Diamond Estates Wines & Spirits Inc. — Management Reports 2021

Jul 23, 2021

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

The following management discussion and analysis ("MD&A") of Diamond Estates Wines & Spirits Inc. ("Diamond" or "the Company") provides a review of corporate developments, results of operations and financial position for the three and twelve month periods ended March 31, 2021 ("Q4 2021" and "FY 2021" respectively) compared with the corresponding periods ended March 31, 2020 ("Q4 2020" and "FY 2020" respectively). This discussion is prepared as of July 22, 2021 and should be read in conjunction with the audited consolidated financial statements and accompanying notes of Diamond for the fiscal years ended March 31, 2021 and March 31, 2020. Additional information regarding Diamond is available on Diamond's SEDAR profile at www.sedar.com. The results reported in this MD&A have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and are presented in Canadian dollars (unless otherwise indicated) which is the Company’s functional currency.

FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements. Forward-looking statements can often 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 the Company 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 MD&A. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, the ability of the Company to obtain necessary financing, the economy generally, the COVID-19 pandemic, conditions in the target market of the Company, consumer interest in the services and products of the Company, competition and anticipated and unanticipated costs. Such statements could also be materially affected by environmental regulation, liquor regulation, taxation policies, competition, the lack of available and qualified personnel or management, stock market volatility and the ability to access sufficient capital from internal or external sources. Actual results, performance or achievement could differ materially from those expressed herein. While the Company anticipates that subsequent events and developments may cause its views to change, the Company specifically disclaims any obligation to update these forward-looking statements, except as required by applicable law. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this MD&A. 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. Readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the Company. Additional factors are noted in this MD&A under "Risk Factors".

COMPANY OVERVIEW

Diamond Estates Wines and Spirits Inc. is a producer of high-quality wines and a sales agent for over 120 beverage alcohol brands across Canada. The Company operates two wineries, one in Ontario and one in British Columbia, that produce predominantly VQA wines under such well-known brand names as 20 Bees, EastDell, Lakeview Cellars, Dan Aykroyd, Fresh, McMichael Collection, Seasons, Serenity, and Backyard Vineyards.

Page 1 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

Through its commercial division, Trajectory Beverage Partners ("TBP"), 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 Josh wines from California, Fat Bastard and Andre Lurton wines from France, Kaiken wines from Argentina, Blue Nun wines from Germany, Francois Lurton wines from France and Argentina, Felix Solis wines from Spain, Waterloo Brewing from Canada, Landshark Lager from the USA, Marston's beers from England, Edinburgh Gin from Scotland, Tamdhu, Glengoyne and Smokehead single-malt Scotch whiskies, Barcelo Rum from the Dominican Republic, C.K. Mondavi & Family wines including Charles Krug from Napa, Bols Vodka from Amsterdam, Koyle Family Wines from Chile, Pearse Lyons whiskies and gins from Ireland, Niagara Craft Distillers’ beverages from Ontario, Fontana di Papa wines from Italy.

The Company’s mission is to build lasting, mutually beneficial relationships with channel partners, growers, suppliers and employees. To meet this goal, the Company is undertaking significant investments in winemaking, brand marketing, sales programming, performance management and back-office infrastructure, including information systems which will support growth in an efficient, profitable manner. Based on its analysis of the market, the Company believes that the growth prospects for the domestic and import beverage alcohol markets in Canada are positive. The Company continues to be a participant in the export market and has been successfully expanding its focus beyond China. Canadian wines and particularly Icewine enjoy a premium product positioning with international consumers.

The Company is committed to achieving its sales objectives through its distribution network, which is focused on the provincial liquor boards, licensed restaurants and bars, grocery chains, Diamond's two retail locations, and export channels. This distribution network is supported by enhanced sales, marketing and promotional programs.

RECENT EVENTS AND FY 2021 HIGHLIGHTS

• Revenue for FY 2021 of $25.6 million, a decline of $1.2 million from FY 2020 revenue of $26.8 million, due to COVID-19 and its related impacts;

• Gross margin for FY 2021 was $10.5 million, a decline of $1.6 million from $12.1 million in FY 2020, while gross margin as a percentage of revenue was 41.2% for FY 2021 compared to 45.2% in FY 2020, mostly due to revenue decline in high margin trade channels and consumer shifts to lower priced, lower margin brands;

• EBITDA was $0.8 million in FY 2021 compared to $(0.8) million in FY 2020, an increase of $1.6 million with the increase attributable to a decrease in selling, general and administrative expenses of $3.2 million, net of the reduction in gross margin of $1.6 million. The decrease in SG&A expenses is attributable to a decline of $2.0 million in employee compensation and temporarily reducing advertising and promotion levels of $0.8 million due to the COVID-19 pandemic.

• On June 10, 2021, the Company completed a non-brokered private placement of $1.83 million aggregate principal amount of 10.0 % unsecured convertible debentures;

• On October 26, 2020, the Company entered into an Amended and Restated Credit Agreement ("ARCA") (to replace the original BMO credit agreement dated September 29, 2017). The ARCA was amended on March 26, 2021 (the "First Amendment to the ARCA") and further amended on June 29, 2021 (the Second Amendment to the ARCA") with the maturity date extended to October 1, 2022;

• The winery division launched a new innovative 3L foil laminate pouch under the 20 Bees brand into the Grocery channel. To date, the product has received widespread acceptance in the channel due to its low environmental impact, unique format and attractive pricing.

Page 2 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

• The Company maintained its strong #2 position in the emerging Ontario grocery channel amongst VQA wines, with 20 Bees representing three of the top 20 selling stock keeping units. Josh Cellars Cabernet Sauvignon continues to be the top selling imported red wine over $15, with sales volumes doubling year-over-year;

• The impact of the COVID-19 pandemic continues to shift consumer purchase behaviour from on-premise/outof-home to in-home consumption. As a direct result, Diamond has seen a shift of sales volume from traditional retail and on-premise channels to grocery, on-line, direct delivery and curbside retail, with the trend particularly prevalent in Ontario ( see discussion under "Strategic Outlook and Direction" section below ); and

• On July 27, 2020, it was announced that the Government of Canada has agreed to repeal the federal excise duty exemption (the “Exemption”) of 100% Canadian wine by June 30, 2022. This agreement was reached following a World Trade Organization challenge put forward by Australia. The Federal Finance Minister announced a replacement program to support domestic producers in the Federal budget presented to Parliament on April 19, 2021. Budget 2021 provides a winery support program valued at $101 million for fiscal 2022-23 and 2023-24, to be developed and administered by Agriculture and Agri-Food Canada (AAFC). Details of the program have not been finalized but it is anticipated that the program will provide sufficient support to fully replace the federal excise tax exemption.

SELECT FINANCIAL INFORMATION

FY 2021 $ Revenue 25,552,514 Gross margin 10,531,143 Net loss and comprehensive loss (2,635,213) Basic and diluted loss per share (0.01) Working capital surplus (deficiency) 20,401,475 Total assets 49,819,991 Term loans and lease liabilities payable 26,897,902	FY 2020 $ 26,794,230 12,112,565 (4,186,039) (0.02) (993,456) 49,951,228 22,284,817	FY 2019 $ 28,123,103 12,230,587 (3,271,245) (0.02) 14,887,530 45,735,180 23,141,618

See discussion of financial results under "Results of Operations" and "Liquidity and Capital Resources"

Page 3 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

QUARTERLY PERFORMANCE (UNAUDITED)

The following table highlights certain key quarterly financial highlights. Commentary on the selected highlights is included under "Results of Operations" and "Liquidity and Capital Resources".

			Mar-2021	Dec-2020	Sep-2020	Jun-2020	Mar-2020	Dec-2019	Sep-2019	Jun-2019
			Q4 2021	Q3 2021	Q2 2021	Q1 2021	Q4 2020	Q3 2020	Q2 2020	Q1 2020
			$	$	$	$	$	$	$	$
Balance sheet
Working	capital	surplus	20,401,475	20,351,192	17,601,504	18,365,074	(993,456)	18,119,252	14,326,686	14,356,072
(deficiency)
Term debt and finance leases			26,897,902	25,606,250	22,482,868	22,851,385	22,284,817	21,520,150	19,266,726	25,274,441
Total equity			18,187,297	19,443,352	19,781,906	20,102,264	20,445,742	21,946,546	20,743,733	14,982,458
Income statement
Revenue			5,365,358	6,964,106	7,281,811	5,941,239	5,386,592	6,901,517	7,214,799	7,291,322
Gross margin			1,732,970	2,909,327	3,179,247	2,709,599	2,039,190	2,999,783	3,771,820	3,301,772
EBITDA			(477,770)	211,415	754,903	358,731	(748,041)	(338,409)	215,055	121,168
Adjusted EBITDA			(575,963)	322,367	776,934	506,712	(422,375)	(257,037)	296,427	148,014
Net loss			(1,411,045)	(482,832)	(379,016)	(362,320)	(1,583,226)	(1,314,052)	(476,321)	(812,440)
Basic and diluted loss per share			(0.002)	(0.002)	(0.002)	(0.002)	(0.008)	(0.008)	(0.003)	(0.005)

See definition of selected terms under the heading "Non-IFRS Financial Measures"

RESULTS OF OPERATIONS

Revenue Cost of sales Gross margin Gross margin (% of revenue) Selling, general and administration expenses SG&A expenses (% of revenue) EBITDA Interest Depreciation and amortization Financing costs Income tax recovery Loss from operations Restructuring charges Share based compensation (Gain) loss on disposition of capital assets Net loss and comprehensive loss	$ $	FY 2021 25,552,514 $ 15,021,371 10,531,143 41.2 9,683,864 37.9 847,279 939,660 1,446,903 341,337 - (1,880,621) 578,586 330,433 (154,427) (2,635,213) $	FY 2020 26,794,230 14,681,665 12,112,565 45.2 12,862,792 48.0 (750,227) 1,113,986 1,690,335 135,050 (21,000) (3,668,598) - 528,338 (10,897) (4,186,039)

Page 4 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

Revenue for FY 2021 was $25.6 million, a decline of $1.2 million from $26.8 million in FY 2020. Winery revenue for FY 2021 was $10.8 million, a decrease of 19.9% or $2.7 million from $13.5 million in FY 2020, specifically related to continued reduced operations of most private retail and on-premise accounts nationally as a result of COVID-19. Agency revenue for FY 2021 was $14.8 million, an increase of 10.8% or $1.5 million from $13.3 million in FY 2020. Total revenue for Q4 2021 was $5.4 million, the same as for Q4 2020.

The Company defines gross margin as gross profit less depreciation. Gross margin for FY 2021 was $10.5 million, a decline of $1.6 million from $12.1 million in FY 2020, while gross margin as a percentage of revenue was 41.2% for FY 2021 compared to 45.2% in FY 2020. The gross margin of the winery business decreased $1.9 million, due to revenue decline in high margin trade channels. For the agency business, the gross margin increased by $0.3 million. Overall, there has continued to be a shift in the sales mix to higher volume, lower priced and lower margin brands as consumers curb spending during the pandemic and look to less costly brand alternatives. Gross margin for Q4 2021 was $1.8 million, a decrease of $0.2 million from $2.0 million in Q4 2020, while gross margin as a percentage of revenue was 34.1% for Q4 2021 compared to 37.9% in Q4 2020.

Total SG&A expenses for FY 2021 were $9.7 million, a decrease of $3.2 million, or 24.8%, from $12.9 million in FY 2020. The decrease is attributable to a decline of $2.0 million in employee compensation and temporarily reducing advertising and promotion levels of $0.8 million due to the COVID-19 pandemic. The decline in employee compensation was the result of headcount reductions from the restructuring in the previous quarter, and subsidies of $0.8 million received under the federal government's CEWS program in FY 2021. SG&A expenses for Q4 2021 totaled $2.2 million, a decrease of $0.6 million from $2.8 million in Q4 2020.

Interest expense for FY 2021 of $0.9 million was down compared to $1.1 million in FY 2020 as a result of a decrease in the bank's prime lending rate from the prior year, partially offset by interest on the new BCAP loan. Interest expense for Q4 2021 was $0.3 million which was similar to Q4 2020.

Depreciation and amortization expense for FY 2021 was $1.4 million, a decrease of $0.3 million from $1.7 million in FY 2020. The decrease is mainly attributable to the reduction in depreciation expense included in cost of sales.

The Company provided for restructuring charges of $0.6 million in FY 2021 to cover the expected payroll and benefit costs from a staffing reduction.

Loss from operations for FY 2021 was $1.9 million compared to $3.7 million in FY 2020 with the improvement largely attributable to the reduction in SG&A expenses of $3.2 million noted above, partially offset by the decrease in gross margin of $1.6 million. Net loss for Q4 2021 was $1.4 million, a decrease of $0.2 million compared to a net loss of $1.6 million in Q4 2020, attributable mostly to the year-over-year decrease of SG&A expenses.

Page 5 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

LIQUIDITY AND CAPITAL RESOURCES

Accounts receivable Inventory Prepaid expenses Total current assets Property, plant and equipment Right of use assets Intangible assets Total assets Accounts payable and accrued liabilities and other Current portion of term loans payable and lease liabilities Total current liabilities Term loans payable, net of current portion Finance leases, net of current portion Total liabilities Shareholders' equity

March 31, 2021 March 31, 2020 $ 2,684,546 $ 3,406,053 23,418,282 22,099,156 254,101 266,146 26,356,929 25,771,355 17,697,058 18,208,422 3,180,600 3,166,836 2,585,404 2,804,615 $ 49,819,991 $ 49,951,228 $ 4,734,792 $ 7,220,669 1,220,662 19,544,142 5,955,454 26,764,811 22,990,244 - 2,686,996 2,740,675 31,632,694 29,505,486 18,187,297 20,445,742 $ 49,819,991 $ 49,951,228

On October 26, 2020, the Company entered into an Amended and Restated Credit Agreement ("ARCA") to replace the original the BMO credit agreement dated September 29, 2017. The ARCA was amended on March 26, 2021 (the "First Amendment to the ARCA") and further amended on June 29, 2021 (the Second Amendment to the ARCA"). The ARCA is guaranteed by a general security agreement covering the assets of the Company and its subsidiaries and is subject to the following facilities detailed below.

The initial BMO credit agreement was dated September 29, 2017 and was amended pursuant to a first amending agreement dated July 29, 2019, a second amending agreement (the "Second Amending Agreement") dated December 17, 2019, a third amending agreement (the "Third Amending Agreement") dated May 15, 2020, and a fourth amending agreement (the "Fourth Amending Agreement") dated July 24, 2020.

Working capital was $20.4 million as at March 31, 2021, an increase of $21.4 million compared to the $1.0 million deficiency as at March 31, 2020. During the interim period ended September 30, 2020, the term loan maturity was extended to July 1, 2022 under the Fourth Amending Agreement. Accordingly, as the maturity date is twelve months after the reporting date, classification of the term loan reverted back to long-term. The Second Amending Agreement, in effect as of March 31, 2020, had a maturity date of September 26, 2020. As that maturity date fell within twelve months of the reporting date, all indebtedness was classified as current. On a pro-forma basis (after giving effect to the Fourth Amending Agreement), the working capital as at March 31, 2020 was $17.7 million, such that normalized working capital has increased by $2.7 million as at March 31, 2021. This increase is largely due to the proceeds of the BCAP loan of $2.75 million, classified as a long-term liability, being invested in inventory, a current asset.

Accounts receivable of $2.7 million as at March 31, 2021 decreased by $0.7 million from $3.4 million as at March 31, 2020. The decrease was primarily the result of improved collections due to a change in the customer sales mix.

Page 6 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

The inventory balance was $23.4 million as at March 31, 2021, an increase of $1.3 million from $22.1 million as at March 31, 2020. The increase is seasonal in nature due to the contractually committed annual purchase of the fall grape harvest in October and November, and was financed from the proceeds of the BCAP loan. Winery inventory is dependent on domestically grown grapes that are used in the sale of premium and ultra-premium wines that are held for a longer period than imported wine. These wines are typically aged for one to three years before they are sold.

Property, plant and equipment of $17.7 million as at March 31, 2021 decreased by $0.5 million from $18.2 million as at March 31, 2020. The decrease was the net of (i) additions of $0.4 million, less (ii) depreciation of $0.9 million.

Right-of-use assets of $3.2 million as at March 31, 2021 remained consistent at $3.2 million as at March 31, 2020, reflecting net of (i) additions of $0.4 million, less (i) depreciation of $0.4 million.

Intangible assets of $2.6 million as at March 31, 2021 decreased by $0.2 million from $2.8 million at March 31, 2020, reflecting net of additions of $0.1 million offset by amortization of $0.3 million.

Accounts payable and accrued liabilities of $4.7 million as at March 31, 2021 decreased by $2.5 million from $7.2 million as at March 31, 2020. The decrease in accounts payable and accrued liabilities was funded by an operating line increase plus improved collections on accounts receivable.

The BMO credit facilities are governed under the terms of the ARCA and include the new BCAP term loan (see discussion below) , an existing non-revolving term loan, a revolving operating line, the total of which was $23.8 million as at March 31, 2021, an increase of $4.6 million from $19.2 million as at March 31, 2020. The existing term loan balance declined by $0.4 million to $8.5 million as a result of quarterly scheduled repayments, while the operating line balance increased by $2.3 million to $12.6 million.

Over the course of FY 2021, the Company's credit facility with BMO had the following major changes:

• In July, 2020, under the Fourth Amending Agreement to the credit agreement then in effect:, as follows: (i) the maturity date was extended to July 1, 2022, (ii) definitions of certain EBITDA adjustments were refined for the quarters ended September 30, 2020 and December 31, 2020, (iii) the minimum fixed charge coverage ratio was amended to 1.20|1 and 1.05|1 respectively for the quarters ended September 30, 2020 and December 31, 2020; and (iv) quarterly principal payments of $125,000 on the term loan were deferred for the quarters ended September 30, 2020 and December 31, 2020.

• As part of the ARCA, the Company obtained the BCAP loan from BMO in the amount of $2.75 million. The loan is secured by an 80% guarantee from the Export Development Corporation ("EDC"), and has the following terms and conditions:

• bears interest monthly at CAD prime rate plus 1.25%';

• repayable in 48 equal monthly principal payments of $57,292, starting on the first anniversary of funding;

• EDC guarantee subject to renewal annually at a fee of 1.8% of the amount of the original loan; and

• maturity date of July 1, 2022.

Page 7 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

The following table outlines the Company’s contractual undiscounted obligations as at March 31, 2021. The Company analyzes contractual obligations for financial liabilities in conjunction with other commitments in managing liquidity risk. Contractual obligations include term loans payable, lease liabilities, and contracts for the purchase of grapes, packaging and other raw materials.

Accounts payable and accrued liabilities Term loans payable Lease liabilities Purchase contracts for grapes, packaging and other raw materials Total contractual obligations	<1 year 2-3 years 4,735 - 844 22,946 420 887 4,501 8,250	4-5 years >5 years Total $ (000's) - - 4,735 - - 23,790 696 1,106 3,109 - - 12,751
	10,500 32,083	696 1,106 44,385

The Company's debt to equity ratio increased to 1.48:1 as at March 31, 2021 from 1.09:1 as at March 31, 2020, where debt is defined as total liabilities less accounts payable and accrued liabilities, and equity is defined as shareholders' equity. This increase is due to the new BCAP term loan debt.

RELATED PARTY TRANSACTIONS

During FY 2021 and FY 2020, the Company had related party transactions, including (i) compensation of key management personnel and directors, and (ii) transactions with entities related to or controlled by directors, as follows:

	FY 2021	FY 2020
	$	$
Salary	964,654	1,136,901
Director fees	111,828	72,250
Share based compensation under stock option plan and DSU plan	330,433	528,338
Commissions	221,531	64,091
Winery lease payments	-	80,000
Grape purchases	-	115,143

Accounts payable and accrued liabilities as at March 31, 2021 includes $82,188 (2020 - $100,852) with respect to balances owing to related parties for the transactions disclosed above.

Page 8 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

CAPITALIZATION

The Company has common shares and other equity instruments outstanding at each reporting date as follows:

Common shares Stock options Deferred share units Warrants Total equity instruments	March 31, 2021 200,005,566 15,100,000 2,647,637 750,000	March 31, 2020 Change in period 200,005,566 - 8,050,000 7,050,000 1,815,037 832,600 - 750,000 209,870,603 8,632,600
	218,503,203

The changes to the Company's overall capitalization during 2021 YTD include the following:

Common shares

The Company did not issue any common shares during the year ended March 31, 2021

Stock options

During FY 2021, the Board of Directors authorized the issuance of a total 10,300,000 stock option grants to directors and key members of management, as follows:

• 1,250,000 options on August 3, 2020;

• 7,050,000 options on September 2, 2020;

• 500,000 options on September 15, 2020; and

• 1,500,000 options on March 9, 2021.

The options have exercise prices ranging from $0.14 to $0.18 and a term of 5 years, vesting as to 25% per year on each anniversary date over the next 4 years. A total of 3,250,000 options expired unexercised on the departure of members of management.

Deferred share units

During FY 2021, the Company issued 832,600 DSUs valued at $125,579 to non-executive directors under the DSU Plan in settlement of deferred directors' compensation, as follows:

• 196,485 DSUs on April 20, 2020 valued at $31,438

• 201,898 DSUs on August 20, 2020 valued at $28,265

• 245,674 DSUs on November 19, 2020 valued at $31,938

• 188,543 DSUs on March 9, 2021 valued at $33,938

Page 9 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

Warrants

As consideration for BMO entering into the Fourth Amending Agreement to the Company's credit facility (see discussion under "Liquidity and Capital Resources" section above) , the Company issued 750,000 warrants to its lender. Each warrant is exercisable into one common share of the Company at an excise price of $0.16 per common share. The warrants vested immediately and expire on July 1, 2022.

NON-IFRS FINANCIAL MEASURES

Management uses net loss and comprehensive loss as presented in the consolidated statements of net loss and comprehensive loss as well as "EBITDA" and "Adjusted EBITDA" as a measure to assess performance of the Company. EBITDA and "Adjusted EBITDA" are other financial measures and are reconciled to net loss and comprehensive loss below under "Results of Operations".

EBITDA and Adjusted EBITDA are supplemental financial measure to further assist readers in assessing the Company’s ability to generate income from operations before considering the Company's financing decisions, depreciation of property, plant and equipment and amortization of intangible assets. EBITDA comprises gross margin less operating costs before financial expenses, depreciation and amortization, non-cash expenses such as share-based compensation, one-time and other unusual items, and income tax. Adjusted EBITDA comprises EBITDA before nonrecurring expenses such as severance, restructuring costs, one-time financing charges, acquisition costs, cost of sales adjustments related to inventory acquired in business combinations and other non-recurring adjustments. Gross margin is defined as gross profit excluding depreciation on property, plant and equipment used in production. Operating expenses exclude interest, depreciation on property, plant and equipment used in selling and administration, and amortization of intangible assets.

EBITDA does not represent the actual cash provided by the operating activities nor is it a recognized measure of financial performance under IFRS. Readers are cautioned that this measure should not be considered as a replacement for those as per the consolidated financial statements prepared under IFRS. The Company's definitions of this nonIFRS financial measure may differ from those used by other companies.

Page 10 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

The Company calculates EBITDA and Adjusted EBITDA as follows:

Net loss for year Interest Depreciation and amortization Share-based compensation Restructuring charges Financing costs Gain on disposition of capital assets Income tax recovery EBITDA Cost of goods sold adjustments for fair value of BYV inventories sold Inventory adjustment Adjusted EBITDA	FY2021 FY2020 $ $ (2,635,213) (4,186,039) 939,660 1,113,986 1,446,903 1,690,335 330,433 528,338 578,586 - 341,337 135,050 (154,427) (10,897) - (21,000) 847,279 (750,227) - - 182,771 515,256 1,030,050 (234,971)

SUBSEQUENT EVENTS

Convertible debentures

On June 10, 2021, the Company announced that it has completed a non-brokered private placement of $1.83 million aggregate principal amount of 10.0 % unsecured convertible debentures of the Company with certain insiders of the Company, including Lassonde and Oakwest Corporation Limited.

• The debentures bear interest from the date of issue at 10.0% per annum, calculated monthly, in arrears. The interest accrues on the principal outstanding under the debentures until such principal is repaid or converted. The debentures will mature on July 2, 2023, unless the holder requests to accelerate the maturity date in the event the Company completes an equity financing for minimum gross proceeds of $2 million within the next 12 months.

• The debentures are convertible at the holder's option from the date of issuance until the maturity date at a conversion price of $0.185. If repayment of the debentures on the maturity date would constitute non-compliance by the Company under its senior borrowing obligations, the holder has the option to convert at the conversion price, or to roll the obligations over into new one-year debentures, on similar terms to be negotiated. The debentures are also redeemable at the Company's option, subject to an early redemption fee during the first 12 months following closing of the offering of an additional 1% interest and, if during the first six months, a minimum six months interest.

• All securities issued in connection with the offering are subject to a four-month hold period expiring October 11, 2021. The Company intends to use the net proceeds of the offering for general working capital purposes in support of an anticipated increase in operations coinciding with of the reopening of the economy over the next several months.

Page 11 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

Second Amendment to ARCA

On June 29, 2021, the Company executed the Second Amendment to the ARCA that extended the maturity date of the ARCA by 3 months from July 1, 2022 to October 1, 2022.

Options and DSUs

On May 31, 2021, the Board of Directors approved the issuance of 9i) 169,688 DSUs valued at $33,938, and (ii) 500,000 stock options to a key member of management with an exercise price of $0.20 per share with a term of five years, vesting evenly on each anniversary date over four years

STRATEGIC OUTLOOK AND DIRECTION

Diamond is committed to building enduring, high quality beverage alcohol brands that enhance life enjoyment in a socially responsible manner. The Company believes in the development of leading brands that recognize consumers' interests in wine, beer and ready-to-drink beverages and spirits, while addressing their desire to explore the many of the Company's exciting offerings. The Company has also added low alcohol and no-alcohol beer and wine suppliers to its portfolio, as consumer interest and demand in those categories is growing. Vertically integrated, Diamond combines modern and efficient production facilities for its Niagara and B.C wines with a national marketing agency for its broad portfolio of leading international wines and spirits. The Company is well positioned to add to its throughput of wine production and leverage its national sales force to drive growth from existing brands and support new brands secured by the agency without material change to its cost structure. In addition to this, the Company’s partnership with Lassonde Industries Inc. has enabled the Company to pursue its growth strategies, and access to a reputable national sales team that can build and expand the Company’s market share in grocery stores across Canada.

The COVID-19 pandemic continues to have a material impact on the global economy, the scale and duration of which remains uncertain. To date, there has been significant volatility in foreign exchange rates, restrictions on the conduct of businesses, including travel restrictions and supply chain disruptions.

These changes have had direct impacts on the Company's business, reducing sales from winery retail (including fewer international visitors), on-premise licensee business, contracts and export channels. The loss of business in those channels has been partially compensated for by increased sales from grocery retail, online, direct delivery and curbside pickups.

In order to adapt to this new reality, the Company's retail operations have changed with the introduction of physical distancing, reduced density and a modified shopping experience in all retail locations. This includes touchless retail, limited product tastings and greater use of external physical resources (patios, event canopies and outdoor venues).

The Company expects a rebound in revenue once the COVID-19 restrictions eases across the country, particularly in Ontario, level of vaccination amongst the population becomes significant and physical distancing is relaxed, social bubbles are expanded, and restaurants and bars are fully reopened. Many provincial governments have permanently relaxed the rules governing restaurants to allow home delivery of beverage alcohol with take-out meals which has somewhat mitigating the decline in beverage alcohol . Depending on the duration and extent of the impact of COVID19, this could materially impact the Company's results of operations, cash flows and financial position.

Page 12 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

The retail modernization of the sale of beverage alcohol in Ontario continues to be a high priority for the provincial government. To date, the government has issued 450 beer licenses and 227 wine licenses to Ontario grocers and has reiterated its commitment to allowing the sale of beer and wine in grocery, big-box and convenience stores during their current mandate. The current focus of the government on managing the issues related to COVID-19 pandemic and opposition from the incumbent Brewer’s Retail organization has slowed the expansion of the government’s plans.

The Company firmly believes that the export market for Canadian wines will return to more normal volumes and growth as the COVID-19 pandemic subsides worldwide. Interest in and appreciation of Canadian Icewine and table wines remains high. The company continues to successfully expand distribution into new jurisdictions including Russia, Finland, USA, Thailand, Singapore, Vietnam and Taiwan.

RISK FACTORS

BUSINESS RISKS

The following risk factors should be carefully considered in evaluating the Company and the industry it operates in. The risks presented below may not be all of the risks that Diamond may face. It is believed that these are the factors that could cause actual results to be different from expected and historical results. New risks may emerge and management may not be able to predict all of them, or be able to predict how they may cause actual results to be different from those contained in any forward-looking statements.

PROFITABILITY

There is no assurance that Diamond will earn profits in the future, or that profitability will be sustained. There is no assurance that future revenues will be sufficient to generate the funds required to continue Diamond’s business development and marketing activities. If Diamond does not have sufficient capital to fund its operations, it may be required to reduce its sales and marketing efforts or forego certain business opportunities.

DEPENDENCE ON MANAGEMENT AND KEY PERSONNEL

Diamond will depend on the business and technical expertise of its management team and there is little possibility that this dependence will decrease in the near term. Diamond’s success will depend in large measure on certain key personnel. The loss of the services of such key personnel may have a material adverse effect on Diamond’s business, financial condition, results of operations and prospects. The contributions of the existing management team to the immediate and near term operations of Diamond are likely to be of central importance. In addition, the competition for qualified personnel in the industry is competitive and there can be no assurance that Diamond will be able to continue to attract and retain all personnel necessary for the development and operation of its business. Investors must rely upon the ability, expertise, judgment, discretion, integrity and good faith of the management of Diamond.

GOVERNMENT REGULATION OF LIQUOR INDUSTRY

Diamond will operate in the highly regulated retail liquor industry in the Province of Ontario and throughout Canada. The Alcohol and Gaming Commission of Ontario (the “AGCO”), the Liquor Control Board of Ontario (the “LCBO”) and similar Liquor Boards throughout Canada, may issue decisions, enact rules, new legislation or regulations or may make changes to existing legislation or regulations, all of which can impact the operation of Diamond both favourably and unfavourably. There is no assurance that new legislation or regulations or changes to existing legislation or regulations or decisions of any regulatory bodies in the retail liquor industry in Canada will not adversely affect the operations, profitability, or distributable cash of Diamond.

Page 13 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

SIGNIFICANT COMPETITION

The alcoholic beverage industry in Canada is intensely competitive, consisting of many large and small Canadian corporations and international corporations with some possessing extensive experience and financial resources.

MANAGEMENT OF GROWTH

Diamond may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls. The ability of Diamond to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. The inability of Diamond to deal with this growth may have a material adverse effect on Diamond’s business, financial condition, results of operations and prospects.

ADDITIONAL FINANCING

Diamond will require additional financing in order to make further investments or take advantage of future opportunities. The ability of Diamond to arrange such financing in the future will depend in part upon prevailing capital market conditions, as well as upon the business success of Diamond. There can be no assurance that Diamond will be successful in its efforts to arrange additional financing on terms satisfactory to Diamond. If additional financing is raised by the issuance of shares or other forms of convertible securities from treasury, control of Diamond may change and shareholders may suffer additional dilution. If adequate funds are not available, or are not available on acceptable terms, Diamond may not be able to take advantage of opportunities, or otherwise respond to competitive pressures and remain in business.

From time to time, Diamond may enter into transactions to acquire assets or the shares of other organizations or seek to obtain additional working capital. These transactions may be financed in whole or in part with debt, which may increase Diamond’s debt levels above industry standards for companies of similar size. Depending on future plans, Diamond may require additional equity and/or debt financing that may not be available or, if available, may not be available on favourable terms to Diamond. The level of Diamond’s indebtedness, from time to time, could impair its ability to obtain additional financing on a timely basis to take advantage of business opportunities that may arise.

LABOUR COSTS AND SHORTAGES AND LABOUR RELATIONS

The success of Diamond’s business depends on a large number of both hourly and salaried employees. Changes in the general conditions of the employment market could affect the ability of Diamond to hire or retain staff at current wage levels. The occurrence of either of these events could have an adverse effect on Diamond’s results of operations. Diamond does not currently have unionized staff, but no assurance can be made that some or all of the employees of Diamond will not unionize in the future. If successful, such an occurrence could increase labour costs and thereby have an adverse effect on Diamond’s results of operations.

The COVID-19 pandemic has multiple effects on the Company and its employees. Diamond has recently instituted new retail protocols and procedures in all its retail facilities including the use of PPE, instituting mandatory physical distancing between employees and patrons and installing plexiglass dividers at all check-out counters and tasting bars. Additionally, the Company has revamped its manufacturing procedures to insure physical distancing and the use of appropriate protective equipment with all manufacturing and delivery staff.

The Company is respecting and complying with all additional safety protocols and guidelines, and has enhanced operating protocols to ensure physical distancing, personal protection and proper sanitizing with additional support for in-house delivery for PPE and safety protocols.

Page 14 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

AGRICULTURAL RISK

The production and sale of wine is dependent upon a consistent supply of high-quality grapes available at reasonable prices. Should some or all of the wineries that Diamond works with be unable to produce the quality of grapes necessary to produce wine, such a shortfall in product could adversely affect the operations, results and financial position of Diamond.

Diamond expects to continue to increase its share of the premium wine business in Canada, principally through the sale of VQA wines, and as a result is more dependent on the quality and supply of domestically grown premium quality grapes. If any of Diamond’s vineyards experience certain weather variations, natural disasters, pestilence, other severe environmental problems or other occurrences, Diamond may not be able to secure a sufficient supply of grapes and there could be a decrease in the production of certain products from those regions and/or an increase in costs. In the past, where there was a significant reduction in domestically sourced grapes, the Government of Ontario, in conjunction with the Wine Council of Ontario and the Ontario Grape Growers Marketing Board, agreed to temporarily increase the blending of imported wines, which enabled Diamond to continue to supply wines to the market. There is no certainty that such intervention will be available to the same extent in the future, if at all. The inability to secure premium quality grapes could impair the ability of Diamond to supply wines to its customers.

FOREIGN EXCHANGE

Foreign exchange risk exists on the purchases of all agency brand inventories purchased in foreign currencies for British Columbia and Alberta, which are predominately in Euros and Australian dollars. Diamond currently does not enter into foreign exchange contracts.

ENERGY COSTS

Diamond could experience an increase in energy costs which could result in higher transportation, freight and other operating costs. Diamond’s future operating expenses and margins will be dependent on its ability to manage the impact of cost increases. Diamond cannot guarantee that it will be able to pass along increased energy costs to its customers through increased prices.

TAXATION

Canada imposes excise and other taxes on beverage alcohol products in varying amounts which have been subject to change. Significant increases in excise and other taxes on beverage alcohol products could materially and adversely affect Diamond’s financial condition or results of operations. In addition, federal and provincial governmental agencies extensively regulate the beverage alcohol products industry concerning such matters as licensing, trade practices, permitted and required labelling, advertising and relations with consumers and retailers. Certain federal and provincial regulations also require warning labels and signage. New or revised regulations or increased licensing fees, requirements or taxes could also have a material adverse effect on Diamond’s financial condition or results of operations.

TRADEMARKS

Diamond considers its trademarks, particularly certain brand names and product packaging, advertising and promotion design and artwork to be of significant importance to its business and ascribes a significant value to these intangible assets. Diamond will rely on trademark laws and other arrangements to protect its proprietary rights. There can be no assurance that the steps taken by Diamond to protect its intellectual property rights will preclude competitors from developing confusingly similar brand names or promotional materials. Diamond believes that its proprietary rights do not infringe upon the proprietary rights of third parties, but there can be no assurance in this regard.

Page 15 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

IMPORTANCE OF INVENTORY, WAREHOUSE AND DISTRIBUTION SYSTEMS

Diamond’s inventory, warehouse and distribution systems are critical components of its operations. Diamond’s ability to maintain and upgrade the capabilities of these systems is important to its future performance. If Diamond is unable to maintain the inventory, warehouse and distribution systems or fails to adequately upgrade these systems, Diamond’s operations could be adversely affected with the further material adverse effect being on financial results of operations.

WHOLESALE COST INCREASES

Wholesale costs are dependent on a number of factors, including inflation and fuel prices. Any attempt to pass on an increase in wholesale costs to consumers through product price increases could have a material adverse effect on Diamond’s sales while a failure to effectively pass any such increases on to consumers could have a material adverse effect on Diamond’s result of operations.

DISTRIBUTION BUSINESS

Diamond’s business model includes a number of wine and alcohol brands that are represented on an agency basis. There is a risk that such agency brands are sold to an entity that has a pre-existing distribution agency relationship with a provider other than Diamond, and Diamond’s revenues and profitability could suffer as result. Furthermore, Diamond’s distribution business depends on the ability to retain its current brands as well as attracting additional brands in the future, and a failure to do so could negatively impact revenues and profitability of Diamond.

CREDIT RISK

Credit risk arises from credit exposure to customers through outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the Company's financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of its counterparties, considering their financial position, past experience and other factors. As the large majority of the Company's accounts receivable balances are collectable from government-controlled liquor boards, management believes the Company's credit risk relating to accounts receivable is at an acceptably low level.

EXPOSURE TO INTEREST RATE FLUCTUATIONS

The Company has a high level of floating rate debt. Interest rate risk exists as an increase in interest rates would increase the Company's overall financing costs and have a material impact on Diamond's financial position over the long term.

ENVIRONMENTAL COMPLIANCE

Environmental liabilities may potentially arise when companies are in the business of manufacturing products and, thus, required to handle potentially hazardous materials. As an owner and lessor of property, the Company is subject to various federal and provincial laws relating to environmental matters. Such laws provide that the Company could be held liable for the cost of removal and remediation of hazardous substances on its properties. Management is of the opinion that the risk of environmental liabilities is considered minimal.

PACKAGING

The Company purchases glass, bag in box and other components used in the bottling and packaging of wine. The largest component in the packaging of wine is glass, of which there are few domestic or international suppliers. Diamond sources glass from various distributors and manufacturers both domestically and internationally to insure an adequate supply. As there is currently only one commercial supplier of glass in Canada, any interruption in supply could have an adverse impact on the Company’s ability to supply its markets.

Page 16 of 20

DIAMOND ESTATES WINES & SPIRITS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

The COVID-19 outbreak is now affecting many countries. This pandemic is having significant impacts on global supply chains. The Company's supply of packaging could therefore be significantly affected by disruptions affecting certain suppliers directly and indirectly.

. INDUSTRY CONSOLIDATION

In recent years, the global beverage alcohol industry has experienced a significant amount of consolidation. Industry consolidation can have varying degrees of impact and, in some cases, may even create exceptional opportunities. Under either scenario, management believes that the Company is well positioned to deal with this or other changes to the competitive landscape in Canada.

CYBERSECURITY

In the normal course of business, the Company relies on information technology systems to process, transmit and store information in all areas of its operations as well as for the reporting of its results. Additionally, a significant portion of that information concerns its business and/or clients and partners and is maintained either within its premises or at the sites of its technology partners.

These systems may be vulnerable to an increasing number of sophisticated cyber threats and other failures such as telecommunications interruptions, natural disasters, human error and other security issues. Such events could impede or interrupt the Company’s operations or result in other negative consequences, including remediation costs, loss of revenue, litigation and reputational damage, or fines and criminal penalties. The Company’s financial results, market value or ability to achieve its strategic business objectives could be significantly affected by such events.

The Company regularly monitors, manages, and enhances its ability to mitigate cyber risk through its enterprise-wide cyber security programs; disaster recovery investments; risk management practices; implementations of policies, procedures and control processes; and outsourcing contract management practices to address such risks. However, there is no absolute assurance that such measures can impede all such risks.

RISKS RELATED TO COMMON SHARE INVESTMENTS

PRICE VOLATILITY OF PUBLICLY TRADED SECURITIES

In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies have experienced wide fluctuations in price. There can be no assurance that continuing fluctuations in price will not occur. It may be anticipated that any quoted market for Diamond’s shares will be subject to market trends generally, notwithstanding any potential success of Diamond in creating revenues, cash flows or earnings. The value of Diamond’s shares will be affected by such volatility. A public trading market in the Common Shares having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of common shares at any given time, which presence is dependent on the individual decisions of investors over which Diamond has no control. There can be no assurance that an active trading market in securities of Diamond will be sustained. The market price for Diamond’s securities could be subject to wide fluctuations, which could have an adverse effect on the market price of Diamond. The stock market has, from time to time, experienced extreme price and volume fluctuations, which have often been unrelated to the operating performance, net asset values or prospects of particular companies. If an active public market for Diamond’s shares is not present, the liquidity of a shareholder’s investment may be limited and the share price may decline.

Page 17 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

DILUTION

Diamond may make future acquisitions or enter into financings or other transactions involving the issuance of securities of Diamond which may be dilutive to the existing shareholders.

DIVIDENDS

Diamond has not paid any dividends on its outstanding common shares. Any payments of dividends on the common shares of Diamond will be dependent upon the financial requirements to finance future growth, the financial condition of Diamond and other factors which Diamond’s board of directors may consider appropriate in the circumstance. It is unlikely that Diamond will pay dividends in the immediate or foreseeable future.

FINANCIAL MARKET TURMOIL

Global financial market and economic conditions can pose a significant threat to economic growth in almost all sectors and economies, causing a decline in consumer and business confidence, a reduction in credit availability and a dampening in business and household spending.

USES OF ESTIMATES AND JUDGEMENTS

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made. These include, but are not limited to, the following:

COVID-19 ESTIMATION UNCERTAINTY

The COVID-19 pandemic has had a material impact on the global economy, the scale and duration of which remains uncertain. To date, there has been significant volatility in foreign exchange rates, restrictions on the conduct of businesses, including travel restrictions and supply chain disruptions. Depending on the duration and extent of the impact of COVID-19, this could materially impact the Company's results of operations, cash flows, and financial position and could result in changes to estimates used. Changes related to these could be material.

FAIR VALUE OF GRAPES AT THE POINT OF HARVEST

Where possible, the fair value of grapes at the point of harvest is determined by reference to local market prices for grapes of a similar quality and the same varietal. For grapes for which local market prices are not readily available, the average price of similar grapes is used. The fair value of grapes is included in the cost of bulk wine inventory.

Page 18 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment and ROU assets represent a significant proportion of the asset base of the Company as they amount to 41.9% of total assets as at March 31, 2021 (March 31, 2020 - 42.8%). Therefore, estimates and assumptions made to determine their carrying value and related depreciation are critical to the Company's financial position and performance. IFRS requires management to test for impairment of property, plant and equipment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. The charge in respect of periodic depreciation is derived after determining an estimate of an asset's expected useful life and the expected residual value at the end of its life. The useful lives and residual values of the Company's assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life.

GROSS VERSUS NET PRESENTATION

When deciding the most appropriate basis for presenting revenue or costs of revenue, both the legal form and substance of the agreement between the Company and its business partners are reviewed to determine each party's respective role in the transaction. Where the Company's role in a transaction is that of principal, revenue is recognized on a gross basis. This requires revenue to comprise the gross value of the transaction billed to the customer, after trade discounts, with any related expenditure charged as an operating cost. Where the Company's role in a transaction is that of an agent, revenue is recognized on a net basis with revenue representing the margin earned.

USEFUL LIFE OF INTANGIBLE ASSETS

Significant judgement is involved in the determination of useful life for the computation of depreciation of intangible assets. No assurance can be given that actual useful lives will not differ significantly from current assumptions.

IMPAIRMENT OF INTANGIBLE ASSETS

Testing intangible assets for impairment involves estimating the recoverable amount of the CGUs to which intangible assets are allocated. This requires making assumptions about future cash flows, growth rates, market conditions and discount rates, which are inherently uncertain. Actual amounts may vary from these assumptions and cause significant adjustments.

RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

IAS 1 "Presentation of Financial Statements" and IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors"

These standards have been amended to use a consistent definition of materiality throughout all accounting standards, clarify the explanation of the definition of material and incorporate some of the guidance in IAS 1 about immaterial information. The amendments are effective for annual periods beginning on or after January 1, 2020. The adoption of these amendments did not have a significant impact on the consolidated financial statements.

Page 19 of 20

DIAMOND ESTATES WINES & SPIRITS INC. MANAGEMENT DISCUSSION AND ANALYSIS

YEARS ENDED MARCH 31, 2021 AND 2020

IFRS 3 "Business Combinations"

This standard has been amended to improve the definition of a business. The amendments will help companies determine whether an acquisition made is of a business or a group of assets. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contributions to the ability to create outputs. The amendments are effective for annual periods beginning on or after January 1, 2020. The adoption of these amendments did not have a significant impact on the consolidated financial statements.

IFRS 16 "Leases"

This standard has been amended to provide lessees with an optional exemption from assessing whether a rent concession related to COVID-19 is a lease modification. This amendment is effective for annual periods beginning on or after June 1, 2020. At this time, the Company has not received rent concessions related to COVID-19 and therefore, this amendment is not expected to have a significant impact on the consolidated financial statements.

IAS 16 "Property, Plant and Equipment"

This standard has been amended to prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds received from selling items produced while the entity is preparing the asset for its intended use, clarify that an entity is "testing whether the asset is functioning properly" when it assesses the technical and physical performance of the asset and requires certain related disclosures. The amendments are effective for annual periods beginning on or after January 1, 2022. The Company has not yet assessed the impact of the amendments on the consolidated financial statements.

IAS 1 "Presentation of Financial Statements"

This standard has been amended to clarify that liabilities are classified as either current or non-current depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date. This amendment also clarifies the meaning of settlement of a liability. This amendment is effective for annual periods beginning on or after January l, 2023. The Company has not yet assessed the impact of the amendment on the consolidated financial statements.

IAS 37 "Provisions"

This standard has been amended to clarify that, before a separate provision for an onerous contract is established, an entity recognizes an impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to that contract and to clarify the meaning of costs to fulfil a contract. The amendments are effective for annual periods beginning on or after January 1, 2022. The Company has not yet assessed the impact of the amendments on the consolidated financial statements.

IFRS 9 "Financial Instruments"

This standard has been amended to address which fees should be included in the 10% test for derecognition of financial liabilities. This amendment is effective for annual periods beginning on or after January 1, 2022. The Company has not yet assessed the impact of the amendment on the consolidated financial statements.

Page 20 of 20