DIRTT ENVIRONMENTAL SOLUTIONS LTD

(Amounts stated in thousands of U.S. dollars unless otherwise stated)

1. GENERAL INFORMATION

DIRTT Environmental Solutions Ltd. and its subsidiary (“DIRTT”, the “Company”, “we” or “our”) is a leader in industrialized construction. DIRTT’s system of physical products and digital tools empowers organizations, together with construction and design leaders, to build high-performing, adaptable, interior environments. Operating in the workplace, healthcare, education, and public sector markets, DIRTT’s system provides total design freedom, and greater certainty in cost, schedule, and outcomes.

DIRTT’s proprietary design integration software, ICE® (“ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE Software is also licensed to unrelated companies and Construction Partners of the Company.

DIRTT is incorporated under the laws of the province of Alberta, Canada. Its headquarters is located at 7303 – 30th Street S.E., Calgary, AB, Canada T2C 1N6 and its registered office is located at 4500, 855 – 2nd Street S.W., Calgary, AB, Canada T2P 4K7. DIRTT’s common shares trade on the Toronto Stock Exchange 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.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These consolidated financial statements (“Financial Statements”), including comparative figures, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

In these Financial Statements, unless otherwise indicated, all dollar amounts are expressed in United States (“U.S.”) dollars. DIRTT’s financial results are consolidated in Canadian dollars, the Company’s functional currency, and the Company has adopted the U.S. dollar as its reporting currency. All references to US$ or $ are to U.S. dollars and references to C$ are to Canadian dollars.

Principles of consolidation

The Financial Statements include the accounts of DIRTT and its subsidiary. All intercompany balances, income and expenses, unrealized gains and losses and dividends resulting from intercompany transactions have been eliminated upon consolidation.

Basis of measurement

These Financial Statements have been prepared on the historical cost convention except for certain financial instruments, assets held for sale and stock-based compensation that are measured at fair value, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

Use of estimates

The preparation of the Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates primarily relate to unsettled transactions and events as of the date of the Financial Statements. Estimates are based on historical data and experience, as well as various other factors that management considers reasonable under the circumstances. Actual outcomes can differ from these estimates.

Significant estimates and assumptions made by management include:

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Estimates of ability and timeliness of customer payments of trade receivables;

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Estimates of useful lives of depreciable assets as well as the fair value of long-term assets and future cash flows used for impairment calculations;

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Determining the fair value less costs to sell of the assets held for sale;

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Estimates of future taxable earnings used to assess the realizable value of deferred tax assets and the ability to recognize a deferred tax asset;

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Estimates of inventory obsolescence based on slow moving inventory items;

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Tax interpretations, regulations and legislation in the various jurisdictions in which the Company and its subsidiary operate;

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Estimates of the fair value of stock awards, including whether the performance criteria will be met and measurement of the ultimate payout amount; and

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Estimates of liabilities associated with the potential and amount of warranty, legal claims and other contingencies.

Segments

Management has determined that DIRTT hasone operating segment. The Company’s chief executive officer, president and chief operating officer, and chief financial officer, who are DIRTT’s chief operating decision makers, review financial information on a consolidated and aggregate basis, together with certain operating metrics principally, to make decisions about how to allocate resources and to measure the Company’s performance.

Foreign currency translation

DIRTT Environmental Solutions Ltd. is a Canadian company and its functional currency is the Canadian dollar. DIRTT’s wholly owned subsidiary, DIRTT Environmental Solutions Inc., is domiciled in the United States and its functional currency is the U.S. dollar.

Assets and liabilities denominated in foreign currencies, other than those held through foreign subsidiaries, are translated into the transacting company’s functional currency at the year-end exchange rate for monetary items, and at the historical exchange rates for non-monetary items. Foreign currency revenues and expenses are translated at the exchange rates in effect on the dates of the related transactions. Foreign exchange gains and losses, other than those arising from the translation of the Company’s net investments in its foreign subsidiary, are included in income.

The accounts of the Company’s U.S. dollar subsidiary is translated into Canadian dollars, and the Financial Statements are translated into U.S. dollars for financial statement presentation. Assets and liabilities are translated using year-end exchange rates, and revenues, expenses, gains and losses are translated using average monthly exchange rates. Foreign exchange gains and losses arising from the translation of the Company’s assets and liabilities are included in “comprehensive (loss) income for the year”.

Cash and cash equivalents and restricted cash

Cash and cash equivalents include cash on hand held at banks and cash equivalents, which are defined as highly liquid investments with original maturities of three months or less. Restricted cash is a reserve account not available for immediate or general business use and is required as collateral to commercial credit cards or when certain requirements are not met under the terms of the Company’s senior secured credit facility (as defined in Note 14).

Trade and other receivables, net of expected credit losses

Accounts receivable are recorded at the invoiced amount, do not require collateral and do not bear interest. The Company estimates its allowance for doubtful accounts using the current expected credit loss methodology, which is designed to capture the Company’s current estimate of all expected credit losses.

Inventory

Inventory is comprised of raw materials and work in progress. The Company does not typically carry a significant amount of finished goods inventory. Inventory is valued at the lower of weighted average cost and net realizable value. Net realizable value is based on an item’s usability in the manufacturing of the Company’s products. The Company records an allowance for obsolescence when the net realizable value of inventory items declines below weighted average cost. Net realizable value is determined based on current market prices for inventory less the estimated cost to sell. Work in progress is valued at an estimate of cost, including attributable overheads, based on stage of completion.

Fixed production overheads are allocated to inventory on the basis of normal capacity of the production facilities. In periods where production levels are abnormally low, unallocated overheads are separately recognized as an expense in the period in which they are incurred.

Assets held for sale

The Company classifies an asset group (“asset”) as held for sale in the period that (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable and transfer of the asset is expected to qualify for recognition as a completed sale within one year (subject to certain events or circumstances), (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially and subsequently measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the consolidated statement of operations and comprehensive loss in the period in which the held for sale criteria are met. Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset.

The Company assesses the fair value of assets held for sale less any costs to sell at each reporting period until the asset is no longer classified as held for sale.

Leases

The Company categorizes leases at their inception as either operating or finance leases. Leases where the Company assumes substantially all of the rewards or ownership and leases where ownership is transferred at the end of the lease term, or by way of a bargain purchase option, are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability, so as to achieve a constant rate of interest on the balance of the liability. Finance charges are recognized in the statement of operations.

The Company’s Leasing Facilities (as defined in Note 14) are accounted for as finance leases as ownership of the equipment is expected to return to the Company at the end of the lease term. These transactions are not accounted for as a sale of the underlying equipment as the Company continues to control the equipment.

For leases categorized as operating, the Company determines if an arrangement is a lease or contains a lease element at inception. The arrangement is a lease if it conveys the right to the Company to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Operating leases are separately disclosed as operating lease right-of-use (“ROU”) assets, with a corresponding lease liability split between current and long-term components on the balance sheet. Operating leases with an initial term of 12 months or less are not included on the balance sheet.

The Company recognizes lease expense for these leases on a straight-line basis over the lease term. ROU assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Upon derecognition of ROU assets and operating lease liabilities, costs associated with cease-use liabilities, including costs for early termination, will reduce the ROU asset in calculating any gain or loss from early termination.

Property, plant and equipment

Property, plant and equipment are recorded at cost, including direct costs, attributable indirect costs and carrying costs, less accumulated depreciation and any accumulated impairment losses. Expenditures for repairs and maintenance are expensed as incurred, while renewals and betterments are capitalized.

Depreciation is charged to the consolidated statement of operations on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives of the Company’s property, plant and equipment are as follows:

When assets are disposed of or retired, the cost and accumulated depreciation and impairment losses are removed from the respective accounts and any resulting gain or loss is reflected in operating expenses.

Capitalized software costs

The Company capitalizes costs related to internally developed software during the application development stage when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project, and (iii) it is probable that the project will be completed and performed as intended. Capitalized costs include costs of personnel and related expenses for employees and third parties directly attributable to the projects. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Costs incurred for significant upgrades and enhancements are also capitalized. Costs related to preliminary project activities and post implementation activities, including training, maintenance and minor modifications or enhancements are expensed as incurred. Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the developed asset, which isfive years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of the assets.

Software development is considered internal-use as it is used to design and sell the DIRTT products and is not included in the end client’s product. Revenues received from Construction Partners for ICE Software are recognized as revenues as they are considered an element of the product sale. Any incidental third-party revenues received for the ICE Software are credited against capitalized software costs. The Company follows this accounting policy for cloud computing arrangements that are considered a service contract, however, these projects are capitalized to prepaids and other assets on the balance sheet and are expensed as an operating cost, as opposed to amortization, over the expected term of the software service contract.

Impairment of long-lived assets

Management evaluates the recoverability of the Company’s property, plant and equipment, capitalized software costs and ROU assets when events or changes in circumstances indicate a potential impairment exists. Events and changes in circumstances considered by the Company in determining whether the carrying value of long-lived assets may not be recoverable include, but are not limited to, significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, and changes in the Company’s business strategy. Impairment testing is performed at an asset level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (an “asset group”). In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of the asset group. If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Convertible Debentures

The Company accounts for convertible debentures as liabilities. Embedded features included in the convertible debentures that require bifurcation are accounted for separately. Costs incurred directly related to the issuance of convertible debentures are presented as a direct deduction against the carrying amount of the convertible debentures and are amortized to interest expense using the effective interest method.

Income taxes

Income tax expense is comprised of current and deferred tax. Income tax is recognized in the consolidated statement of operations and comprehensive income (loss) except to the extent it relates to items recognized directly in equity.

Current tax

Current tax expense is based on the results for the year, adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax

Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income in the period during which the change occurs.

When appropriate, the Company records a valuation allowance against deferred tax assets to reflect that these tax assets may not be realized. In determining whether a valuation allowance is appropriate, the Company considers whether it is more likely than not that all or some portion of the Company’s deferred tax assets will not be realized, based on management’s judgment using available evidence about future events.

At times, tax benefits claims may be challenged by a tax authority. Tax benefits are recognized only for tax positions that are more likely than not sustainable upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.

Revenue recognition

The Company accounts for revenue in accordance with topic 606, Revenue from Contracts with Customers, (“ASC 606”) and Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers. Under ASC 606, an entity recognizes revenue in a manner that reflects the transfer of promised goods or services to customers in an amount which the entity expects to be entitled in exchange for those goods or services.

The Company recognizes revenue upon transfer of control of promised goods or services to customers at the transaction price, an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Transaction price is calculated as selling price net of variable consideration which may include estimates for sales incentives related to current period product revenue. Revenue is measured at the fair value of the consideration received or receivable, after discounts, rebates and sales taxes or income taxes and duties.

Product sales

The Company recognizes revenue upon transfer of control of products to the customer, which typically occurs upon shipment. The Company’s main performance obligation to customers is the delivery of products in accordance with purchase orders. Each purchase order defines the transaction price for the products purchased under the arrangement. Construction Partners typically sell DIRTT product to end clients and issue purchase orders to the Company to manufacture the product. Construction Partners utilize ICE Software licenses to sell DIRTT products. The ICE Software licenses sold to Construction Partners are not considered a separate performance obligation as they are not distinct, and ICE Software license revenue is recognized in conjunction with product sales. The Construction Partner ICE Software revenue is recognized over the license period.

The Company’s standard sales terms are Free On Board shipping point, which comprise the majority of sales. The Company usually requires a 50% progress payment on receipt of certain orders, excluding certain government orders or in some special contractual situations. Customer deposits received are recognized as a liability on the balance sheet until revenue recognition criteria is met. At the point of shipment, the customer is generally required to pay the balance of the sales price within 30 days. The Company’s sales arrangements do not have any material financing components. In addition, the Company’s customer arrangements do not produce contract assets that are material to its consolidated financial statements.

The Company provides sales commissions to internal and external sales representatives which are earned in the period in which revenue is recognized.

The Company accounts for product transportation revenue and costs as fulfillment activities and presents the associated costs in costs of goods sold in the period in which the Company sells its product.

Contracts containing multiple performance obligations

The Company offers certain arrangements whereby a customer can purchase products and installation together, which are generally capable of being distinct and accounted for as separate performance obligations. Where multiple performance obligations exist, the Company determines revenue recognition by (1) identifying the contract with the customer, (2) identifying the performance obligation in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations based on the relative standalone selling prices, typically based on cost plus a reasonable margin, and (5) recognizing revenue as the performance obligations are satisfied.

Installation and other services

The Company provides installation and other services for certain customers as a distinct performance obligation. Revenue from installation services is recognized over time as the service is performed.

Principal vs Agent Considerations

The Company evaluates the presentation of revenue on a gross vs. net basis based on whether it acts as a principal by controlling the product or service sales to customers. In certain instances, the Company facilitates contracting of certain sales on behalf of Construction Partners. The Company records these revenues on a gross basis when the Company is obligated to fulfill the service and has the risk associated with service delivery. The Company records these revenues on a net basis when the Construction Partner has the obligation to fulfill the services and has the risk associated with service delivery.

Rebates

Rebates to Construction Partners and customers are accrued for and recognized as a reduction of revenue at the date of the sale to the customer. Rebates include amounts collected directly by the Company owed to Construction Partners or customers in accordance with their agreements. Other sales discounts are deducted immediately from sales invoices.

Contract balances

Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records an unbilled receivable when revenue is recognized prior to invoicing. As the Company’s contracts are less than one year in duration, the Company has elected to apply the practical expedients to expense costs related to costs to obtain contracts and not disclose unfulfilled performance obligations. As deferred revenue and customer deposits are typically recognized during the year, the Company does not account for financing elements.

Warranties

The Company provides a warranty on all products sold to its clients and Construction Partner’s clients. Warranties are not sold separately to customers. Provisions for the expected cost of warranty obligations are recognized based on an analysis of historical costs for warranty claims relative to current activity levels and adjusted for factors based on management’s assessment that increase or decrease the provision. Warranty provision is recognized in cost of goods sold. Warranty claims have historically not been material and do not constitute a separate performance obligation.

Stock-based compensation

The Company follows the fair value-based approach to account for options, share awards and restricted share units (“RSUs”). Compensation expense and an increase in “Additional paid-in capital” are recognized for options and RSUs over their vesting period based on their estimated fair values on the grant date, as determined using the Black-Scholes option pricing model for the majority of options and the market value of the Company’s common shares on the grant date for share awards and RSUs. Certain executive RSUs have performance conditions and are valued using a Monte Carlo model.

On exercise of stock options and RSUs, the recorded fair value of the option or RSU is removed from “Additional paid-in capital” and credited to “Share capital”. For options, any consideration paid by employees is credited to “Share capital” when the option is exercised. The Company’s stock options and RSUs are not shares of the Company and have no rights to vote, receive dividends, or any other rights as a shareholder of the Company.

Stock-based compensation expense is also recognized for performance share units (“PSUs”) and deferred share units (“DSUs”) using the fair value method. Compensation expense is recognized over the vesting period and the corresponding amount is recorded as a liability on the balance sheet.

The Company measures the DSUs granted under the LTIP (as defined herein) beginning in the second quarter 2023, using the closing price of the Company’s common shares on the grant date as the present intention is to settle the New DSUs in equity. This is recognized as an increase to stock-based compensation and the corresponding liability on the balance sheet.

Technology and development expenditures

Technology and development expenses are comprised primarily of salaries and benefits associated with the Company’s product and software development personnel which do not qualify for capitalization. These costs are expensed as incurred and exclude certain information technology costs used in operations which are classified as general and administrative costs.

Government subsidies

The Company accounts for government subsidies on an accrual basis when the conditions for eligibility are met. The Company has adopted an accounting policy to present government subsidies as other income. The nature, significant terms and conditions of government subsidies are disclosed in the Financial Statements.

Common shares

In lieu of a par value for common shares, the Company has elected to calculate any cancellation of common shares using the stated value of shares. The excess of purchase cost over stated value of shares cancelled upon repurchase will be recorded as additional paid-in capital.

Earnings per share

Basic earnings per share is calculated using the weighted average number of common shares outstanding during the year and adjusted for any change in capital structure events triggering retroactive changes to weighted average number of common shares outstanding. Diluted earnings per share is calculated using the treasury stock method for determining the dilutive impact of stock options, RSUs, PSUs, PRSUs and New DSUs. The Company follows the “if converted” method for accounting for the impact of convertible debentures on net income (loss) per share, whereby interest charges applicable to the convertible debentures are added to the numerator and the convertible debentures are assumed to have been converted at the beginning of the period (or time of issuance, if later), and the resulting common shares are added to the denominator.

Fair value of financial instruments

ASC 820, “Fair Value Measurements,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the consolidated balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s fair value analysis is based on the degree to which the fair value is observable and grouped into categories accordingly:

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Level 1 financial instruments are those which can be derived from quoted market prices (unadjusted) in active markets for similar financial assets or liabilities.

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Level 2 financial instruments are those which can be derived from inputs that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). Level 2 financial instruments include current and long-term debt. The carrying amounts of these instruments approximates fair value due to limited changes to interest rates and the Company’s credit rating since issuance.

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Level 3 financial instruments are those derived from valuation techniques that include inputs for the financial asset or liability which are not based on observable market data (unobservable inputs). The Company does not have any Level 3 financial instruments.

The carrying amounts of cash and cash equivalents and restricted cash; trade and accrued receivables, other receivables; accounts payable and accrued liabilities; other liabilities; and customer deposits approximate fair value due to their short-term nature.

3. ADOPTION OF NEW ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS ISSUED

On December 14, 2023, the FASB issued Accounting Standards Update No. 2023-09, “Improvements to Income Tax Disclosures” (the “ASU-2023-09”) further disaggregated information on an entity’s tax rate reconciliation and income taxes paid. The amendments in ASU-2023-09 was effective for fiscal years beginning after December 15, 2024. The Company has adopted this standard.

On November 5, 2024, the FASB issued Accounting Standards Update No. 2024-03, “Disaggregation of Income Statement Expenses” (the “ASU-2024-03”) which requires further disaggregated information on an entity’s types of expenses presented to better understand the components of an entity’s expense captions. The amendments within ASU-2024-03 are effective for annual reporting periods starting December 15, 2026, and interim periods beginning after December 15, 2027, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard and expects this to impact the presentation and disclosures of the Consolidated Statement of Operations and Comprehensive (Loss) Income.

On November 27, 2024, the FASB issued Accounting Standards Update No. 2024-04, “Induced Conversions of Convertible Debt Instruments” (the “ASU-2024-04”) which requires discussing an entity’s assessment of induced conversion and debt extinguishment of convertible debt instruments. The amendments in ASU-2024-04 are effective for fiscal years beginning after December 15, 2025, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard.

On July 30, 2025, the FASB issued Accounting Standards Update No. 2024-05, “Financial Instruments - Credit Losses” (the “ASU-2025-05”) which requires additional consideration when estimating the expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. The amendments in ASU-2025-05 are effective for fiscal years beginning after December 15, 2025. The Company is evaluating the impact of the adoption of this standard.

On September 18, 2025, the FASB issued Accounting Standards Update No. 2025-06, “Targeted Improvements to the Accounting for Internal-Use Software” (the “ASU-2025-06”) which amends certain aspects of the accounting for and disclosure of software costs. The amendments in ASU-2025-06 are effective for fiscal years beginning after December 15, 2027, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this trend.

On December 8, 2025, the FASB issued Accounting Standards Update No. 2025-11, “Narrow-Scope Improvements to Interim Reporting” (the “ASU-2025-11”) which clarifies the guidance on interim reporting disclosures. The amendments in ASU-2025-11 are effective for interim reporting periods with annual reporting periods beginning after December 15, 2027. The Company is evaluating the impact of the adoption of this trend.

Although there are several other new accounting standards issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its Financial Statements.

4. GOVERNMENT SUBSIDIES

In the United States, the Employee Retention Credit (“ERC”) was established by Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act to provide an incentive for employers to keep their employees on their payroll during COVID-19 closures. The ERC is a refundable payroll tax credit based on qualified wages paid by an eligible employer between March 12, 2020, and October 1, 2021, for companies experiencing a significant decline in gross receipts during a calendar quarter or having operations fully or partially suspended during the quarter due to COVID-19. During the third quarter of 2022, the Company determined it was eligible for the ERC for the first three quarters of 2021 and filed a claim for $7.3 million in payroll tax credits ($7.1 million net of expenses). As at December 31, 2023, the $7.3 million of these claimed credits (plus an additional $0.2 million of interest) were received.

For the twelve months ended December 31, 2024 and 2025, no government subsidies were claimed or received.

5. REORGANIZATION AND ASSETS HELD FOR SALE

Temporary Suspension of Operations and Subsequent Closure at the Rock Hill Facility

On September 27, 2023, the Company decided to permanently close the Rock Hill Facility. Certain assets, including manufacturing equipment, which met held for sale criteria at that time were reclassified from property, plant and equipment. During the three months ended March 31, 2024, $1.0 millionof the assets held for sale were sold. At March 31, 2024, the assets held for sale balancewas reduced from $0.5 million to $nil, resulting in a $0.5 million impairment charge for the first quarter as we were not able to determine the likelihood of a sale based on the market interest at that time.

Assets classified as held for sale as at December 31, 2023, of $1.6 million consisted of manufacturing equipment previously used in the Rock Hill Facility (refer to Note 11). As part of the decision to permanently close the Rock Hill Facility, $10.3 million of assets were assessed against the assets held for sale criteria and reclassified from property, plant and equipment to assets held for sale in the third quarter of 2023. The assets were measured at the lower of the net book value versus the fair value less cost to sell resulting in an impairment charge of $8.7 million. At March 31, 2024, the assets held for sale balance was reduced from $0.5 million to $nil, resulting in a $0.5 million impairment charge for the first quarter as we were not able to determine the likelihood of a sale based on the market interest at that time. These assets were subsequently disposed.

To move the assets or dispose of the assets at the Rock Hill Facility, the Company fully settled the principal balance of the U.S. leasing facility in the fourth quarter of 2023. Principal payments of $7.8 million and interest penalties of $0.4 million were incurred (refer to Note 14). As a result of this settlement, $2.6 million of restricted cash was released to the Company in the fourth quarter of 2023.

Effective December 30, 2025, the Company entered into an agreement for an early termination of the lease at the Rock Hill Facility. As such, the remaining leasehold improvements were measured at the lower of the net book value versus the fair value less cost to sell resulting in an impairment charge of $2.3 million during 2025.

Transformation Office

In 2024, DIRTT’s leadership team set up a new team, the Construction Services team (previously referred to as Integrated Solutions), to support our Construction Partner network in increasing market share and accessing markets to which we previously did not have access. In early 2025, a transformation office was established to accelerate the strategic transformation of our business by streamlining the Company’s processes and procedures, supporting Construction Services and improving productivity across the Company (the “Transformation Office”). We are incurring consultant costs to assist in, advise, and implement our transformation process, as well as various non-recurring expenses. The program is planned to be completed in 2026.

For the year ended December 31,2025, 2024, and 2023, the following reorganization costs incurred relate to the above mentioned initiatives:

Of the $2.1 million reorganization costs in accounts payable and accrued liabilities as at December 31,2025 (December 31, 2024 - $0.1 million), $1.8 million relates to termination benefits (December 31,2024 - $0.07 million) and $0.3 million relates to other reorganization costs (December 31,2024 - $0.03 million).

6. GAIN ON SALE OF SOFTWARE AND PATENTS

There were no sales of software and patents during the years ended December 31, 2025 and December 31, 2024.

In 2023, the Company entered into a Co-Ownership Agreement (the “Co-Ownership Agreement”) and a partial patent assignment agreement with AWI. The agreements provided for a cash payment from AWI to the Company of $10.0 million, subject to certain routine closing conditions, in exchange for the partial assignment to AWI and resulting co-ownership of a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE Software that is used by AWI (the “Applicable ICE Software Code”), including a 50% interest in the patent rights that relate to the Applicable ICE Software Code. Under the Co-Ownership Agreement, the Company also agreed to provide AWI a transfer of knowledge concerning the source code of the Applicable ICE Software Code. In exchange for completing the knowledge transfer, the Company received an additional cash payment of $1.0 million in the fourth quarter of 2023. The Co-Ownership Agreement provides that the Company and AWI have separate exclusive fields of use and restrictive covenants with respect to the Applicable ICE Software Code and related intellectual property, which survive until either party elects to separate from its relationship with the other and for five years thereafter. The Company concurrently entered into an Amended and Restated Master Services Agreement (the “ARMSA”) with AWI, under which AWI had also prepaid certain development services to be provided by DIRTT. The ARMSA will automatically terminate if the Co-Ownership Agreement is terminated or expires, and may also be terminated if either party breaches the exclusive fields of use or restrictive covenants in the Co-Ownership Agreement.

The $11.0 million of proceeds on the sale of the 50% interest in the Applicable ICE Software Code, pursuant to the Co-Ownership Agreement, during 2023. In accordance with GAAP, the proceeds were first applied to the net book value of the related costs of software of $2.9 million and patents (other assets) of $0.9 million. The residual amount of $7.1 million was recognized as a gain in the consolidated statement of operations. Further, $1.8 million was received during 2023 as a prepayment under the ARMSA, which was recognized into revenue during 2023 and the first quarter of 2024. Part of the proceeds of this transaction were used to settle one of our equipment leases of $1.6 million and resulted in the release of $0.4 million of restricted cash during 2023 (refer to Note 14).

7. GAIN ON EXTINGUISHMENT OF CONVERTIBLE DEBENTURES

On February 15, 2024, the Company commenced a substantial issuer bid and tender offer (the “Issuer Bid”) pursuant to which the Company offered to repurchase for cancellation: (i) up to C$6.0 million principal amount of its issued and outstanding January Debentures (as defined in Note 14) at a purchase price of C$720 per C$1,000 principal amount of January Debentures, and (ii) up to C$9.0 million principal amount of its issued and outstanding December Debentures (as defined in Note 14 and together with the January Debentures, the “Debentures”), at a purchase price of C$600 per C$1,000 principal amount of December Debentures.

C$4.7 million ($3.5 million) aggregate principal amount of the January Debentures and C$5.8 million ($4.3 million) aggregate principal amount of December Debentures were validly deposited and not withdrawn at the expiration of the Issuer Bid on March 22, 2024, representing approximately 11.66% of the January Debentures and 16.50% of the December Debentures issued and outstanding at that time. The Company took up all the Debentures tendered pursuant to the Issuer Bid for aggregate consideration of C$7.0 million ($5.2 million) (comprised of C$6.9 million ($5.1 million) repayment on principal and interest of C$0.1 million ($0.1 million)).

On August 2, 2024, the Company entered into a Convertible Debenture Repurchase Agreement (the “Repurchase Agreement”) with 22NW, pursuant to which the Company purchased for cancellation an aggregate of C$18,915,000 principal amount of the January Debentures at a purchase price of C$684.58 per C$1,000 principal amount of January Debentures and C$13,638,000 principal amount of the December Debentures at a purchase price of C$665.64 per C$1,000 principal amount of December Debentures, for an aggregate purchase price of C$22,104,591.45, inclusive of a cash payment for all accrued and unpaid interest up to, but excluding, the date on which such Debentures were purchased by the Company (the “Debenture Repurchase”). The Debenture Repurchase closed on August 2, 2024. The purchase price of each series of Debentures (excluding the cash payment for accrued and unpaid interest) represented a discount of approximately 4% to the average trading price of the applicable series of Debentures on the Toronto Stock Exchange (the “TSX”) for the 20 trading days preceding August 2, 2024. Following the Debenture Repurchase, C$16,642,000 principal amount of the January Debentures and C$15,587,000 principal amount of the December Debentures remained outstanding and 22NW no longer held any Debentures.

On August 28, 2024, the Company commenced a normal course issuer bid (the “Debentures NCIB”) for the Debentures which expired on August 27, 2025. On August 26, 2025, the Company announced the renewal of the Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB (the “Renewed Debentures NCIB”). The Renewed Debentures NCIB is expected to terminate on August 27, 2026 with respect to the December Debentures and terminated on January 31, 2026 with respect to the January Debentures, concurrent with the maturity date of the January Debentures. Under the Debentures NCIB, DIRTT was permitted to acquire up to C$1,664,200 principal amount of the January Debentures and C$1,558,700 principal amount of the December

Debentures. For the year ended December 31,2025, C$0.3 million ($0.2 million) principal amounts of the December Debentures and C$0.06 million ($0.04 million) principal amounts of the January Debentures had been acquired through the Debentures NCIB. Under the Renewed Debentures NCIB, DIRTT is permitted to acquire up to C$1,656,900 principal amount of the January Debentures and C$1,493,500 principal amount of the December Debentures. For the year ended December 31,2025, C$0.1 million ($0.1 million) principal amounts of the December Debentures and C$0.01 million ($0.01 million) principal amounts of the January Debentures had been acquired through the Renewed Debentures NCIB.

For the year ended December 31,2025, the gain on extinguishment of convertible debentures relate to the above mentioned initiatives:

In accordance with GAAP, it was determined that the C$0.5 million ($0.3 million) repayment on convertible debt through the Debentures NCIB and the Renewed Debentures NCIB, in aggregate, in the year ended December 31,2025 (C$29.2 million ($21.4 million) repayment of convertible debt through the Issuer Bid, the Debenture Repurchase, and the Debentures NCIB in the year ended December 31,2024), triggered an extinguishment of C$0.5 million ($0.3 million) (C$43.4 million ($31.8 million) for the year ended December 31,2024) of principal amount of debt. The gain on extinguishment of C$0.03 million ($0.02 million) for the year ended December 31,2025 (C$14.2 million ($10.4 million) for the year ended December 31,2024), was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs.

8. LEASES

The Company leases office and factory space under various operating leases. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company gives consideration to instruments with similar characteristics when calculating its incremental borrowing rate. The Company’s operating leases have remaining lease terms of 1 year to 8 years. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

The weighted average remaining lease term and weighted average discount rate at December 31, 2025, wassix years (2024 -eight years) and 6.8% (2024 –7.1%), respectively.

The Company entered into a sublease arrangement for part of the Phoenix Facility during the second quarter of 2022, commencing July 1, 2022. The Company entered in to an additional sublease arrangement for the remaining part of the Phoenix Facility during the third quarter of 2024, commencing October 1, 2024, which was terminated in the fourth quarter of 2025 resulting in $0.5 million of bad debt expense. The Company is actively pursuing options to sublease this area. Additionally, the Company entered into a sublease agreement for the Plano, DXC to one of our Construction Partners in that region, in which the subtenant has assumed responsibility for all monthly rent, utilities, maintenance, taxes and other costs as of April 1, 2023, through December 31, 2024. The Plano sublease agreement was extended for an additional four years, through October 31, 2028.

In May 2025, the Company entered into a leasing agreement for a Houston DXC. Undiscounted cash flows associated with this lease are $1.4 million. The rent obligations have been discounted at a rate of 6.05% to determine the lease liability.

On December 30, 2025, the Company entered an early termination agreement for its Rock Hill Facility lease (refer to Note 5). As a result of this termination, the lease liability and ROU asset associated with this lease have been derecognized. Undiscounted cash flows associated with this modification were$10.5 million. The termination of the lease resulted in a $1.0 million fee paid for the termination and a $0.9 million gain on disposal.

In November 2025, the Company modified and existing agreement for a Calgary manufacturing facility to extend the leasing term for an additional three years. Undiscounted cash flows associated with this modification are C$3.5 million. ($2.6 million). The rent obligations have been discounted at a rate of 5.15% to determine the lease liability.

In the fourth quarter of 2025, we determined that the Phoenix Facility (which was closed in 2022) was impaired. The Company determined that there were no impairment indicators for the facilities in use.

The following table includes ROU assets included on the balance sheet at December 31,2025 and 2024:

The components of the lease cost for the years ended December 31,2025, 2024 and 2023 were as follows:

The following table includes lease liabilities included on the balance sheet at December 31,2025 and 2024:

The following table includes maturities of operating lease liabilities at December 31,2025:

9. TRADE AND ACCRUED RECEIVABLES

Accounts receivable are recorded at the invoiced amount, do not require collateral and do not bear interest. The Company estimates an allowance for credit losses using the lifetime expected credit loss at each measurement date, taking into account historical credit loss experience as well as forward-looking information in order to establish rates for each class of financial receivable with similar risk characteristics. Adjustments to this estimate are recognized in the statement of operations.

In order to manage and assess our risk, management maintains credit policies that include regular review of credit limits of individual receivables and systematic monitoring of aging of trade receivables and the financial wellbeing of our customers. In addition, we acquired trade credit insurance effective April 1, 2020. At December 31, 2025, approximately 59% of our trade accounts receivable are insured, relating to accounts receivables from counterparties deemed creditworthy by the insurer and excluding accounts receivable from government entities. In addition, and where possible, we collect a 50% deposit on sales, excluding government and certain other clients.

Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the years ended December 31, 2025 and December 31, 2024, no single Construction Partner accounted for greater than 10% of revenue.

No change to our expected credit loss was required during the year ended December 31, 2025, or December 31, 2024 for our trade receivables. We however have an expected credit loss on the sublease income of our Phoenix lease of $0.5 million. Receivables aregenerally considered to be past due when over 60 days old, unless there is a separate payment arrangement in place for the collection of the receivable.

10. INVENTORY

As of December 31, 2025, the Company had$0.5 million (2024 - $0.9 million) provided for inventory that is not expected to be used in future production and the associated expense has been recorded to cost of goods sold. During 2025, the Company wrote off$0.8 million of inventory against the provision (2024 - $1.7 million) and made an additional provision of$0.4 million (2024 - $1.0 million). In addition, the Company recorded direct write offs against inventory of $nil (2024 - $0.1 million). Production overheads capitalized in work in progress were$0.3 million at December 31, 2025 (2024 - $0.4 million).

11. PROPERTY, PLANT AND EQUIPMENT, NET

(1)

Effective December 30, 2025, the Company entered into an agreement for an early termination of the lease at the Rock Hill Facility. As such, the remaining leasehold improvements were measured at the lower of the net book value versus the fair value less cost to sell resulting in an impairment charge of $2.3 million during 2025 (Refer to Note 5).

The following table presents a reconciliation of the impairment charge incurred for the year ended December 31, 2025:

As at December 31, 2025, the Company had $0.2 million of assets in progress of completion which were excluded from assets subject to depreciation (2024 – $0.4 million).

As at December 31, 2024 the Company determined that there were no impairment indicators warranting an impairment test.

12. CAPITALIZED SOFTWARE, NET

Estimated amortization expense on capitalized software is $1.3 million in 2026, $1.1 million in 2027, $0.9 million in 2028, $0.5 million in 2029, and $0.2 million in 2030.

13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES AND OTHER LIABILITIES

(1)

In 2025, $0.7 million of rebates were earned (2024 - $1.9 million) and $0.7 million were paid (2024 -$1.6 million).

Other liabilities

(1)

The following table presents a reconciliation of the warranty provisions balance:

14. LONG-TERM DEBT

Revolving Credit Facility

On February 12, 2021, the Company entered into a loan agreement governing a C$25.0 million senior secured revolving credit facility with the Royal Bank of Canada (“RBC”), as lender (the “RBC Facility”). Under the RBC Facility, the Company is able to borrow up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of (i) 75% of the book value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims (the “Borrowing Base”). Interest was calculated at the Canadian or U.S. prime rate plus 30 basis points or at the Canadian Dollar Offered Rate or LIBOR plus 155 basis points. Under the RBC Facility, if the “Aggregate Excess Availability”, (defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash), is less than C$5.0 million, the Company was subject to a fixed charge coverage ratio (“FCCR”) covenant of 1.10:1 on a trailing twelve-month basis. Additionally, if the FCCR was below 1.10:1 for the three immediately preceding months, the Company would be required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Leasing Facilities (defined below). Should an event of default occur or the Aggregate Excess Availability be less than C$6.25 million forfive consecutive business days, the Company would enter a cash dominion period whereby the Company’s bank accounts would be blocked by RBC and daily balances will offset any borrowings and any remaining amounts made available to the Company.

On February 9, 2023, the Company extended the RBC Facility (the “Extended RBC Facility”). The Extended RBC Facility had a maximum borrowing base of C$15 million and a one-year term. Interest was calculated as at the Canadian or U.S. prime rate plus 75 basis points or the Canadian Dollar Offered Rate or Term Secured Overnight Financing Rate (“Term SOFR”) plus 200 basis points plus the Term SOFR Adjustment (as defined in the amended loan agreement governing the Extended RBC Facility). Under the Extended RBC Facility, if the trailing twelve-month FCCR was not above 1.25 forthree consecutive months, a cash balance equivalent to one year’s worth of Leasing Facilities payments would be maintained. Effective October 2023, inventory was scoped out of the Borrowing Base.

On February 9, 2024, the Company extended the Extended RBC Facility (the “Second Extended RBC Facility”). The Second Extended RBC Facility is subject to the borrowing base calculation to a maximum of C$15 million and a one-year term. Interest is calculated at the Canadian or U.S. prime rate plus 75 basis points or at the Canadian Dollar Offered Rate or Adjusted Term CORRA or Term SOFR plus the Term SOFR Adjustment, in each case plus 200 basis points. The Second Extended RBC Facility removed the three-month FCCR covenant, which resulted in the release of $0.1 million of restricted cash during 2024 (the Company had $0.4 million restricted cash as at December 31, 2023). On February 11, 2025, the Company extended the Second Extended RBC Facility for a period of two weeks up to February 25, 2025 whilst the Company and RBC completed negotiations.

On February 20, 2025, the Company extended the Third Extended RBC Facility (the “Fourth Extended RBC Facility”). The Fourth Extended RBC Facility is subject to the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million and matures on November 30, 2025. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. Under the RBC Facility, if the “Aggregate Excess Availability” (defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash), was less than C$3.0 million for at least thirty consecutive calendar days, the Company is subject to a FCCR covenant of 1.10:1 on a trailing twelve-month basis. The Fourth Extended RBC Facility also includes a new letter of credit facility guaranteed by the Export Development of Canada of C$5.0 million. The Company has also entered into a bonding facility with Great Midwest Insurance Company, and any other company that is part of or added to Skyward Specialty Insurance Group, Inc. (“Skyward”), which allows access to a $15.0 million bonding facility subject to an individual maximum of $5.0 million. Under the terms of the facility with Skyward, any bonds issued will be secured through letters of credit issued pursuant to the Fourth Extended RBC Facility. At December 31, 2025, no bonds have been issued through such bonding facility.

On November 4, 2025, the Company extended the Fourth Extended RBC Facility (the “Fifth Extended RBC Facility”). The Fifth Extended RBC Facility matures on November 30, 2026 and is subject to the same borrowing base terms as the previous facility; with the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. At December 31, 2025, available borrowings are C$16.3 million ($11.8 million)(December 31, 2024 – C$14.4 million ($10.0 million) of available borrowings), calculated in the same manner as the RBC Facility described above, of which no amounts have been drawn. As described below, as at December 31, 2025, the Company was not in compliance with certain covenants under the Fifth Extended RBC Facility. RBC has agreed to provide a waiver pursuant to Section 8.3 of the Fifth Extended RBC Facility in connection with the foregoing.

On February 11, 2026 and in connection with the Loan (as defined herein), the Company amended the Fifth Extended RBC Facility (the “Seventh Amended RBC Facility”) and, together with its subsidiary, entered into priority agreements with RBC and BDC (collectively, the “Priority Agreement”). The Seventh Amended RBC Facility matures on November 30, 2026 and is subject to the same borrowing base terms as the previous facility. The Seventh Amended RBC Facility allows the Company to incur indebtedness to BDC of C$15 million under the Loan and incorporates permitting specific encumbrances to BDC and the Priority Agreement. The Seventh Amended RBC Facility also releases certain mortgage collateral held by RBC.

The Fifth Extended RBC Facility includes a customary “Restricted Payments” covenant that prohibits us from, among other things, repurchasing our common shares, unless we have satisfied certain conditions (the “Payment Conditions”). The Payment Conditions include a condition that, after giving effect to the relevant Restricted Payment, our FCCR be at least 1.10 to 1.00 on a trailing 12-month basis. In February 2026, we and RBC determined that our purchases of our common shares under our NCIB in December 2025 did not comply with the Restricted Payments covenant because our FCCR was below 1.10 to 1.00. RBC has agreed to provide a waiver pursuant to Section 8.3 of the Fifth Extended RBC Facility in connection with the foregoing.

Leasing Facilities

The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) of which C$4.4 million ($3.2 million) has been drawn and C$3.9 million ($3.0 million) has been repaid, and a $14.0 million equipment leasing facility in the United States of which $13.3 million has been drawn and repaid (the “U.S. Leasing Facility” and, together with the Canada Leasing Facility, the “Leasing Facilities”) with RBC. The Canada Leasing Facility has a seven-year term and bears interest at 4.25%. Refer to Note 5 on the decision to permanently close the Rock Hill Facility. As part of this decision, the Company fully settled the $7.8 million principal balance of the U.S. Leasing Facility in the fourth quarter of 2023. The U.S. Leasing Facility is no longer available to be drawn on. With the settlement of this liability, $2.6 million was released from restricted cash.

The Company did not make any draws on the Leasing Facilities during 2025 or 2024. The associated financial liabilities are shown on the consolidated balance sheet in the current portion of long-term debt and accrued interest and long-term debt.

Convertible Debentures

On January 25, 2021, the Company completed a C$35.0 million ($27.5 million) bought-deal financing of convertible unsecured subordinated debentures (the “January Debentures”) with a syndicate of underwriters. On January 29, 2021, the Company issued a further C$5.25 million ($4.1 million) of the January Debentures under the terms of an overallotment option granted to the underwriters. The January Debentures matured and became repayable on January 31, 2026 (the “January Debentures Maturity Date”) and accrued interest at the rate of 6.00% per annum payable semi-annually in arrears on the last day of January and July of each year commencing on July 31, 2021 until the January Debentures Maturity Date. Interest and principal were payable in cash or shares at the option of the Company. The January Debentures were convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the January Debentures Maturity Date and the date specified by the Company for redemption of the January Debentures. Costs of the transaction were approximately C$2.7 million, including the underwriters’ commission. As a result of the Rights Offering (refer to Note 16), the conversion price of the January Debentures was adjusted to C$4.03 per common share representing a conversion rate of 248.1390 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$4.7 million ($3.5 million) of the principal balance of the January Debentures, and paid C$0.04 million ($0.03 million) of the interest payable on such January Debentures (refer to Note 7). On August 2, 2024, the Company completed the Debenture Repurchase. On August 28, 2024, the Company commenced the Debentures NCIB which expired on August 27, 2025. On August 26, 2025, the Company announced the Renewed Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB. The Renewed Debentures NCIB terminated on January 31, 2026, with respect to the January Debentures, concurrent with the maturity date of the January Debentures. During the year ended December 31, 2025, the Company repurchased for cancellation C$0.06 million ($0.04 million) principal amount of January Debentures, in aggregate, as part of the Debentures NCIB and Renewed Debentures NCIB (2024 - C$0.01 million ($0.01 million)). As at December 31, 2025, C$16.6 million ($12.1 million) principal amount of the January Debentures was outstanding (2024 - C$16.6 million ($11.6 million)). The January Debentures were paid on maturity on January 31, 2026.

On December 1, 2021, the Company completed a C$35.0 million ($27.4 million) bought-deal financing of convertible unsecured subordinated debentures (the “December Debentures”) with a syndicate of underwriters. The December Debentures will mature and be repayable on December 31, 2026 (the “December Debentures Maturity Date”) and accrue interest at the rate of 6.25% per annum payable semi-annually in arrears on the last day of June and December of each year commencing on June 30, 2022 until the December Debentures Maturity Date. Interest and principal are payable in cash or shares at the option of the Company. The December Debentures will be convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the December Debentures Maturity Date and the date specified by the Company for redemption of the December Debentures. Costs of the transaction were approximately C$2.3 million, including the underwriters’ commission. As a result of the Rights Offering (refer to Note 16), the conversion price of the December Debentures was adjusted to C$3.64 per common share representing a conversion rate of 274.7253 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$5.8 million ($4.3 million) of the principal balance of the December Debentures and paid C$0.08 million ($0.06 million) of the interest payable on such December Debentures (refer to Note 7). On August 2, 2024, the Company repurchased for cancellation C$13.6 million ($10.1 million) principal amount of December Debentures held by 22NW. On August 28, 2024, the Company commenced the Debentures NCIB which expired on August 27, 2025. On August 26, 2025, the Company announced the Renewed Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB. The Renewed Debentures NCIB is expected to terminate on August 27, 2026 with respect to the December Debentures. During the year ended December 31, 2025, the Company repurchased for cancellation C$0.4 million ($0.3 million) principal amount of the December Debentures, in aggregate, as part of the Debentures NCIB and Renewed Debentures NCIB (2024 - C$0.3 million ($0.2 million)). As at December 31, 2025, C$14.8 million ($10.8 million) principal amount of the December Debentures was outstanding (2024 - C$15.3 million ($10.6 million)).

Term Loan

On December 11, 2025, the Company entered into a letter agreement (the “Letter”) with the Business Development Bank of Canada (“BDC”), pursuant to which BDC committed to lending the Company up to C$15.0 million (the “Loan”) subject to the satisfaction of certain conditions. The Letter was subsequently amended on January 30, 2026 and February 9, 2026 (the “Amended Letter”) to amend certain conditions.

Following the satisfaction of the conditions precedent set forth in the Letter, BDC will make an initial disbursement to the Company of C$5.5 million and, subject to certain conditions, a secondary disbursement of C$4.5 million and a third disbursement of C$5.0 million. The Loan will accrue interest at a rate equal to BDC’s floating base rate (currently 6.55% per annum) minus 0.75%. Monthly principal repayments of the Loan commence in May 2026 with additional monthly interest-only payments due on the last day of each month following the first disbursement. The Loan matures on April 30, 2032.

The obligations of the Company under the Amended Letter are secured by: (a) a general security agreement from the Company granting (i) a first-ranking security interest in specific equipment and (ii) a second priority security interest in all other present and after-acquired personal property (excluding consumer goods), subject to certain registered charges; (b) a guarantee from DIRTT Environmental Solutions, Inc. for the full amount of the Loan; (c) various landlord’s waivers of distraint; (d) a first mortgage in the principal amount of US$5.0 million on the land and buildings located at 325 North Wells Street, Chicago, IL, USA and (e) a letter of credit for C$3.5 million for the third disbursement of C$5.0 million.

The proceeds of the Loan are expected to be used to partially refinance the Company’s outstanding 6.00% convertible debentures due January 31, 2026 (the "Debentures"). The remaining C$1.6 million principal amount of Debentures is expected to be repaid using cash on hand.

The Company received C$5.5 million from BDC on February 13, 2026. The next disbursement of C$4.5 million is subject to the receipt of certain landlord waivers and other conditions. The last disbursement of C$5.0 million is expected to be in the second half of the year, subject to certain conditions.

15. INCOME TAXES

Reconciliation of income taxes

The following reconciles income taxes calculated at the Canadian statutory rate with the actual income tax expense. The Canadian statutory rate includes federal and provincial income taxes. This rate was used because Canada is the domicile of the parent entity of the Company.

The provision for income taxes is comprised of federal, state, provincial and foreign taxes based on pre-tax income. In the United States, the CARES Act of 2020 allows, among other provisions, for the recovery of taxes paid over the preceding five years from current year losses.

The Company’s U.S. subsidiary’s result was taxable income for the year ended December 31, 2025. The Company utilized prior year operating losses against this income; however, U.S. tax law does not allow for the full offset of losses against current year taxable income to reduce tax payable to zero. This resulted in current tax payable of $0.5 million in 2025 (2024 - $0.4 million).

Deferred tax assets and liabilities

Significant components of the Company’s deferred tax assets and liabilities as at December 31,2025 and 2024 were as follows:

Summary of temporary difference movements during the year:

For the year ended December 31, 2025, the Company recorded valuation allowances of $1.0 million against deferred tax assets incurred during the year. A valuation allowance is recognized to the extent that it is more likely than not that the deferred tax assets will not be realized (2024 – $3.8 million).

On an annual basis, the Company and its subsidiary file tax returns in Canada and various foreign jurisdictions. In Canada, the Company’s federal and provincial tax returns for the years 2020 to 2023 remain subject to examination by taxation authorities. In the United States, both the federal and state tax returns filed for the years 2019 to 2023 remain subject to examination by the taxation authorities.

Tax loss carryforwards and other tax pools

The significant components of the Company’s net future income tax deductions in these consolidated financial statements are summarized as follows:

16. RIGHTS OFFERING

On November 21, 2023, the Company announced that the Board of Directors had approved a rights offering (the “Rights Offering”) to its common shareholders for aggregate gross proceeds of C$30.0 million ($22.4 million).

In connection with the Rights Offering, the Company entered into a standby purchase agreement, dated November 20, 2023 (the “Standby Purchase Agreement”) with 22NW and 726 BC LLC and 726 BF LLC (together, “726”), or their permitted assigns (collectively and including WWT Opportunity #1 LLC, to which 726 transferred all of their common shares to on December 1, 2023, the “Standby Purchasers”). Subject to the terms and conditions of the Standby Purchase Agreement, each Standby Purchaser agreed to exercise its Basic Subscription Privilege (as defined below) in full and to collectively purchase from the Company, at the subscription price, all common shares not subscribed for by holders of Rights (as defined below) under the Basic Subscription Privilege or Additional Subscription Privilege (as defined below), up to a maximum of C$15.0 million each, so that the maximum number of common shares that could be issued in connection with the Rights Offering would be issued and the Company would receive aggregate gross proceeds of C$30.0 million ($22.4 million). As described below, no standby fee was paid to the Standby Purchasers in connection with the Rights Offering; however, DIRTT reimbursed the Standby Purchasers for their reasonable expenses in the amount of $0.03 million each.

On January 9, 2024, the Company announced the completion of the Rights Offering to its common shareholders and the issuance of 85,714,285 common shares at a price of C$0.35 ($0.26) per whole common share for aggregate gross proceeds of C$30.0 million ($22.4 million) and aggregate net proceeds of $21.3 million ($1.1 million of costs associated with the Rights Offering). Each right distributed under the Rights Offering (each, a “Right”) entitled eligible holders to subscribe for 0.81790023 common shares, exercisable for whole common shares only, meaning 1.22264301 Rights were required to purchase one common share (the “Basic Subscription Privilege”). In accordance with applicable law, the Rights Offering included an additional subscription privilege (the “Additional Subscription Privilege”) under which eligible holders of Rights who fully exercised the Rights issued to them under their Basic Subscription Privilege, were entitled to subscribe for additional common shares, on a pro rata basis, that were not otherwise subscribed for under the Basic Subscription Privilege.

DIRTT issued an aggregate of 67,379,471 common shares pursuant to the Basic Subscription Privilege and 18,334,814 common shares pursuant to the Additional Subscription Privilege. As a result of the common shares issued under the Basic Subscription Privilege and Additional Subscription Privilege, no common shares were available for issuance pursuant to the Standby Purchase Agreement.

17. STOCK-BASED COMPENSATION

In May 2020, shareholders approved the DIRTT Environmental Solutions Ltd. Long Term Incentive Plan, which was subsequently amended and restated in each of 2023, 2024 and 2025 and is currently called the DIRTT Environmental Solutions Ltd. Third Amended and Restated Long-Term Incentive Plan (as amended and restated, the “LTIP”). Each amendment and restatement was approved by our shareholders. The LTIP replaced the predecessor incentive plans, being the Performance Share Unit Plan (“PSU Plan”) and the Amended and Restated Stock Option Plan (“Stock Option Plan”). No further awards have been or will be granted under either the Stock Option Plan or the PSU Plan following initial approval of the LTIP in May of 2020, but both plans remain in place to govern the terms of any awards that were granted pursuant to such plans.

The LTIP gives the Company the ability to award options, share appreciation rights, restricted share units, deferred share units, restricted shares, dividend equivalent rights, and other share-based awards and cash awards to eligible employees, officers, consultants anddirectors of the Company and its affiliates. In accordance with the LTIP, the sum of (i)30,350,000 common shares plus (ii) the number of common shares subject to stock options previously granted under the Stock Option Plan that, following May 22, 2020, expire or are cancelled or terminated without having been exercised in full, have been reserved for issuance under the LTIP. Upon vesting of certain LTIP awards, the Company may withhold shares as a means of meeting DIRTT’s tax withholding requirements in respect of the withholding tax remittances required in respect of award holders. To the extent the fair value of the withheld shares upon vesting exceeds the grant date fair value of the instrument, the excess amount is credited to retained earnings or deficit.

Prior to May of 2023, deferred share units (“DSUs”) were granted to non-employee directors under the Deferred Share Unit Plan for Non-Employee Directors (as amended and restated, the “DSU Plan”) and settleable only in cash. As of May 30, 2023, the LTIP provides the Company the ability to settle DSUs in either cash or common shares, while consolidating future share-based awards under a single plan. The terms of the DSU Plan are otherwise materially unchanged as incorporated into the LTIP. Effective May 30, 2023, no new awards have been or will be made under the DSU Plan, but awards previously granted under the DSU Plan will continue to be governed by the DSU Plan. DSUs are settled following cessation of services with the Company.

Stock-based compensation expense

The following summarizes RSUs, PRSUs, PSUs (each as defined herein) and DSUs activity during the periods:

Restricted share units (time-based vesting)

Except as noted below, outstanding restricted share units (“RSUs”) that vest based on time have an aggregate time-based vesting period ofthree years and generally one-third of the RSUs vest every year over a three-year period from the date of grant. The RSUs will be settled following vesting by way of the provision of cash or shares to employees (or a combination thereof), at the discretion of the Company. The weighted average fair value of the RSUs granted in 2025 and 2024 was C$0.90 and C$0.68, respectively, which was determined using the closing price of the Company’s common shares on their respective grant dates.

During 2023,150,000 RSUs were granted to each of the chief executive officer, president and chief operating officer and chief financial officer which vested in the first and third quarters of 2024. During the third quarter of 2024, certain of the Company’s executives were granted (i)5 million RSUs which will cliff vest on August 14, 2026 and (ii)975,000 RSUs, one-third of which will vest every year over a three-year period from the date of grant, at a weighted average fair value of C$0.75 which was determined using the closing price of the Company’s common shares on their respective grant dates. Subsequentto year-end, the president and chief operating officer departedthe Company. Under his executive employment contract,2,866,667 RSUs will vest on an accelerated basis on March 3, 2026. These RSUs, net of tax, will be settled in common shares.

During the fourth quarter of 2025,200,000 RSUs were granted to the chief transformation officer, which vested immediately and were settled in common shares. The weighted average fair value of the RSUs granted was C$1.01.

Restricted share units (performance-based vesting)

During 2022 and 2021, RSUs were granted to executives with service and performance-based conditions for vesting based on the Company’s share price performance (the “PRSUs”). Based on share price performance since the date of grant,66.7% of the 2021 PRSUs vested on March 1, 2024, but none of the 2022 PRSUs vested upon completion of the three-year service period. As at December 31, 2024, the Company had 45,177 PRSUs outstanding. All PRSUs were expired as of December 31,2025.

Performance share units

During the second quarter of 2023, certain executives were issued a strategic equity grant through performance share units (“PSUs”). The performance period of the PSUs is from January 1, 2023, to December 31, 2026, with a cliff vesting term for December 31, 2026.2,584,161 PSUs were granted and depending on the level of performance, the PSUs will vest 100%,160% or 190% up to a maximum of 4,909,907 PSUs. Settlement will be made in the form of shares issued from treasury. The performance measures are a combination of Revenue and Earnings Before Interest, Taxes, Depreciation and Amortization and both targets have to be achieved. As of December 31, 2025, the fair value of these PSUs have been deemed to be nil based on the likelihood of achieving the targets compared to current results. During the third quarter of 2023,738,553 PSUs with a $nil value were forfeited as a result of an executive departure. There are 1,845,608 PSUs with a $nil value outstanding as at December 31,2025. Subsequent to year-end, the president and chief operating officer departed from the Company and 922,804 PSUs and were forfeited.

During the fourth quarter of 2025,752,000 PSUs were granted to the chief transformation officer. The performance period is from November 26, 2025 until June 30, 2026 with a cliff vesting term for June 30, 2026. The performance measures relate to success of cost savings targets tied to transformation efforts by the Company. As of December 31, 2025, the PSUs have been deemed to have a value of $0.6 million.

During the fourth quarter of 2025,510,000 PSUs were granted to employees. The performance period ended December 31, 2025. The performance measure was for the Company to reach a share price of C$1.85 and Adjusted EBITDA greater than $20 million. At of the end of the performance period, the conditions were not met and all PSUs related to this grant were forfeited. The fair value of the PSUs were deemed to be $nil at the time of the grant based on the likelihood of achieving the target.

Deferred share units

Granted under the DSU Plan

The fair value of the DSU liability and the corresponding expense is charged to profit or loss at the grant date. Subsequently, at each reporting date between the grant date and settlement date, the fair value of the liability is remeasured with any changes in fair value recognized in profit or loss for the period. During 2025, the Company settled 0.3 million DSUs (nil in 2024) to departed directors with a fair value of $0.2 million ($nil in 2024). DSUs outstanding at December 31, 2025 had a fair value of$0.5 million which is included in other liabilities on the balance sheet (December 31, 2024 – $0.7 million).

Granted under LTIP

DSUs granted after May 30, 2023 (the “New DSUs”) will be settled by way of the provision of cash or shares (or a combination thereof) to the directors, at the discretion of the Company. The Company intends to settle these DSUs through issuances of common shares. The weighted average fair value of the DSUs granted in 2025 and 2024 was C$0.89 ($0.64) and C$0.69 ($0.50), respectively, which was determined using the closing price of the Company’s common shares on the grant date. During 2025, the Company settled 1.2 million New DSUs (nil in 2024) to departed directors with a fair value of $0.6 million ($nil in 2024). New DSUs outstanding at December 31, 2025 had a fair value of $1.4 million which is included in other liabilities on the balance sheet (December 31, 2024 – $1.3 million).

Options

The following summarizes options granted, forfeited and expired during the periods:

Range of exercise prices outstanding at December 31, 2023:

As at December 31, 2025, the Company had no outstanding options.

Dilutive instruments

For the years ended December 31, 2025 and December 31, 2023, respectively,5.5 million and 3.6 million RSUs (including PRSUs),2.3 million and 1.8 million New DSUS,1.8 million PSUs, nil and 0.2 million options, and 34.5 million and 156.8 million shares would be issued if the principal amount of the Debentures were settled in our common shares at the year-end share price were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net loss per share.

For the year ended December 31, 2024,2.3 million RSUs and PRSUs,2.0 million New DSUs and 45.1 million shares which would have been issued if the principal amount of the Debentures were settled in common shares at the year-end price were included in the diluted earnings per share calculation (Note 19).1.8 million PSUs and 0.2 million RSUs and PRSUs were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net income per share.

18. SHARE REPURCHASES

On December 18, 2024, the Company announced a normal course issuer bid for common shares (the “Shares NCIB”), which commenced on December 20, 2024, terminates on December 19, 2025 and permits DIRTT to acquire up to 7,515,233 common shares. All purchases will be made on the open market through the facilities of the TSX at the market price of common shares at the time of acquisition. Any common shares acquired through the Shares NCIB will be immediately cancelled.

On February 13, 2025, the Company entered into a share repurchase agreement (the “NGEN Repurchase Agreement”) with NGEN III, LP (“NGEN”), pursuant to which the Company purchased for cancellation 3,920,844 common shares held by NGEN at a purchase price of $0.80 per share (the “Share Repurchase”). Pursuant to the terms of the NGEN Repurchase Agreement, the purchase price of $0.80 per share was a 1% discount to the closing price of the common shares on the TSX on January 27, 2025 (converted into U.S. Dollars using the February 13, 2025 closing exchange rate published by the Bank of Canada). Upon completion of the Share Repurchase on February 14, 2025, there were 189,643,903 common shares outstanding. The common shares repurchased under the Share Repurchase counted against the maximum number of shares that may be repurchased pursuant to the Shares NCIB, being 7,515,233 shares.

On December 18, 2025, the Company announced the renewal of the Shares NCIB ("Renewed Shares NCIB") which commenced on December 22, 2025, terminates on December 21, 2026 and permits DIRTT to acquire up to 9,593,878 common shares. All purchases will be made on the open market through the facilities of the TSX at the market price of common shares at the time of acquisition. Any common shares acquired through the Shares NCIB will be immediately cancelled.

In addition to the Share Repurchase, DIRTT acquired and cancelled 1,860,152 common shares during the year ended December 31, 2025, under the Shares NCIB (58,478 common shares for the year ended December 31,2024) and nil shares under the Renewed Shares NCIB.

The following table summarizes the common shares repurchased and cancelled during the period:

(1) Includes 3,920,844 common shares that were repurchased from NGEN under the Share Repurchase at a purchase price of $0.80 per share. The Share Repurchase was completed on February 14, 2025. The Share Repurchase was a privately negotiated transaction and was not made pursuant to the Shares NCIB or any other publicly announced share repurchase programs, although it was counted against the Shares NCIB limit.

(2)The Renewed Shares NCIB commenced on December 22, 2025. In the month of December, 168,656 shares were purchased under the Shares NCIB and nil were purchased under the Renewed Shares NCIB, therefore no purchases were counted against the Renewed Shares NCIB limit of 9,593,878.

19. EARNINGS PER SHARE

On November 21, 2023, the Company announced a Rights Offering which allowed holders of common shares, as of the close of business on December 12, 2023, transferable subscription rights to purchase up to an aggregate of 85,714,285 common shares at a subscription price of C$0.35 per common share (refer to Note 16). An adjustment is required on the calculation of net loss per share for the year ended December 31, 2023 to account for the bonus factor that resulted from this event.

(1) For years ended December 31, 2025 and 2023, the Net loss per share - diluted excludes the effect of 34.5 million and 156.8 million shares, respectively, that would be issued if the principal amount of the Debentures were settled in our common shares at the year-end price and are excluded as they would be anti-dilutive. For the year ended December 31, 2024, the Net income per share − diluted includes the effect of 45.1 million shares related to the Debentures as they would have the potential to dilute basic earnings per share.

(2) For the years ended December 31, 2025 and 2023, the Net loss per share − diluted excludes the effectof 5.5 million and 3.6 million RSUs (including PRSUs) andnil and 1.8 million PSUs and 2.3 million and 1.8 million New DSUs, respectively, as these would be anti-dilutive. For the year ended December 31, 2024, the Net income per share − diluted includes the effect of 2.3 million RSUs (including PRSUs) and 2.0 million New DSUs would have the potential to dilute basic earnings per share.

20. REVENUE

In the following table, revenue is disaggregated by performance obligation and timing of revenue recognition. All revenue comes from contracts with customers. Refer to Note 21 for the disaggregation of revenue by geographic region.

DIRTT sells its products and services pursuant to fixed-price contracts which generally have a term of one year or less. The transaction price used in determining the amount of revenue to recognize from fixed-price contracts is based upon agreed contractual terms with each customer and is not subject to variability.

Revenue recognized at a point in time represents the majority of the Company’s sales. Revenue is recognized when a customer obtains legal title to the product, which is when ownership of the product is transferred to, or services are delivered to, the customer. Revenue recognized over time is limited to installation, services and ongoing maintenance contracts with customers and is recorded as performance obligations are satisfied over the term of the contract.

Contract Liabilities

Contract liabilities primarily relate to deposits received from customers and maintenance revenue from license subscriptions. The balance of contract liabilities was lower as at December 31, 2025, compared to the prior year period mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2024 and 2023, respectively, totaling $4.0 million and $5.3 million were recognized as revenue during 2025 and 2024, respectively.

Sales by Industry

The Company periodically reviews product revenue by industry vertical market to evaluate trends and the success of industry specific sales initiatives. The nature of products sold to the various industries is consistent and therefore the periodic review is focused on sales performance.

21. SEGMENT REPORTING

The Company hasone reportable and operating segment, and operates intwo principal geographic locations, Canada and the United States. Revenue continues to be derived almost exclusively from projects in North America and predominantly from the United States. The Company’s revenue from operations from external customers, based on location of operations, and information about its non-current assets, is detailed below.

Revenue from external customers

Non-current assets

DIRTT has one reportable segment: solutions. The DIRTT solutions segment derives revenues from customers by providing physical products and digital tools through our ICE Software to create interior spaces for our customers across the commercial, healthcare, education and government industries. The accounting policies of the solutions segment are the same as those described in Note 2 – significant accounting policies.

DIRTT’s chief operating decision maker in 2025 was the executive leadership team that includes the president and chief operating officer, chief financial officer, and the chief executive officer (subsequent to year-end, the president and chief operating officer departed the Company). The chief operating decision maker assesses performance for the solution segment and decides how to allocate resources based on gross profit and net (loss) income that also is reported on the consolidated statement of operations and comprehensive (loss) income as consolidated gross profit and net (loss) income. The measure of segment assets is reported on the balance sheet as total consolidated assets. The chief operating decision maker uses net (loss) income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the solution segment or into other parts of the entity, such as to repay long term debt.

Gross profit and net (loss) income are used to monitor budget versus actual results. The chief operating decision maker also uses net (loss) income in competitive analysis by benchmarking to DIRTT’s competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation.

DIRTT derives revenue primarily in North America and manages the business activities on a consolidated basis. The technology used in the customer arrangements is based on a single software platform that is deployed to, and implemented by, customers in a similar manner.

Segment profit and loss reconciliation to net (loss)income after tax

22. COMMITMENTS AND CONTINGENCIES

As at December 31, 2025, the Company had outstanding purchase obligations of approxi mately $4.0 million related to service commitments, inventory, and property, plant and equipment purchases (2024 – $4.2 million). Refer to Note 8 for lease commitments.

As previously disclosed, DIRTT Environmental Solutions Inc. received a subpoena for records in relation to an ongoing inquiry by the U.S. Department of Justice into certain projects and services provided by a third party and DIRTT dating back to 2014. The Company is complying with the subpoena and cooperating with the Department of Justice. There have been ongoing discussions regarding the possible resolution of these matters with the Department of Justice without admitting or denying liability. Based on the discussions to date, the Company provided $2.0 million as at December 31, 2025 for the cost of a potential settlement of these matters with the Department of Justice.

23. LEGAL PROCEEDINGS

With respect to the DIRTT’s lawsuit against Falkbuilt Ltd. (“Falkbuilt”), Messrs. Smed and Loberg, and their associates, in Utah, on February 5, 2025, the U.S. District Court for the Northern District of Utah (the “Utah Court”) granted Falkbuilt’s motion to dismiss the case, on the basis of forum non conveniens. In simple terms, the Utah Court decided that it would not hear DIRTT’s claim in Utah because Canada was more appropriate, and Canadian law applies to most of DIRTT’s claims. Further the Utah Court found that DIRTT’s Canadian company, DIRTT Environmental Solutions Ltd., owns the trade secrets that were the subject matter of the Utah claim, so whether the theft of those trade secrets occurred in Canada or abroad, they would result in injury to DIRTT Environmental Solutions Ltd. and should be pursued in Canada. The Utah Court, in essence, redirected the determination of those damages from Utah to Canada, being the appropriate forum for the legal dispute. On March 4, 2025, DIRTT filed a motion for reconsideration pursuant to Federal Rules of Civil Procedure, Rule 60(b). The reconsideration requests relief from the Utah Court’s February 5, 2025, Memorandum Decision and Order granting the Defendant’s motion to dismiss for forum non conveniens. The briefing is complete as of April 15, 2025, and the parties are awaiting a decision.

In November 2024, the Alberta Court of King’s Bench scheduled an 8-week trial commencing February 2, 2026, and running until March 27, 2026 for DIRTT’s action against Falkbuilt, Messrs. Smed and Loberg and several other former DIRTT employees alleging breaches of restrictive covenants, fiduciary duties, employment duties and confidentiality. DIRTT is pursuing damages and losses it suffered in Canada, the United States, and abroad in the Court of King’s Bench of Alberta. The Court of King’s Bench will determine whether Falkbuilt, Messrs. Smed and Loberg and others wrongfully caused DIRTT to suffer damages, which could exceed $50,000,000.

In 2019, Falkbuilt filed a lawsuit against DIRTT in the Court of Queen’s bench in Alberta (as it was then), alleging that DIRTT had misappropriated and misused their alleged proprietary information in furtherance of DIRTT’s product development. In June 2025, Falkbuilt requested discontinuance on a without costs basis on account of the delay. DIRTT has accepted this offer and the discontinuance of claim was filed in the Court of King's Bench of Alberta on July 17, 2025.

No amounts are accrued for the above legal proceedings.

24. RELATED PARTY TRANSACTIONS

On March 15, 2023, the Company entered into a Debt Settlement Agreement (the “Debt Settlement Agreement”) with 22NW and Aron English, 22NW’s principal and a director of DIRTT, (together, the “22NW Group”) who, collectively, beneficially owned approximately 19.5% of the Company’s issued and outstanding common shares at such time. Pursuant to the Debt Settlement Agreement, the Company agreed to reimburse the 22NW Group for the costs incurred by the 22NW Group in connection with the contested director election at the annual and special meeting of shareholders of the Company held on April 26, 2022, being approximately $1.6 million (the “Debt”).

Pursuant to the Debt Settlement Agreement, the Company agreed to repay the Debt by either, or a combination of (i) a payment in cash by the Company to the 22NW Group, and/or (ii) the issuance of equity securities of the Company to the 22NW Group. The liability as at March 31, 2023 was revalued using the closing common share price at March 31, 2023, and a $2.1 million liability and expense was recorded in the financial statements.

In connection with the Debt Settlement Agreement, on March 15, 2023, the Company entered into a share issuance agreement with the 22NW Group, pursuant to which the Company agreed to repay the Debt with the issuance to the 22NW Group of 3,899,745 common shares at a deemed price of $0.40 per common share, subject to approval by the Company’s shareholders which was obtained at the Company’s annual and special meeting of shareholders held on May 30, 2023.

Other related party transactions for the year ended December 31, 2023, relate to the sale of DIRTT products and services to the 22NW Group for $0.3 million. The sale to the 22NW Group was based on price lists in force and terms that are available to all employees. There were no sales to the 22NW Group for the years ended December 31, 2025 and December 31, 2024.

On August 2, 2024, the Company entered into a Convertible Debenture Repurchase Agreement with 22NW Group to purchase for cancellation of C$18.9 million ($14.0 million) principal amount of the January Debentures and C$13.6 million ($10.1 million) principal amount of the December Debentures for an aggregate purchase price of C$22.1 million ($16.2 million). As at December 31, 2024, 22NW no longer held any Debentures. Interest earned on Debentures held by a related party is $nil for the year ended December 31, 2025 ($1.0 million for the year ended December 31, 2024). Interest was earned on terms applicable to all Debenture holders.

Additionally, on August 2, 2024, DIRTT entered into a support and standstill agreement (the “2024 Support Agreement”) with 22NW and WWT, DIRTT’s second largest shareholder, which replaced the support and standstill agreement entered into with 22NW on March 22, 2024. Under the 2024 Support Agreement, both 22NW and WWT agreed to certain voting and standstill obligations, including voting in favor of the management director nominees at each of DIRTT’s next two annual general meetings and voting in favor of the ratification of the Amended and Restated SRP. Additionally, each of 22NW and WWT has the right to designate a director nomineeat each of DIRTT’s next two annual general meetings, and is subject to certain restrictions with respect to commencing a take-over bid for the Company. The 2024 Support Agreement also permits WWT to acquire up to 4,067,235 additional shares through market purchases (representing approximately 2% of the then issued and outstanding shares), which provides WWT with an opportunity to own the same number of shares as 22NW (being 57,447,988 shares, or approximately 29.8% of the issued and outstanding shares as of the date of the 2024 Support Agreement). The 2024 Support Agreement otherwise prohibits each of 22NW and WWT from acquiring any additional shares. Since the commencement of the 2024 Support Agreement, WWT acquired 156,250 shares in the year ended December 31, 2024. As of result of the share sale by WWT to the 726 Entities on February 13, 2026 as described below, WWT is no longer entitled to its nomination right under the 2024 Support Agreement. Except as amended by the 2026 Support Agreement described below, the 2024 Support Agreement otherwise remains in force.

To give effect to the terms of the 2024 Support Agreement, the Board adopted the Amended and Restated SRP, effective August 2, 2024, which amended and restated the Company’s shareholder rights plan agreement originally adopted by the Board on March 22, 2024 (the “Original SRP”). The Amended and Restated SRP was ratified by shareholders at the special meeting held on September 20, 2024 (the “SRP Meeting”). The Amended and Restated SRP revised the definition of “Exempt Acquisition” in order to permit WWT to acquire additional common shares without triggering the provisions of the Amended and Restated SRP. The Amended and Restated SRP is otherwise consistent with the Original SRP and is substantially similar to the rights plan adopted by the Company in 2021. Like the Original SRP, the Amended and Restated SRP is intended to help ensure that all shareholders of the Company are treated fairly and equally in connection with any unsolicited take-over bid or other acquisition of control of the Company (including by way of a “creeping” take-over bid). The Amended and Restated SRP was not adopted in response to any specific proposal to acquire control of the Company, and the Board was not aware of any pending or potential take-over bid for the Company at the time of the adoption.

25. SUBSEQUENT EVENTS

On January 31, 2026, the Company repaid the principal amount of the Company’s issued and outstanding 6.00% convertible unsecured subordinated debentures (the “January Debentures”) of C$16.6 million ($12.1 million).

In February 2026, the Company received C$5.5 million from BDC as part of the Loan. Related to this transaction, the Company entered into the Seventh Amended RBC Facility and the Priority Agreement.

On February 17, 2026, the Company entered into a support and standstill agreement (the “2026 Support Agreement”) with 22NW, and 726 BF LLC and 726 BC LLC (collectively, the “726 Entities”), which amends 2024 Support Agreement in respect of certain matters. The 2026 Support Agreement was entered into in connection with the acquisition by the 726 Entities of certain common shares from WWT, as a result of which the 726 Entities own collectively approximately 15.0% of the Company's outstanding common shares. Under the 2026 Support Agreement, each of 22NW and the 726 Entities has the right to designate a director nominee at the Company's annual general meeting to be held in 2026 (the “2026 Meeting”), so long as they respectively own at least the lesser of (i) 10% of the then outstanding common shares, or (ii) 19,174,445 common shares. Under the 2026 Support Agreement, both 22NW and the 726 Entities are subject to certain voting and standstill obligations, including voting in favor of the management director nominees at the 2026 Meeting. Additionally, 22NW and the 726 Entities are each subject to certain restrictions with respect to commencing a take-over bid for the Company. The Support Agreement otherwise prohibits each of 22NW and the 726 Entities from acquiring any additional common shares and terminates on the date which is 90 days following the 2026 Meeting. Pursuant to the terms of the 2026 Support Agreement, the Company appointed Jeremy Gold, Managing Director, Briger Family Office, to the Board effective February 13, 2026. Mr. Gold is the nominee director for the 726 Entities under the 2026 Support Agreement.