DIRTT ENVIRONMENTAL SOLUTIONS LTD

(Amounts 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, DIRTT Design Editor, also known as the ICE® software and technology platform (“Design Editor”, “ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to unrelated companies and construction partners of the Company (“Construction Partners”), including Armstrong World Industries, Inc. (“AWI”), which owns 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.

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” and on the OTCQX® Best Market (“OTCQX”) under the symbol “DRTTF.”

2. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the Financial Statements contain all adjustments necessary, consisting of only normal recurring adjustments, for a fair statement of its financial position as of June 30, 2026, and its results of operations and cash flows for the three and six months ended June 30, 2026 and 2025. The condensed balance sheet at December 31, 2025, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. These Financial Statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2025 and 2024 and for each of the three years in the period ended December 31, 2025 included in the Annual Report on Form 10-K of the Company as filed with the U.S. Securities and Exchange Commission (the “SEC”) and applicable securities commission or similar regulatory authorities in Canada on February 25, 2026 (the “Annual Report on Form 10-K”).

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 Environmental Solutions Ltd. and its subsidiary. All intercompany balances, income and expenses, unrealized gains and losses, and dividends resulting from intercompany transactions have been eliminated on 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 certain components of stock-based compensation that are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The Company’s quarterly tax provision is based upon an estimated annual effective tax rate.

Seasonality

Sales of the Company’s products are driven by consumer and industrial demand for interior construction solutions. The timing of customers’ construction projects can be influenced by a number of factors including the prevailing economic climate and weather.

3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

On November 5, 2024, the FASB issued Accounting Standards Update No. 2024-03, “Disaggregation of Income Statement Expenses” (“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 Income (Loss).

On November 27, 2024, the FASB issued Accounting Standards Update No. 2024-04, “Induced Conversions of Convertible Debt Instruments” (“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 has adopted this standard and there is minimal impact, as the Company has no existing convertible debt instruments to which this update applies.

On July 30, 2025, the FASB issued Accounting Standards Update No. 2025-05, “Financial Instruments - Credit Losses” (“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 has adopted this standard and there is minimal impact to the financial statements and disclosures.

On September 18, 2025, the FASB issued Accounting Standards Update No. 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software” (“ASU-2025-06”) which targets improvements to the accounting for internal-use software. 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 standard.

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

On May 19, 2026, the FASB issued Accounting Standards Update No. 2026-02, “Environmental Credits and Environmental Credit Obligations” (“ASU-2026-02”) which establishes guidance for the recognition, measurement, presentation, and disclosure of environmental credits and environmental credit obligations. The amendments in ASU-2026-02 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is evaluating the impact of the adoption of this standard.

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. REORGANIZATION

Transformation Office

In early 2025, a transformation office was set up, to accelerate the strategic transformation of our business by streamlining the Company’s processes and procedures, supporting the Construction Services channel, and improving productivity across the Company (the “Transformation Office”). We are incurring one-time consultant costs to assist in, advise, and implement our transformation actions, as well as one-time termination benefits as a result of elimination of positions. The program is planned to be completed in 2026.

For thethree and six months ended June 30, 2026 and 2025, the following reorganization costs incurred relate to the above mentioned initiatives:

Of the $1.7 million of reorganization costs in accounts payable and accrued liabilities as at June 30, 2026 (December 31, 2025 – $2.1 million), $1.67 million relates to termination benefits (December 31, 2025 – $1.8 million) and $0.06 million relates to other reorganization costs (December 31, 2025 – $0.3 million).

5. TRADE AND ACCRUED RECEIVABLES

Accounts receivable are recorded at the invoiced amount, do not require collateral and typically 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 consolidated 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 well-being of our customers. At June 30, 2026, approximately 63% of our trade accounts receivable are trade credit insured, relating to accounts receivable from counterparties deemed creditworthy by the insurer and excluding accounts receivable from government entities. In addition, 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 three and six months ended June 30, 2026 and for the three and six months ended June 30, 2025, no single Construction Partner accounted for greater than 10% of revenue.

The Company’s aged receivables were as follows:

No adjustment to our expected credit losses of $0.1 million was required for the three and six months ended June 30, 2026 for our trade receivables. Receivables are generally 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.

6. OTHER LIABILITIES

(1)

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

(2)

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 U.S. Department of Justice. There have been ongoing discussions regarding the possible resolution of these matters with the U.S. 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 U.S. Department of Justice. There has beenno update as at June 30, 2026.

7. 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”), as disclosed in our Annual Report on Form 10-K. The Company has extended the RBC Facility a number of times since 2023, including on November 4, 2025 (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. The Company would have been in default under the Fifth Extended RBC Facility if the January Debentures were not paid in full or refinanced on terms and conditions satisfactory to RBC by January 31, 2026. The January Debentures were paid in full on January 31, 2026.

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.

On March 11, 2026, the Company entered into the Waiver and Eighth Amendment to Loan Agreement (the “Eighth Amended RBC Facility”), which matures on November 30, 2026. The Eighth Amended RBC Facility is subject to the same borrowing base terms stated in the Seventh Amended RBC Facility. The Eighth Amended RBC Facility includes a customary “Restricted Payments” covenant that prohibits us from, among other things, repurchasing our common shares and paying dividends, unless we have satisfied certain conditions (the “Payment Conditions”). The Payment Conditions include conditions that, after giving effect to the relevant Restricted Payment, the Company has a net borrowing availability of at least C$5.0 million over the preceding 30-day period, and ourfixed charge coverage ratio (“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. The Eighth Amended RBC Facility provided a waiver in connection with the foregoing.

At June 30, 2026, available borrowings under the Eighth Amended RBC Facility are C$9.6 million ($6.7 million) (December 31, 2025 – C$16.3 million ($11.8 million) of available borrowings), calculated in the same manner as the RBC Facility described above, of which no amounts have been drawn. Under the RBC Facility, if the “Net Borrowing Availability” (defined as the borrowing base less any loan advances and 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. As at June 30, 2026, the Company is in compliance with its financial covenants.

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$4.1 million ($3.0 million) has been repaid. The Canada Leasing Facility has a seven-year term and bears interest at 4.25%.

The Company did not make any draws on the Canada Leasing Facility during the three and six months ended June 30, 2026 (2025 – $nil). 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. 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). As a result of the Rights Offering, 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 (“Issuer Bid”). On August 2, 2024, the Company repurchased for cancellation C$18.9 million ($14.0 million) principal amount of the January Debentures held by 22NW Fund, L.P. (“22NW”). On August 28, 2024, the Company commenced the Debentures normal course issuer bid (the “Debentures NCIB”) 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”) and is expected to terminate on August 27, 2026 for the December Debentures. The Renewed Debentures NCIB terminated on January 31, 2026, with respect to the January Debentures, concurrent with the January Debentures Maturity Date and repayment of the January Debentures. The Company made $nil repurchases under the Renewed Debentures NCIB of the January Debentures during the three and six months ended June 30, 2026 (C$0.02 million ($0.01 million) and C$0.05 million ($0.04 million)) for the three and six months ended June 30, 2025, respectively, as part of the Debentures NCIB).

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”), and collectively with the January Debentures, the “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 ofthe transaction were approximately C$2.3 million, including the underwriters’ commission. As a result of the Rights Offering, 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. 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. The Company didnot repurchase any of the December Debentures during thethree months ended June 30, 2026. During the six months ended June 30, 2026, the Company repurchased for cancellation C$0.03 million ($0.02 million) principal amount of the December Debentures, as part of the Renewed Debentures NCIB and (C$0.1 million ($0.1 million) and C$0.2 million ($0.1 million) for the three and six months ended June 30, 2025, respectively, as part of the Debentures NCIB). As at June 30, 2026, C$14.8 million ($10.4 million) principal amount of the December Debentures was outstanding.

BDC 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, February 9, 2026 and March 9, 2026 (the “Amended Letter”).

Following the satisfaction of the conditions precedent set forth in the Letter, the Company received an initial disbursement of C$5.5 million on February 13, 2026 and, following satisfaction of certain additional conditions, a second disbursement of C$4.5 million on March 11, 2026. Subject to certain conditions, it is expected that BDC will make a third disbursement of C$5.0 million in the second half of 2026. The Loan accrues interest at a rate equal to BDC’s floating base rate (6.55% per annum) minus 0.75%. Monthly principal repayments of the Loan commence in May 2026 and additional monthly interest payments are due on the last day of each month, beginning on March 31, 2026. The Loan matures on April 30, 2032. Costs of the transaction were approximately C$0.4 million ($0.3 million). As at June 30, 2026, the Company is in compliance with the Loan’s financial covenants.

The obligations of the Company under the Amended Letter are secured by: (a) general security agreements 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) guarantees from DIRTT Environmental Solutions, Inc. for the full amount of the Loan, supported by general security agreements granting (i) a first ranking security interest in specific equipment and (ii) second priority security interest in all other present and after acquired personal property (excluding consumer goods), subject to certain registered charges; (c) various landlord’s waivers of distraint; (d) 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, together with cash on hand, were used to refinance the January Debentures.

The following table includes principal maturities of the BDC Loan at June 30, 2026:

8. 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 and directors 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 the six months ended June 30, 2025 was C$0.82. During the second quarter of 2026, the Executive Chairman of the Board was granted 150,000 RSUs with a weighted average fair value of C$0.77, which was determined using the closing price of the Company’s common shares on the respective grant date. These RSUs vested on July 2, 2026.

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. All PRSUs were expired as of March 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. An aggregate of 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 June 30, 2026, the fair value of these PSUs have been deemed to be $nil based on the likelihood ofachieving the targets compared to current results. During the third quarter of 2023 and the first quarter of 2026,738,553 PSUsand 922,804 PSUs, respectively, with a $nil value were forfeited as a result of executive departures and 922,804 PSUs with a $nil value are outstanding at June 30, 2026.

During the fourth quarter of 2025, the Company granted 752,000 PSUs to its chief transformation officer. The performance period is from November 26, 2025 to June 30, 2026. The performance measures relate to success of cost savings targets tied to transformation efforts by the Company. The achievement of the performance criteria will be determined by the Board of Directors in the third quarter of 2026. As of June 30, 2026, the PSUs were deemed to have a value of$0.6 million(December 31, 2025 – $0.6 million).

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. DSUs outstanding at June 30, 2026 had afair value of $0.4 million which is included in other liabilities on the balance sheet (December 31,2025 – $0.5 million).

Granted under the 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 the first six months of 2026 and 2025 was C$0.74 ($0.52) and C$0.92 ($0.66), respectively, which was determined using the closing price of the Company’s common shares on the grant date. New DSUs outstanding at June 30, 2026 had a fair valueof $1.7 million which is included in other liabilities on the balance sheet (December 31,2025 – $1.4 million).

Dilutive Instruments

For the three months ended June 30, 2026, 0.9 million PSUs and 20.6 million common shares which would have been issued if the principal amounts of the December Debentures were settled in common shares at the quarter-end price 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. 0.7 million RSUs and 3.0 million New DSUs were included in the diluted weighted average number of common shares. See Note 10 for the dilutive impact on net income per share.

For the six months ended June 30, 2026,0.9 million PSUs,2.1 million RSUs,2.9 million New DSUs, and 20.6 million common shares which would have been issued if the principal amounts of the December Debentures were settled in common shares at the quarter-end 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 three and six months ended June 30, 2025,1.0 million and 6.7 million RSUs, respectively,3.2 million New DSUs,1.8 million PSUs, and 38.6 million common shares which would have been issued if the principal amounts of the December Debentures and the January Debentures were settled in common shares at the quarter-end 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.

9. 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 and terminated on December 19, 2025, and permitted DIRTT to acquire up to 7,515,233 common shares.730,148 and 1,248,411 common shares were acquired and cancelled during thethree and six months ended June 30, 2025, respectively. All repurchases under the Shares NCIB were made on the open market through the facilities of the Toronto Stock Exchange (the “TSX”) at the market price of common shares at the time of acquisition. Any common shares acquired through the Shares NCIB were immediately cancelled.

On December 18, 2025, the Company announced the renewal of the Shares NCIB which commenced on December 22, 2025 and will terminate on December 21, 2026 (the “Renewed Shares NCIB”). The Renewed Shares NCIB permits DIRTT to acquire up to 9,593,878 of its 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 the acquisition. Any common shares acquired through the Renewed 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 common share (the “Share Repurchase”). Pursuant to the terms of the NGEN Repurchase Agreement, the purchase price of $0.80 per common 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 count against the maximum number of shares that could be repurchased pursuant to the Shares NCIB, being 7,515,233 shares.

Under the Renewed Shares NCIB, DIRTT acquired and canc ellednil common shares during thethree months ended June 30, 2026 and 208,006 common shares during thesix months ended June 30, 2026.

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

10. EARNINGS (LOSS) PER SHARE

(1) For the three months ended June 30, 2026, the Net income per share − diluted includes the effectof 0.6 million RSUs, and 3.0 million New DSUs, as they would have the potential to dilute basic income per share. Refer to Note 8 for the anti-dilutive impact on the three and six months ended June 30, 2026 and the three and six months ended June 30, 2025.

11. REVENUE

In the following table, revenue is disaggregated by performance obligation and timing of revenue recognition. All revenue comes from contracts with customers. See Note 12 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 includes pre-construction services, license fees, installation and ongoing maintenance contracts with customers and is recorded as performance obligations which 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 June 30, 2026 compared to December 31, 2025 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2025 and 2024 totaling $3.5 million and $4.0 million, respectively, were recognized as revenue in the six months ended June 30, 2026 and 2025, respectively.

Sales by Industry

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

12. 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 solutions segment provides digital tools (access to ICE software) and physical products to create modular interior construction spaces for our customers.

DIRTT’s chief operating decision makers are its chief financial officer and chief executive officer. The chief operating decision makers assess performance for the solutions segment and decide how to allocate resources based on gross profit and net income (loss) that also is reported on the Consolidated Statement of Operations and Comprehensive Income (Loss) as consolidated gross profit and net income (loss). The measure of segment assets is reported on the balance sheet as total consolidated assets. The chief operating decision makers use net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the solutions segment or into other parts of the entity, such as to repay long-term debt.

Net income (loss) are used to monitor budget versus actual results. The chief operating decision makers also use net income (loss) 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 income (loss) after tax

(1) Includes Sales and marketing, General and administrative, Operations support, Technology and development, Stock-based compensation, and Reorganization costs.

(2) Includes Tax expenses, non-recurring gains and losses, foreign exchange gains (losses), interest income and interest expenses.

13. INCOME TAXES

As at June 30, 2026, the Company had a valuation allowance of$30.5 million against deferred tax assets as the Company has experienced cumulative losses in recent years (December 31, 2025 –$30.9 million).

14. COMMITMENTS AND CONTINGENCIES

As at June 30, 2026, the Company had outstanding purchase obligations of approximately $2.6 million related to service commitments, inventory, and property, plant and equipment purchases (December 31, 2025 –$4.0 million). As at June 30, 2026, the Company had undiscounted operating lease liabilities of $24.5 million (December 31, 2025 – $27.8 million).

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.

15. RELATED PARTY TRANSACTIONS

On August 2, 2024, DIRTT entered into a support and standstill agreement (the “2024 Support Agreement”) with 22NW and WWT Opportunity #1 LLC (“WWT”), DIRTT’s second largest shareholder at the time, 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 Company’s amended and restated shareholder rights plan. Additionally, each of 22NW and WWT had the right to designate a director nominee at 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. As a 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.

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 the 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 had the right to designate a director nominee at the Company’s annual general meeting that was held on May 7, 2026 (the “2026 Meeting”), so long as they respectively owned 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 2026 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.

Other related party transactions for the three and six months ended June 30, 2026, relate to the sale of DIRTT products and services to the Fortress Investment Group, a related party to the 726 Entities, for $0.1 million. The sale to the Fortress Investment Group was based on price lists in force and terms that are available to all employees. There wereno related party transactions for thethree months ended June 30, 2025.