Middle East Freeze Sparks Deep Value Discount

• Domestic E-Commerce Remains a Resilient Bright Spot: North American e-commerce sales provided a buffer, growing 22% YoY on average across all brands, signalling strong repeat customer engagement.
• Core Fundamentals Intact: We believe the company's long-term fundamentals remain intact and that the distribution freeze is temporary, affecting only near-term revenue and EPS.
• LivRelief Brand Reactivation: DHB partnered with Peak Processing Solutions (ASX: PKP), an established cannabis products manufacturer and distributor in Canada, to license and relaunch its largely inactive LivRelief Infused™ line in Canada, generating a new revenue stream beginning Q4-FY2026.
• US Retail Expansion of Dream Water Kids: Following strong adoption of its adult line, DHB launched Dream Water Kids Sleep Gummies in March 2026, its first pediatric product. Studies indicate that 25–50% of US children experience chronic sleep issues. Unlike the adult line, the children's formula contains a lower melatonin dose and child-focused ingredients. While the launch expands DHB's addressable market, the pediatric sleep category is highly competitive and faces greater regulatory and consumer scrutiny than adult products.
• Undervalued Balance Sheet Limits Downside: Working capital net of long-term debt is $2.94M against a $3.13M MCAP, meaning the market values the core operating business at just $0.19M. The stock currently trades at just 0.24x forward revenue, representing a 79% discount to the industry peer average of 1.12x.
• Extremely Depressed Valuation Invites M&A: We are lowering our FY2026/FY2027 estimates but leaving FY2028+ intact. With the shares down 38% since our March 2026 report, we believe the current valuation may attract interest from larger players. Given the compelling risk/reward profile, we are adding DHB to our Top Picks list.

Price and Volume (1-year)

	YTD	12M
DHB	-50%	-52%
TSXV	-1%	35%
S&P Personal Care	-4%	-5%

Quick insights from the CEO in our short interview

* Delivra Health has paid FRC a fee for research coverage and distribution of reports. All figures in C$ unless otherwise specified. See last page for other important disclosures, rating, and risk definitions. 

Overview

Product portfolio includes sleep aid, anxiety relief, and pain relief formulations

Products

Source: Company / FRC

Asset-light model with outsourced manufacturing and packaging across North America

Two Primary Brands: Dream Water (sold in the U.S./Canada/the Middle East), and LivRelief (sold in Canada)

Available at 30k+ outlets in the U.S., and Canada, including major retailers, airports, and pharmacy chains 

Financials (Year-End: June 30th)

Q3 revenue -60% YoY, 29% below our estimate, driven by weak Middle East sales; Orders from the largest international distributor fell 89% YoY

Source: Company Filings, FRC

Although orders began to pick up in Q4, we still expect a weak quarter

We believe Middle East shipments will gradually normalize in the coming months as U.S.-Iran negotiations continue to progress

* Historically, quarterly revenue has been volatile due to the timing of orders from large customers

Bright spot: North American e-commerce sales increased 22% YoY on average across its brands, indicating strong engagement and repeat purchasing

Gross margin down 25 pp YoY, 23 pp below our estimate, primarily due to lower sales 

SG&A down 7% YoY; marketing expenses down 25% YoY in response to weaker revenue

EBITDA turned negative; EPS declined from ($0.01) to ($0.03), vs our estimate of a modest $0.003 profit 

Source: Company Filings, FRC

Balance sheet remains healthy despite weak operating performance 

Source: Company Filings, FRC

No outstanding options/warrants are in-the-money

FRC Projections and Valuation 

Source: Company Filings, FRC

Near-term estimates have been reduced following weaker Q3 results; FY2028+ forecasts remain unchanged

DCF Valuation

Source: FRC

As a result, our DCF valuation declined from $0.75 to $0.63/share

Comparables Valuation

Source: FRC/S&P Capital IQ

DHB is one of the most undervalued stocks on our list within the Personal Care Products sector

Comparables Valuation

The average sector forward EV/Revenue is up 9% since our previous report in March 2026

Source: FRC/S&P Capital IQ

DHB trades at 0.24x forward revenue vs the sector average of 1.12x, a 79% discount (69% previously)

Applying the sector EV/Revenue multiple yields a valuation of $0.41/share  ($0.45/share previously), reflecting lower revenue forecasts partially offset by the higher sector multiple

Recent M&A Transactions

Source: FRC/S&P Capital IQ

Recent sector M&A transactions averaged 2.2x revenue vs DHB at 0.24x, an 89% discount

We are reiterating our BUY rating, while adjusting our fair value estimate from $0.60 to $0.53/share  (the average of our DCF and comparables valuations). We view the recent revenue shortfall as a temporary geopolitical disruption rather than a deterioration in DHB 's underlying business. Given the c ompany's solid balance sheet, multiple growth initiatives, and deeply discounted valuation, we believe the risk/reward profile remains attractive.

Risks

We believe the company is exposed to the following key risks (not exhaustive):

• Operates in a highly regulated industry subject to government intervention
• Competition
• Product recall and liability
• FOREX
• Like any business involved in consumer product sales, we believe hefty marketing budgets are critical for growth

We are maintaining our risk rating of 3 (Average)

APPENDIX