61-101 pursuant to the "financial hardship" exemption provided under Section 5.7(1)(e) of MI 61-101, as the Company is in a situation of serious financial difficulty, the Insider Issuance is designed to improve the financial position of the Company and the circumstances described in Section 5.5(f) of MI 61-101 are not applicable. Management notes that while the Company recently closed a non-brokered private placement on November 14, 2023, the net proceeds of that transaction were pre-allocated to reducing accounts payable, the repayment of debt, and associated transaction costs. Further details will be provided in the Company’s material change report to be filed under the Company’s profile on the SEDAR+ website at www.sedarplus.ca.

All securities issued in connection with the 2023 Replacement Debentures are subject to a four month and one day hold period from the date of issuance in accordance with Canadian securities laws. The issuance of the 2023 Replacement Debentures is subject to the final approval of the TSXV.

The Company also wishes to announce that it has reached an agreement to sell its Queenston Mile Vineyard with a closing date of February 15, 2024. The Company has agreed to a purchase price of approximately $4.4 million for the real estate, chattels, equipment and inventory. The purchase price includes a $500,000 vendor take-back mortgage and an agreement to acquire approximately $400,000 of finished goods inventory on a cost plus basis. As part of the Company’s debt reduction strategy the proceeds of the sale will be utilized to reduce working capital and long-term debt.

About Diamond Estates Wines and Spirits Inc.

Diamond Estates Wines and Spirits Inc. 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 five production facilities, four in Ontario and one in British Columbia, that produce predominantly VQA wines under such well-known brand names as 20 Bees, Creekside, EastDell, Lakeview Cellars, Mindful, Queenston Mile, Shiny Apple Cider, Fresh, Proud Pour, Red Tractor, Seasons, Serenity and Backyard Vineyards.

Through its commercial division, Trajectory Beverage Partners, the Company is the sales agent for many leading international brands in all regions of the country as well as being a distributor in the western provinces. These recognizable brands include Fat Bastard, Meffre, Pierre Chavin and Andre Lurton wines from France, Brimincourt Champagne from France, Merlet and Larsen Cognacs from France, Kaiken wines from Argentina, Blue Nun and Erben wines from Germany, Calabria Family Estate Wines and McWilliams Wines from Australia, Saint Clair Family Estate Wines and Yealands Family Wines from New Zealand, Storywood and Cofradia Tequilas from Mexico, Maverick Distillery spirits (including Tag Vodka and Barnburner Whisky) from Ontario, Magnum Cream Liqueur from Scotland, Talamonti and Cielo wines from Italy, Catedral and Cabeca de Toiro wines from Portugal, Waterloo Beer & Radlers from Canada, Landshark Lager from the USA, Edinburgh Gin, Tamdhu, Glengoyne and Smokehead single- malt Scotch whiskies from Scotland, Islay Mist, Grand MacNish and Waterproof whiskies from Scotland, C. Mondavi & Family wines including C.K Mondavi & Charles Krug from Napa, Wize Spirits, Hounds Vodka and Valley of Mother of God Gins from Canada, Bols Vodka from Amsterdam, Collective Arts beers, spirits and RTDs from Ontario, Koyle Family Wines from Chile and Pearse Lyons whiskies and gins from Ireland.

Early Warning Disclosure

On November 9, 2023, Lassonde Holding, a corporation controlled by Mr. Pierre-Paul Lassonde, Chairman of the Board of Lassonde Industries, was issued a 2023 Replacement Debenture in the aggregate principal amount of $2,850,000 and Lassonde Industries was issued a 2023 Replacement Debenture in the aggregate principal amount of $500,000.

Prior to the issuance of the 2023 Replacement Debentures, Lassonde Industries directly owned 25,346,506 Common Shares, 1,123,958 warrants convertible into 1,123,958 Common Shares, $500,000 in principal amount of 2022 Debentures, 80,000 options exercisable for 80,000 Common Shares and 277,338 deferred share units which may be settled, at the discretion of the Company, for up to 277,338 Common Shares. Prior to the issuance of the 2023 Replacement Debentures, Lassonde Holding directly owned 617,824 Common Shares, $2,850,000 in principal amount of 2022 Debentures and 250,000 warrants convertible into 250,000 Common Shares. As such, prior to the issuance of the 2023 Replacement Debentures, the Lassonde Group, directly or indirectly, owned or controlled, 25,964,330 Common Shares, representing approximately 54.23% of the then issued and outstanding Common Shares, $3,350,000 in principal amount of 2022 Debentures, 80,000 options, 1,373,958 warrants and 277,338 deferred share units.

Following the issuance of the 2023 Replacement Debentures, based on the number of the issued and outstanding Common Shares and without additional issuance or conversion of securities (including the 2023 Replacement Debentures), the security holdings of the Lassonde Group in the Company have not changed, except that the Lassonde Group now owns $3,350,000 in principal amount of 2023 Replacement Debentures in lieu of the 2022 Debentures.

The 2023 Replacement Debentures are convertible into Common Shares. If Lassonde Holding was to convert all of its 2023 Replacement Debentures (exclusive of accrued interest, including interest on the 2022 Debentures), it would own, directly or indirectly, 10,796,395 Common Shares, representing approximately 18.60% of the issued and outstanding Common Shares (based on the then current number of issued and outstanding Common Shares, assuming no additional issuance or conversion) and if Lassonde Industries was to convert all of its 2023 Replacement Debentures (exclusive of accrued interest, including interest on the 2022 Debentures), it would own, directly or indirectly, 27,132,220 Common Shares, representing approximately 54.63% of the issued and outstanding Common Shares (based on the then current number of issued and outstanding Common Shares, assuming no additional issuance or conversion). Accordingly, the Lassonde Group would own, directly or indirectly, 37,928,615 Common Shares, representing approximately 63.38% of the issued and outstanding Common Shares (based on the then current number of issued and outstanding Common Shares, assuming no additional issuance or conversion).

The participation by Lassonde Group in the issuance of the 2023 Replacement Debentures was undertaken for investment purposes and to assist the Company with the execution of its strategic plan. The Lassonde Group may, from time to time, acquire additional securities of the Company for investment purposes and may, from time to time, increase or decrease its beneficial ownership or control of the Company depending on market or other conditions.

This news release is being issued as required by National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues and National Instrument 62?104 – Take-Over Bids and Issuer Bids and relates to: (a) Lassonde Holding, whose head office is located at 54 rang de la Montagne, Rougemont, Québec, J0L 1M0; and (b) Lassonde Industries, whose head office is located at 755 rue Principale, Rougemont, Québec, J0L 1M0. Copies of the early warning reports with additional information in respect of the foregoing matters will be available under the Company’s profile on the SEDAR+ website at www.sedarplus.ca or by contacting:

For Lassonde Holding:
Pierre Boulais, Financial Director
3346625 Canada Inc.
54 Rang de la Montagne, Rougemont, Québec, J0L 1M0
450-469-2912

For Lassonde Industries:
éric Gemme, Chief Financial Officer
Lassonde Industries Inc.
755 rue Principale, Rougemont, Québec, J0L 1M0
450-469-4926, ext 10456

Forward Looking Statements

This press release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Diamond Estates Wines and Spirits Inc. to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to the economy generally; consumer interest in the services and products of the Company; financing; competition; and anticipated and unanticipated costs. While the Company acknowledges that subsequent events and developments may cause its views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the views of the Company as of any date subsequent to the date of this press release. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240117049778/en/

Contacts

Andrew Howard
President & CEO
Diamond Estates Wines & Spirits Inc.
[email protected]

Ryan Conte, CPA, CA, CBV
Chief Financial Officer
Diamond Estates Wines & Spirits Inc.
[email protected]