DIRTT ENVIRONMENTAL SOLUTIONS LTD

Overview

DIRTT designs and manufactures adaptable, sustainable spaces where people work, learn, and heal. Since 2004, DIRTT has grown to become a leader in industrialized construction, providing a compelling alternative to conventional construction methods.

DIRTT’s construction system offers unrivaled speed, accuracy, and quality. Our proprietary product design and software platform, ICE® (“ICE” or “ICE Software”), simplifies preconstruction, production, and installation. These advantages provide our end users greater cost certainty and up to 30% shorter construction schedules compared to conventional construction methods.

DIRTT spaces are built for change and ready to adapt as needs evolve. Our design ensures components are interchangeable and can be repurposed for small updates or full reconfigurations without major renovation, cost, or waste.

Our approach to industrialized construction combines a portfolio of interior construction products with advanced digital tools. ICE Software serves as the engine for our system, enabling projects to be designed, visualized, organized, configured, priced, and manufactured off-site, with final assembly and installation completed at the job site. ICE Software empowers faster decision-making during design with real-time changes, visualization, and pricing information. ICE Software connects directly to DIRTT manufacturing facilities for end-to-end integration, precise manufacturing, production management, and coordination of the DIRTT scope. ICE Software is licensed to our Construction Partners (as defined herein), as well as other third-parties, including Armstrong World Industries, Inc. (“AWI”). In addition to the core ICE Software platform, our cloud-based virtual reality tool and app, called ICEreality, connects teams from anywhere in the world to walk through their virtual space together, while design changes can be made with real-time feedback on pricing.

We work with some of the most innovative clients, design teams, and construction professionals. We reach our clients through a multi-channel approach. One channel is our internal sales team and international network of independent DIRTT Construction Partners (“Construction Partners” or “Partners”). Their DIRTT expertise makes them trusted professionals in their regions for preconstruction considerations, order, installation, and adaptation of interior spaces. DIRTT Construction Partners work with clients and construction teams, ensuring effective management and execution of the DIRTT scope on every project. Long term, they support reconfigurations, adaptations, and adjustments, continuously protecting our clients’ investments in DIRTT while ensuring their spaces stay relevant. The other is our internal Construction Services, a team of experts that unites design, manufacture, and construct seamlessly for greater coordination, reduced risk, and operational certainty. These channels work both independently and together to deliver DIRTT to end clients.

DIRTT was incorporated in Alberta, Canada, under the Business Corporations Act (Alberta) (“ABCA”) on March 4, 2003 and mostly recently amended and restated its articles on May 5, 2019. Our headquarters are located at 7303 30 Street SE, Calgary, Alberta, T2C 1N6, Canada, and our telephone number at that address is 403-723-5000. Our manufacturing facilities are in Calgary, Alberta and Savannah, Georgia.

Our common shares trade on the Toronto Stock Exchange (“TSX”) under the symbol “DRT”. On June 12, 2025, the Company began trading on the OTCQX® Best Market (“OTCQX”) under the symbol “DRTTF.” The Company previously traded on, and upgraded to OTCQX from, the OTC Pink® Market.

Unless otherwise specified or the context otherwise requires, references to “we,” “us,” “our,” “its,” “the Company” or “DIRTT” mean DIRTT Environmental Solutions Ltd. and, where the context so requires, includes our subsidiaries.

Available Information

We file or furnish annual, quarterly and current reports, proxy statements and other documents with the SEC under the Exchange Act. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers, including DIRTT, that file electronically with the SEC. We are also subject to requirements of applicable securities laws in Canada, and documents that we file with the securities commissions or similar regulatory authorities in Canada may be found atwww.sedarplus.ca.

We make available free of charge through our website (www.dirtt.com) our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC and the applicable securities commissions in Canada. In addition to the reports filed or furnished with the SEC and the applicable securities commissions in Canada, we publicly disclose information from time to time in our press releases, investor presentations posted on our website and at publicly accessible conferences. References to such information, including references to our Environmental, Social, and Governance (ESG) Report, and references to our website in this Annual Report, are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Annual Report.

We will provide without charge to you, upon your request, a copy of our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC and the applicable securities commissions or similar regulatory authorities in Canada. Requests for copies should be addressed to 7303 30 Street SE, Calgary, Alberta, T2C 1N6, Canada, Attention: Investor Relations.

Our Solutions

Our array of products and integrations give our clients the tools to create high-performing interiors that stay relevant as consumer needs and preferences change. Unlike conventional prefabricated products, most of our solutions do not have predetermined shapes, sizes, or configurations, empowering clients with design freedom to meet their needs. The core of our product philosophy is a construction system that uses a universal interface. By allowing interchangeable parts, DIRTT can maximize the life cycle for most of our products as well as the spaces they occupy. Committed to sustainability, we subscribe to non-obsolescence, where new DIRTT components work with DIRTT products that came before. Our solutions can be disassembled and reconfigured with minimal waste. With both design freedom and adaptability benefits, client spaces are tailored to their unique needs on day one and can be more easily reconfigured or adapted to stay relevant on day two and beyond.Our solutions (“DIRTT Solutions”) are typically able to address over 90% of an interior space. Components are manufactured in DIRTT facilities and shipped to site for installation. The following table provides a brief description of our primary solutions:

In addition to our core product offering, DIRTT enables integrations with technology, custom graphics, writable surfaces, and Breathe® Living Walls. Further product information can be found on dirtt.com.

Sustainability and Environmental Matters

DIRTT aims to minimize the environmental impact of interior construction through careful material selection, efficient operations, a system designed for future adaptability, and long product lifecycles. We work with clients to understand their unique sustainability goals and identify how building with DIRTT can support LEED, WELL, Living Building Challenge, and other green building standards they may be targeting. Our sustainability team helps to calculate various elements of the DIRTT scope that support certification.

DIRTT’s agile construction system makes it quick, easy, and cost effective to evolve interior spaces through future reconfigurations and relocations, while reducing waste compared to conventional construction and demolition. Our agile system is designed for disassembly to reduce the carbon footprint of new construction and future changes. We further reduce waste through efficient manufacturing and pre-assembled solutions.

We regularly evaluate the environmental impact of our materials, considering impact on the wellness of the occupants using the spaces we build and life cycles of the products we make. DIRTT endeavors to use materials with high recycled content, bio-based content, and low or no volatile organic compounds (VOCs). Most DIRTT assemblies are certified through Science Certification Systems (SCS) Indoor Advantage Gold, recognizing their low-emitting properties. DIRTT wall panel and casework facilities are certified to handle materials with FSC® certification (FSC-C006900), ensuring FSC certified products may be specified.

We recognize the vital importance of reducing embodied carbon within DIRTT products. Our environmentally conscious production facilities are regularly evaluated by cross-functional teams who assess and implement energy efficiency strategies. We further reduce the impact of our operations with recycling and waste diversion programs.

DIRTT releases an annual Environmental, Social, and Governance (ESG) report outlining our commitments to sustainability and the environment. It also provides disclosure of our current environmental and sustainability impacts.

We consistently receive strong industry recognition for our sustainability leadership, including the Seal Sustainable Product Award and the ECO Canada Top Employer Impact Award. These achievements reinforce our commitment to delivering environmentally responsible products for our clients and embedding sustainable practices throughout our manufacturing process.

Further information about DIRTT’s sustainability practices can be found at dirtt.com/sustainability.

Construction Partners and Sales Network

We primarily sell DIRTT Solutions through a network of Construction Partners working in conjunction with local DIRTT sales representatives, as well as internal DIRTT industry specialists, business development professionals and a dedicated Construction Partner support team. Construction Partners and local sales representatives are located in cities throughout the United States and Canada, with additional locations in Saudi Arabia, Mexico, and the United Kingdom. The use of a dispersed network of Construction Partners greatly enhances our ability to drive awareness of the DIRTT brand and understanding of our approach to construction throughout our markets.

As part of our distribution agreements, our Construction Partners are typically required to invest in their own DIRTT Experience Center (“DXC”) so that they are able to effectively showcase DIRTT Solutions. These DXCs are showrooms that provide mock-ups of DIRTT Solutions and related product offerings. DIRTT maintains DXCs in Calgary, Plano (Texas), and Chicago.

Our Construction Partners operate under agreements that outline sales goals and marketing territories which are generally non-exclusive. We expect our Construction Partners to build regional DIRTT-dedicated teams and to use our ICE Software in the sales process. In addition to sales and marketing, our Construction Partners provide value throughout the construction process. At the preconstruction stage, Construction Partners provide design assistance services to the architect and designer; throughout the construction process, Construction Partners act as a specialty subcontractor to the general contractor and provide installation and other construction services. Post-move in, Construction Partners provide warranty work, ongoing maintenance and reconfiguring support. Local DIRTT sales representatives work closely with the Construction Partners throughout the process to ensure successful project implementation and the highest client satisfaction. Construction Partners generally place orders for DIRTT Solutions directly with us and pay us directly for such orders.

At December 31, 2025, we had a total of 66 Construction Partners and 29 sales representatives across North America. We are not dependent on any one Construction Partner or sales representative.

Strategic accounts are a cornerstone in our strategy to drive long-term sustainable and predictable growth. These types of clients manage large real estate footprints in numerous locations. For these clients, it is advantageous and important to establish consistency in design and execution, repeatability, and speed to market. While these relationships can take time to develop, once they are established, the time and resources required to execute additional projects is reduced, which we believe will create profitable, predictable revenue streams. In return, clients benefit from a single point of accountability at DIRTT, a strong network of partners, full lifecycle support from established design standards and preconstruction expert support for their architects, designers and general contractors from field work to post installation support.

In 2024, we launched an additional go-to-market channel called Construction Services (previously referred to as Integrated Solutions). This team provides sales, design, estimating, and project delivery services together or independently with our DIRTT Construction Partners and DIRTT sales representatives. Construction Services increases our sales network’s capacity and targets revenues in channels without existing coverage. There are three key opportunity areas Construction Services is focusing on: (1) diversifying our customer profile, (2) increasing volumes in smaller markets, and (3) expanding into new sectors. Through these efforts, Construction Services aims to simplify our go-to-market strategy and increase access to DIRTT’s portfolio of products.

Manufacturing and Properties

Our DIRTT Solutions are currently manufactured at our facilities in Calgary, Alberta and Savannah, Georgia. Currently our wall surfaces (which we call panels), casework and timber solutions are manufactured in Calgary, while aluminum, glass and power components are manufactured in Calgary and Savannah. Through distributed manufacturing, we can shift production of some components among our manufacturing sites, reduce transportation times and costs, and meet targeted lead times.

Suppliers and Raw Materials

Our inventory balances consist primarily of raw materials, which are kept on hand as components of our custom manufacturing process. Managing our raw material inventory is essential to our business, given our short lead times from order to shipment and our high level of order customization. Our key manufacturing materials are aluminum, hardware, wood and glass. For the twelve months ended December 31, 2025, aluminum accounted for approximately 35% of our purchased materials, while wood, hardware and finishing powder & paint accounted for approximately 12%, 11%, and 10%, respectively. While we maintain multiple suppliers for key materials, for the twelve months ended December 31, 2025, (i) one supplier accounted for approximately 78% of our aluminum supply and two additional suppliers provided 9% each, (ii) two suppliers accounted for approximately 64% and 26% of our wood supply, respectively, (iii) one supplier accounted for 100% of our paint and (iv) two suppliers accounted for approximately 45% and 20% of our hardware supply.

Materials are sourced domestically and, to a much lesser extent, overseas. Approximately 89% of our materials are manufactured and purchased in North America. Purchase decisions are made on the basis of quality, cost, and ability to meet delivery requirements. We do not typically enter into long-term agreements with suppliers. In general, adequate supplies of raw materials are available to all our operations, but we continue to be impacted by inflationary price pressures across substantially all of our raw material requirements, and aluminum purchases may be subject to market capacity constraints. Additionally, the imposition of tariffs or other trade barriers has affected the pricing of our raw materials, including aluminum.

Technology and Development

We continue to focus on developing client-centric innovations and enhancements of both ICE Software and DIRTT Solutions with a primary focus on improving client experience, increasing market penetration and expanding into key markets. At December 31, 2025, we employed 43 employees within our technology and development groups and, including capitalized amounts, invested $6.9 million, $7.6 million and $8.3 million in 2025, 2024 and 2023, respectively, in innovation activities.

In 2023, the Company entered into a Partial Patent Assignment Agreement and a Co-Ownership Agreement (collectively, the “AWI Agreements”) with AWI. The AWI Agreements provide for the partial assignment to AWI and co-ownership of an undivided 50% interest in certain intellectual property rights (including related patents) in a portion of the Company’s ICE Software that is used by AWI (the “Applicable ICE Software Code”), in exchange for a cash payment of $10.0 million. As part of the AWI Agreements, the Company provided AWI a transfer of knowledge concerning the Applicable ICE Software Code in exchange for an additional $1 million which was received in the fourth quarter of 2023. Under the AWI Agreements, the Company and AWI will have separate exclusive fields of use and certain restrictive covenants with respect to the Applicable ICE Software Code and related intellectual property rights, each of which survive until either party elects to separate its relationship from the other and for a period of five years thereafter.

Clients

DIRTT’s principal geographic markets are the United States and Canada. Our revenue is derived almost entirely from projects in North America sold through our two primary revenue channels.

Our revenue opportunities primarily come from commercial projects, including both new construction projects and renovations of existing buildings. Clients range from small owner-managed businesses to multinational Fortune 500 companies across a variety of industries, including healthcare, education, financial services, government and military, manufacturing, non-profit, energy, professional services, retail, technology, and hospitality. We view DIRTT Solutions as generally industry agnostic, with applications in many different industries with minimal adjustments. We are not dependent on any one client or industry segment. In 2025 and 2024, no single Construction Partner represented more than 10% of our revenue, while one client represented more than 10% of our revenue for the year ended December 31, 2023.

Competition

The overall market for interior construction is fragmented and highly competitive. The principal competitive factors in the interior construction industry include price (including cost certainty), speed, quality, customization, and service. Our main competitors are comprised primarily of conventional construction firms, individual tradespeople (including framers, drywall installers, and interior product designers), and modular systems manufacturers. Additionally, conventional construction firms are beginning to develop customizable wall paneling and other interior construction solutions and may directly compete with our DIRTT Solutions. We also compete with commercial furniture manufacturers, such as Teknion Corporation, Haworth Inc., Allsteel Inc., and Steelcase Canada Ltd., who offer a variety of prefabricated interior wall solutions. We expect competition to increase as new entrants or solutions enter the interior construction market. See Item 1A. “Risk Factors”.

Seasonality

The construction industry has historically experienced seasonal slowdowns related to winter weather conditions and holiday schedules, which affect shipping and on-site installation dates, in the first quarter of each calendar year. Our business has generally, but not always, followed this trend with a slight time lag, leading to stronger sales in the second half of the year versus the first half. Weather factors can also influence third-party exterior construction schedules and site conditions, which may in turn affect timing of interior builds.

Due to the fixed nature of certain manufacturing costs, such as our facilities leases and related indirect operating costs, periods of higher revenue volume tend to generate higher gross profit and operating income margins, while periods of lower volume tend to result in lower gross profit and operating income margins. Quarters that contain consistent monthly manufacturing volumes tend to generate higher gross profit than those where manufacturing levels vary significantly from month to month.

Patent and Intellectual Property Rights

Our success depends, in part, upon our intellectual property rights relating to our products, production processes, our technology, including our ICE Software, and other operations. We rely on a combination of trade secret, nondisclosure and other contractual arrangements, as well as patent, copyright and trademark laws, to protect our proprietary rights and competitive advantage. We register our patents and trademarks as we deem appropriate and take measures to defend patents where we deem others are infringing on our patents. The following table presents the status as of December 31, 2025, of our issued and pending patent and design applications relating to various aspects of DIRTT Solutions and ICE Software:

Our issued patents expire between 2025 and 2040. We do not believe that the expiration of any individual patent will have a material adverse effect on our business, financial condition or results of operations. As we develop innovations and new technology, we expect to file additional and supplemental patents to protect our rights in those innovations and new technology. As described in more detail above, AWI owns a 50% interest in the rights, title and interests in the Applicable ICE Software Code, including a 50% interest in a portion of the patent rights that relate to the Applicable ICE Software Code.

Government Regulations

The operation of our business is subject to stringent and complex laws and regulations pertaining to health, safety, and the environment. As an owner or operator of various manufacturing facilities, we must comply with these laws and regulations at the federal, state, provincial and local levels in both the United States and Canada. Failure to comply with environmental laws and regulations may trigger a variety of administrative, civil, or criminal enforcement actions, including the assessment of monetary penalties, the imposition of investigative or remedial requirements, or the issuance of orders limiting current or future operations. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances or industrial wastes have been mismanaged or otherwise released.

While we do not believe that compliance with federal, state, provincial, or local environmental laws and regulations will have a material adverse effect on our business, financial position or results of operations, we cannot provide any assurances that future events, such as changes in existing laws or regulations, the promulgation of new laws or regulations, or the development or discovery of new facts or conditions related to our operations, will not cause us to incur significant costs.

Legal and Regulatory Proceedings

We may be involved from time to time in various lawsuits, claims, investigations, and other legal matters that arise in the ordinary course of business, including matters involving our products, intellectual property, relationships with suppliers, relationships with Construction Partners, relationships with competitors, employees, and other matters. We may, for example, be a party to various litigation matters that involve product liability, tort liability, and claims under other allegations, including claims from our employees either individually or collectively. We do not believe that any current claims, individually or in the aggregate, will have a material adverse effect on our financial condition, liquidity or results of operations. For additional information regarding our current legal proceedings, see Item 3. “Legal Proceedings.”

Human Capital Resources

As at December 31, 2025, DIRTT employed 760 employees, 99.5% full time, 0.5% part time. We had 756 full-time employees consisting of 515 employees in production, 73 employees in sales and marketing, 43 employees in technology and development, 69 employees in operations support, and 56 general and administrative employees. At year-end, approximately 43% of our workforce were salaried employees and approximately 57% were compensated on an hourly basis. As at December 31, 2025, approximately 26% of our workforce was based in the United States, and approximately 74% was based in Canada.

Workplace Values and Equal Employment Opportunity

DIRTT is committed to attracting, developing, and retaining a skilled and diverse workforce, and to fostering an inclusive environment where employees feel a sense of belonging. We value the unique perspectives and experiences our employees bring and strive to maintain a workplace where individuals are respected, supported, and empowered to contribute fully. To advance these objectives, we provide voluntary learning opportunities and mentoring programs that support employee growth and engagement. We adhere to principles of equal employment opportunity, and our hiring and employment decisions are based on merit, qualifications, business needs, and organizational fit.

Culture & Engagement

DIRTT continues to put measures in place to assess and enhance the level of engagement and satisfaction of our employees. In 2024, we deployed a performance management tool catered to drive discussions around team goals, performance and development opportunities, robust succession plans and greater transparency around policy and procedures tied to cost and risk mitigation to support a performance-driven culture.

In 2024, DIRTT conducted an employee engagement survey through the Employee Voice platform, focusing on workplace civility, work life balance, retention, and job satisfaction. The survey achieved an 84% participation rate. Targeted initiatives were introduced to monitor progress on these themes and their impact on overall employee engagement and experience. Engagement surveys are now conducted every other year to allow time for actions to be implemented and completed. The next survey is scheduled for the second quarter of 2026.

Additional development initiatives and active employee engagement include learning and development programs to support a performance-driven culture, enhanced communication platforms, employee recognition initiatives, and a company‑wide philanthropic program.

Our core commitment to organizational safety resulted in a Total Recordable Incident Frequency (TRIF) of 1.10 in 2025, more than 73% below the industry average. DIRTT was recognized in 2025 as Canada's Safest Manufacturing Employer in the industrial sector by Canadian Occupational Safety.

We use a range of compensation incentives which vary by role, including annual variable compensation determined based on a combination of achieving team objectives and financial targets for the Company; quarterly bonuses for our manufacturing personnel paid on adherence to targets related to safety, quality, delivery, inventory and productivity; and commissions based on sales. We also use various forms of stock-based compensation as a retention tool and to further align employee interests with the interests of our shareholders. We continue to monitor our retention by way of voluntary turnover, which was 9.9% by the end of 2025.

None of our employees are covered by collective bargaining agreements. We have never experienced labor-related work stoppages or strikes, and we believe we currently have a positive relationship with our employees.