DIRTT Environmental Solutions Ltd. — Interim / Quarterly Report 2022

Jul 27, 2022

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to Commission file number 001-39061

DIRTT ENVIRONMENTAL SOLUTIONS LTD.

(Exact name of registrant as specified in its charter)

Alberta, Canada (State or other jurisdiction of incorporation or organization) 7303 30th Street S.E. Calgary, Alberta, Canada (Address of principal executive offices)

N/A (IRS Employer Identification No.)

T2C 1N6 (Zip code)

(Registrant’s telephone number, including area code): (403) 723-5000

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Shares, without par value DRTT The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The registrant had 86,988,828 common shares outstanding as of July 21, 2022.

DIRTT ENVIRONMENTAL SOLUTIONS LTD. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS

Cautionary Statement Regarding Forward-Looking Statements............................................................ PART I–FINANCIAL INFORMATION ............................................................................................. Item 1. Financial Statements (Unaudited).............................................................................................. Interim Condensed Consolidated Balance Sheets ........................................................................... Interim Condensed Consolidated Statement of Operations and Comprehensive Loss ................... Interim Condensed Consolidated Statement of Changes in Shareholders’Equity ......................... Interim Condensed Consolidated Statement of Cash Flows........................................................... Notes to the Unaudited Interim Condensed Consolidated Financial Statements............................ Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.... Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................................... Item 4. Controls and Procedures............................................................................................................ PART II–OTHER INFORMATION.................................................................................................... Item 1. Legal Proceedings...................................................................................................................... Item 1A. Risk Factors ............................................................................................................................ Item 2. Unregistered Sales of Equity Securities and Use of Proceeds................................................... Item 3. Defaults Upon Senior Securities................................................................................................ Item 4. Mine Safety Disclosures............................................................................................................ Item 5. Other Information ...................................................................................................................... Item 6. Exhibits......................................................................................................................................

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ii 4 4 4 5 6 7 8 18 33 33 35 35 35 36 36 36 36 37

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (this “Quarterly Report”) are “forward-looking statements” within the meaning of “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “forward-looking information” within the meaning of applicable Canadian securities laws. All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project,” “outlook,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Forward-looking statements are based on certain estimates, beliefs, expectations and assumptions made in light of management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that may be appropriate.

Forward-looking statements necessarily involve unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed or implied in such statements. Due to the risks, uncertainties and assumptions inherent in forward-looking information, you should not place undue reliance on forward-looking statements. Factors that could have an adverse effect on our business, financial condition, results of operations and growth prospects include, but are not limited to, the severity and duration of the coronavirus (“COVID19”) pandemic and related economic repercussions and other risks described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) and applicable securities commissions or similar regulatory authorities in Canada on February 23, 2022 (the “Annual Report on Form 10-K”) as supplemented by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC and applicable securities commissions or similar regulatory authorities in Canada on May 4, 2022, and in this Quarterly Report under “Part II, Item 1A. Risk Factors.” These factors include, but are not limited to, the following:

• the impact of the COVID-19 pandemic and any strain variants or resurgences thereof on our business;

• our ability to implement our strategic plan, including realizing on certain cost-optimization initiatives undertaken in 2022;

• the effect of the cost saving initiatives the Company announced in February and July 2022;

• turnover of our key executives and difficulties in recruiting or retaining key employees;

• the ability of our reconstituted board of directors ("Board of Directors") to successfully implement its transformation plan;

• our ability to attract, train and retain qualified hourly labor on a timely basis to increase overall productive capacity in our manufacturing facilities to enable us to capture rising demand as the construction industry recovers from the COVID-19 pandemic;

• our ability to maintain and manage growth effectively;

• competition in the interior construction industry;

• competitive behaviors by our co-founders and former executives;

• the condition and changing trends of the overall construction industry;

• our reliance on our network of construction partners ("Construction Partners"), which we have previously referred to as our Distribution Partners for sales, marketing and installation of our solutions;

• our ability to introduce new designs, solutions and technology and gain client and market acceptance;

• defects in our designing and manufacturing software and warranty and product liability claims brought against us;

• inflation and material fluctuations of commodity prices, including raw materials and our ability to set prices for our products that satisfactorily adjust for inflation and fluctuations in commodity prices;

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• the effectiveness of our manufacturing processes and our success in implementing improvements to those processes;

• the effectiveness of certain elements of our administrative systems and the need for investment in those systems;

• shortages of supplies of certain key components and materials or disruption in supplies due to global events, including the COVID-19 pandemic;

• global economic, political and social conditions and financial markets;

• our exposure to currency exchange rates, tax rates and other fluctuations, including those resulting from changes in laws or administrative practice;

• legal and regulatory proceedings brought against us;

• • infringement on our patents and other intellectual property; • cyber-attacks and other security breaches of our information and technology systems; • damage to our information technology and software systems;

• our requirements to comply with applicable environmental, health and safety laws, including those relating to the COVID-19 pandemic;

• our ability to generate sufficient revenue to achieve and sustain profitability;

• • our periodic fluctuations in results of operations and financial conditions;

• volatility of our share price;

• the effect of being governed by the corporate laws of a foreign country, including the difficulty of enforcing civil liabilities against directors and officers residing in a foreign country;

• the availability of capital or financing on acceptable terms, which may impact our liquidity and impair our ability to make investments in the business;

• the availability and treatment of government subsidies (including any current or future requirements to repay or return such subsidies); and

• future mergers, acquisitions, agreements, consolidations or other corporate transactions we may engage in.

These risks are not exhaustive. Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in the forward-looking statements in this Quarterly Report. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the effects of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Our past results of operations are not necessarily indicative of our future results. You should not place undue reliance on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under applicable securities laws. We qualify all of our forward-looking statements by these cautionary statements.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DIRTT Environmental Solutions Ltd. Interim Condensed Consolidated Balance Sheets (Unaudited – Stated in thousands of U.S. dollars)

	As at June 30, 2022	As at December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents	19,739	60,313
Restricted cash	3,206 19,686 25,296	3,095 17,540 18,457
Trade and other receivables, net of expected credit losses of
$0.1 million at June 30, 2022 and at December 31, 2021
Inventory
Prepaids and other current assets	5,343	4,399
Total Current Assets	73,270	103,804
Property, plant and equipment, net	46,507	51,697
Capitalized software, net	6,252	7,395
Operating lease right-of-use assets, net	30,748	30,880
Otherassets	5,628	5,663
Total Assets	162,405	199,439
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities	24,516	22,751
Other liabilities	1,853	2,379
Customer deposits and deferred revenue	6,122	2,420
Current portion of long-term debt and accrued interest	3,297	3,323
Current portionof leaseliabilities	5,868	6,214
Total Current Liabilities	41,656	37,087
Long-term debt	65,948	67,319
Long-term lease liabilities	27,635	27,267
Total Liabilities	135,239	131,673
SHAREHOLDERS’ EQUITY
Common shares, unlimited authorized without par value, 86,988,828 issued and outstanding at June 30, 2022 and 85,345,433 at December 31, 2021	186,253	181,782
Additional paid-in capital	10,629	13,200
Accumulated other comprehensive loss	(16,077)	(15,916)
Accumulated deficit	(153,639 )	(111,300 )
Total Shareholders’ Equity	27,166	67,766
Total Liabilities and Shareholders’ Equity	162,405	199,439

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

4

DIRTT Environmental Solutions Ltd. Interim Condensed Consolidated Statement of Operations (Unaudited - Stated in thousands of U.S. dollars)

	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021
	2022				2022
Product revenue	43,091		40,087		80,542		68,629
Servicerevenue	1,610		1,015		2,445		1,938
Total revenue	44,701		41,102		82,987		70,567
Product cost of sales	37,185		31,091		71,792		54,642
Costs of under-utilized capacity	-		-		-		1,756
Service cost ofsales	1,240		787		1,632		1,575
Total cost of sales	38,425		31,878		73,424		57,973
Gross profit	**6,276 **		9,224		**9,563 **		12,594
Expenses
Sales and marketing	7,777		7,564		15,005		14,234
General and administrative	6,877		7,780		14,870		15,021
Operations support	2,528		2,213		5,026		4,510
Technology and development	1,879		1,924		4,019		3,859
Stock-based compensation	1,326		1,861		2,628		2,955
Reorganization	5,163		-		8,855		-
Total operating expenses	**25,550 **		21,342		50,403		40,579
Operating loss	(19,274 )		(12,118	)	(40,840 )		(27,985	)
Government subsidies	49		3,431		624		7,499
Foreign exchange gain (loss)	1,246		(60 )		514		(240 )
Interest income	20		23		31		42
Interest expense	(1,329 )		(794 )		(2,659 )		(1,294 )
	(14)		2,600		(1,490)		6,007
Loss before tax	(19,288 )		(9,518 )		(42,330 )		(21,978 )
Income taxes
Current tax expense	-		210		-		210
Deferred taxexpense	-		10		-		49
	-		220		-		259
Net loss	**(19,288) **		(9,738)		(42,330)		(22,237)
Loss per share
Basic and diluted loss per share	(0.22) 86,023		(0.11) 84,752		(0.49) 85,739		(0.26) 84,717
Weighted average number of shares outstanding(in
thousands)
Basic and Diluted

Interim Condensed Consolidated Statement of Comprehensive Loss

	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021
Loss for the period	(19,288 )	(9,738 )	(42,330 )	(22,237 )
Exchange differences ontranslationof foreignoperations	(594)	716	(161)	1,321
Comprehensive loss for the period	(19,882 )	(9,022 )	(42,491 )	(20,916 )

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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DIRTT Environmental Solutions Ltd. Interim Condensed Consolidated Statement of Changes in Shareholders’ Equity (Unaudited – Stated in thousands of U.S. dollars, except for share data)

	Number of Common shares	Common shares	Additional paid-in capital	Accumulated other comprehensive loss	Accumulated deficit	Total shareholders’ equity
As at December 31, 2020	84,681,364	180,639	10,175	(17,018 )	(57,265 )	116,531
Stock-based compensation	-	-	796	-	-	796
Foreign currency translation adjustment	-	-	-	605	-	605
Net loss for theperiod	-	-	-	-	(12,499)	(12,499)
As at March 31, 2021	84,681,364	180,639	10,971	(16,413 )	(69,764 )	105,433
Stock-based compensation	-	-	1,285	-	-	1,285
Issued on vesting of RSUs	630,211	1,074	(1,074 )	-	-	-
RSUs and Share Awards withheld to settle employee tax obligations	-	-	(252)	-	(342)	(594)
Foreign currency translation adjustment	-	-	-	716	-	716
Net loss for theperiod	-	-	-	-	(9,738)	(9,738)
As at June 30, 2021	85,311,575	181,713	10,930	(15,697 )	(79,844 )	97,102
As at December 31, 2021	85,345,433	181,782	13,200	(15,916)	(111,300)	67,766
Stock-based compensation	-	-	1,339	-	-	1,339
Issued on vesting of RSUs and Share Awards	487,544 - -	1,203 - -	(1,203) (189 ) -	- - 433	- (9 ) -	- (198 ) 433
RSUs and Share Awards withheld to settle
employee tax obligations
Foreign currency translation adjustment
Net loss for the period	-	-	-	-	(23,042 )	(23,042 )
As at March 31, 2022	85,832,977	182,985	13,147	(15,483)	(134,351)	46,298
Stock-based compensation	-	-	1,286	-	-	1,286
Issued on vesting of RSUs and Share Awards	1,155,851 - -	3,268 - -	(3,268) (536 ) -	- - (594)	- - -	- (536 ) (594)
RSUs and Share Awards withheld to settle
employee tax obligations
Foreign currency translation adjustment
Net loss for the period	-	-	-	-	(19,288 )	(19,288 )
As at June 30, 2022	86,988,828	186,253	10,629	(16,077)	(153,639)	27,166

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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DIRTT Environmental Solutions Ltd. Interim Condensed Consolidated Statement of Cash Flows (Unaudited – Stated in thousands of U.S. dollars)

	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021
	2022		2022
Cash flows from operating activities:
Net loss for the period	(19,288)	(9,738)	(42,330)	(22,237)
Adjustments:
Depreciation and amortization	3,344	3,421	7,966	6,823
Stock-based compensation, net of settlements	406	1,649	1,708	2,743
Foreign exchange (gain) loss	(1,433)	68	(782)	240
Accretion of convertible debentures	177	94	342	147
Gain on disposal of equipment	(165)	-	(165)	-
Deferred income tax expense	-	10	-	49
Changes in operating assets and liabilities:
Trade and other receivables	2,824	(2,588 )	(2,142 )	(2,831 )
Inventory	(3,661)	(697)	(7,104)	(500)
Prepaid and other assets, current and long term	(1,059 )	770	(1,167 )	(178 )
Accounts payable and accrued liabilities	713	4,759	3,173	(1,257)
Other liabilities	(39 )	1,260	(39 )	1,767
Customer deposits and deferred revenue	387	(290)	3,719	1,317
Current portion of long-term debt and accrued interest	(86 )	604	(142 )	1,006
Lease liabilities	80	764	121	903
Net cash flows (used in) provided by operating activities	(17,800 )	86	(36,842 )	(12,008 )
Cash flows from investing activities:
Purchase of property, plant and equipment, net of accounts
	(924 )	(5,799 )	(1,887 )	(8,707 )
payable changes
Capitalized software development expenditures	(418)	(631)	(901)	(1,336)
Other asset expenditures	(107 )	-	(281 )	-
Proceeds on sales of equipment	73	-	73	-
Recovery of software development expenditures	45	-	45	24
Net cash flows used in investing activities	(1,331)	(6,430)	(2,951)	(10,019)
Cash flows from financing activities:
Proceeds received on long-term debt	647	8,407	647	37,952
Repayment of long-term debt	(618 )	(552 )	(1,236 )	(760 )
Employee taxpayments on vestingof RSUs	(92)	(589)	(301)	(589)
Net cash flows (used in) provided by financing activities	(63 )	7,266	(890 )	36,603
Effect of foreign exchange on cash, cash equivalents and restricted cash	54	408	220	711
Net (decrease) increase in cash, cash equivalents and
	(19,140 )	1,330	(40,463 )	15,287
restricted cash
Cash, cash equivalents and restricted cash, beginning of period	42,085	59,803	63,408	45,846
Cash, cash equivalents and restricted cash, end of period	22,945	61,133	22,945	61,133
Supplemental disclosure of cash flow information:
Interest paid	(1,179 )	(67 )	(2,331 )	(129 )
Income taxes (paid) received	3,182	(48)	3,207	(48)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets.

	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021
Cash and cash equivalents	19,739	58,326
Restricted cash	3,206	2,807
Total cash, cash equivalents and restricted cash	22,945	61,133

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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DIRTT Environmental Solutions Ltd.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements (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 global 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” 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.

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 Nasdaq Global Select Market (“Nasdaq”) under the symbol “DRTT”.

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, 2022, and its results of operations and cash flows for the three and six months ended June 30, 2022 and 2021. The condensed balance sheet at December 31, 2021, 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, 2021 and 2020 and for each of the three years in the period ended December 31, 2021 included in the Annual Report on Form 10-K of the Company as filed with the SEC and applicable securities commission or similar regulatory authorities in Canada. As described in Note 5, the Company adopted ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance effective January 1, 2022. There was no impact of this standard on our disclosures or accounting for government assistance.

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 on consolidation.

Basis of measurement

These Financial Statements have been prepared on the historical cost convention except for certain financial instruments 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.

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Seasonality

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

3. COVID-19

On March 11, 2020, COVID-19 was declared a global pandemic by the World Health Organization and has had extraordinary and rapid negative impacts on global societies, workplaces, economies and health systems. The resulting adverse economic conditions have negatively impacted construction activity and consequently DIRTT’s business, with significant negative impacts extending through 2021, 2022 and potentially beyond.

While many construction sites remain open and re-opening strategies have been implemented across North America, certain projects have experienced delays, impacted by both the implementation of social distancing and other safety-related measures and the re-emergence of COVID-19 in certain geographic areas. It is not possible to predict the timing and pace of economic recovery, or the resumption of delayed construction activity and related demand, nor is it possible to predict the impact of such developments on the Company’s ability to achieve its business objectives.

COVID-19 has increased the complexity of estimates and assumptions used to prepare the Company’s consolidated financial statements and the following key sources of estimation uncertainty:

Credit risk

COVID-19 may cause DIRTT’s Construction Partners and customers to experience liquidity issues and this may result in higher expected credit losses or slower collections. Management continually assesses the impact of COVID-19 on the Company’s Construction Partners and determined no change to the Company’s provision for credit losses of $0.1 million was required during the three and six months ended June 30, 2022. The estimation of such credit losses is complex because of limited historical precedent for the current economic situation. In addition, the Company maintains trade credit insurance (see Note 6) as further protection from credit losses.

Liquidity risk

The Company may have lower cash flows from operating activities available to service debts due to lower sales or collections as a result of COVID-19. To address this risk and the uncertainty around the timing of a recovery from COVID-19, the Company issued the Debentures (as defined below) in January and December of 2021, for net proceeds of $29.5 million and $25.6 million, respectively, has credit facilities available and has taken steps to reduce its fixed cost base. See Note 8 for information about our credit facilities. See Note 4 for information about reorganization activities.

Government subsidies

As part of the Canadian federal government’s COVID-19 Economic Response Plan, the Canadian government established the Canadian Emergency Wage Subsidy (“CEWS”). The CEWS provided the Company with a taxable subsidy in respect of a specific portion of wages paid to Canadian employees during qualifying periods extending from March 15, 2020 to October 23, 2021 based on the percentage decline of certain of the Company’s Canadian sourced revenues during each qualifying period. The Company’s eligibility for the CEWS was subject to change for each qualifying period and was reviewed by the Company for each qualifying period, with amounts being received by the Company for various, but not each, qualifying period. Pursuant to amendments enacted as part of the 2021 Canadian federal budget, the Company is required to repay a portion of the CEWS amounts received for any qualifying period commencing after June 5, 2021 where the aggregate compensation for “specified executives” (within the meaning of the CEWS) during the 2021 calendar year exceeds the aggregate compensation for “specified executives” during the 2019 calendar year. Upon finalization of 2021 compensation to specified executives, approximately C$0.5 million ($0.4 million) of subsidies was repaid to the Canadian authorities in the second quarter of 2022. The repayment amount was fully provided for in the third quarter of 2021 in accounts payable and accrued liabilities and in the first quarter of 2022 the Company reversed a $0.6 million incremental provision related to this that is no longer necessary.

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On November 19, 2020, the Canadian government also implemented the Canada Emergency Rent Subsidy (“CERS”). The CERS provided a taxable subsidy to cover eligible expenses for qualifying properties, subject to certain maximums, for qualifying periods extending from September 27, 2020 to October 23, 2021, with the amount of the subsidy available to the Company being based on the percentage decline of certain of the Company’s Canadiansourced revenues in each qualifying period. The Company’s eligibility for the CERS was subject to change for each qualifying period and was reviewed by the Company for each qualifying period.

The last claim period under the CEWS and CERS programs ended on October 23, 2021. The Company is not eligible and did not receive any new government subsidies in the quarter or six months ended June 30, 2022.

Impairment

At June 30, 2022, management determined an impairment provision was not required as our outlook is consistent with the assumptions used in our impairment test undertaken at December 31, 2021. In future periods, if our results or outlook are less than our forecast, this determination may need to be revisited.

4. REORGANIZATION

On February 22, 2022, we commenced the process of closing our Phoenix aluminum manufacturing facility (the “Phoenix Facility”), shifting related manufacturing to both our Savannah and Calgary aluminum manufacturing facilities. Additionally, we announced our intention to eliminate a portion of our salaried workforce including manufacturing and office positions along with other cost reduction initiatives. The closure of the Phoenix Facility was substantially completed in the second quarter of 2022. The Company entered into a sublease arrangement during the second quarter of 2022 which will exceed the contractual lease commitments under the Right of Use assets.

Reorganization costs incurred in the three months ended June 30, 2022 of $5.2 million include $3.7 million for incremental insurance on change of control of the Board of Directors on April 26, 2022, $0.9 million related to termination benefits, $0.5 million associated with the closure of the Phoenix Facility, and $0.1 million of other costs. Reorganization costs incurred in the six months ended June 30, 2022 of $8.9 million include $3.7 million for incremental insurance on change of control of the Board of Directors on April 26, 2022, $3.9 million related to termination benefits, $0.7 million associated with the closure of the Phoenix Facility, and $0.6 million of other costs.

Of the amount expensed, $1.6 million and $7.3 million were paid during the three and six months ended June 30, 2022, respectively, and $1.4 million of termination benefits and $0.2 million of other costs were included in accounts payable and accrued liabilities at June 30, 2022.

The Company accelerated the depreciation of certain items of property, plant and equipment and capitalized software associated with these decisions resulting in an additional $1.1 million of depreciation and amortization incurred in the first quarter of 2022.

5. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

In 2021, the Financial Accounting Standards Board issued Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The ASU provides guidance on required disclosures with respect to government assistance in a company’s notes to the annual financial statements. The amendments in the ASU are effective for periods beginning after December 15, 2021. The Company has adopted this standard effective January 1, 2022 and notes there is no significant impact of this standard on our accounting or disclosures for government assistance.

Although there are several other new accounting standards issued or proposed by the Financial Accounting Standards Board, 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.

6. TRADE AND OTHER 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

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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 June 30, 2022, approximately 75% 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, which have arisen since April 1, 2020 when the trade credit insurance became effective.

Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the three and six months ended June 30, 2022, no Construction Partner accounted for greater than 10% of revenue. For the three and six months ended June 30, 2021, one Construction Partner accounted for $8.2 million and $11.8 million of revenue, which was greater than 10% of total revenue for that period. In addition, and where possible, we collect a 50% deposit on sales, excluding government and certain other clients.

The Company’s aged receivables were as follows :

The Company’s aged receivables were as follows:
	As at June 30, December 31, 2022 2021
	June 30, 2022
Current	18,514	13,659
Overdue	913	621
	19,427	14,280
Less: expected creditlosses	(128)	(130)
	19,299	14,150
Sales tax receivable	387	196
Income tax receivable	-	3,194
	19,686	17,540

No adjustment to our expected credit losses of $0.1 million was required for the six months ended June 30, 2022. 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.

7. OTHER LIABILITIES

7. OTHER LIABILITIES
	As at, June 30, 2022 December 31, 2021
	June 30, 2022
Legal provisions(1)	45	143
DSU liability	302	785
Sublease deposits	212	-
Warranty and otherprovisions(2)	1,294	1,451
Other liabilities	1,853	2,379
(1) The Company has provided $0.05 million (December 31, 2021 - $0.1 million) as the estimated amount likely payable for various claims against the Company. The amount provided for is management’s best estimate of the potential payments for amounts claimed. (2) The following table presents a reconciliation of the warranty and other provisions balance: June 30, 2022 December 31, 2021
As at January 1	1,451		1,763
Adjustments to timber provision	-		(500)
Additions to warranty provision	304		1,019
Paymentsrelated to warranties	(461)		(831)
	1,294		1,451

(1) The Company has provided $0.05 million (December 31, 2021 - $0.1 million) as the estimated amount likely payable for various claims against the Company. The amount provided for is management’s best estimate of the potential payments for amounts claimed.

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8. LONG-TERM DEBT

	Revolving Credit Facility	Leasing Facilities	Convertible Debentures	Total Debt
Balance on December 31, 2020	-	5,967	-	5,967
Issuances	-	9,805	55,107	64,912
Accretion of issue costs	-	-	352	352
Accrued interest	-	556	1,935	2,491
Interest payments	-	(556 )	(987 )	(1,543 )
Principal repayments	-	(1,808)	-	(1,808)
Exchange differences	-	(55 )	326	271
Balance at December 31, 2021	-	13,909	56,733	70,642
Current portion of long-term debt and accrued interest	-	2,386	937	3,323
Long-term debt	-	11,523	55,796	67,319
Balance on December 31, 2021	-	13,909	56,733	70,642
Issuances		647	-	647
Accretion of issue costs	-	-	342	342
Accrued interest	-	379	1,810	2,189
Interest payments	-	(379 )	(1,952 )	(2,331 )
Principal repayments	-	(1,236)	-	(1,236)
Exchange differences	-	(90 )	(918 )	(1,008 )
Balance at June 30, 2022	-	13,230	56,015	69,245
Current portion of long-term debt and accrued interest	-	2,515	782	3,297
Long-term debt	-	10,715	55,233	65,948

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”). At June 30, 2022, available borrowings are C$14.5 million ($11.3 million), of which no amounts have been drawn. Interest is 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 is subject to a fixed charge coverage ratio (“FCCR”) covenant of 1.10:1 on a trailing twelve-month basis. Additionally, if the FCCR has been below 1.10:1 for the three immediately preceding months, the Company is required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Leasing Facilities (defined below). The Company did not meet the threemonth FCCR requirement during the second quarter of 2022 which resulted in requiring the restriction of $3.2 million of cash. Should an event of default occur or the Aggregate Excess Availability be less than C$6.25 million for five 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 set-off any borrowings and any remaining amounts made available to the Company.

Leasing Facilities

The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) and a $14.0 million equipment leasing facility in the United States (the “U.S. Leasing Facility” and, together with the Canada Leasing Facility, the “Leasing Facilities”) with RBC, and one of its affiliates, which are available for equipment expenditures and certain equipment expenditures already incurred. The Leasing Facilities, respectively, have seven and five-year terms and bear interest at 4.25% and 5.59%. The U.S. Leasing Facility is amortized over a six-year term and extendible at the Company’s option for an additional year.

During the three and six months ended June 30, 2022, the Company received $nil (twelve months ended December 31, 2021: $9.8 million) of cash consideration under the U.S. Leasing Facility. The associated financial liabilities are shown on the consolidated balance sheet in current other liabilities and long-term debt. In April 2022 the Company received C$0.9 million ($0.7 million) under the Canada Leasing Facility.

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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 with a syndicate of underwriters (the “January Debentures”). 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 will mature and be repayable on January 31, 2026 (the “January Debentures Maturity Date”) and will accrue 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 are payable in cash or shares at the option of the Company. The January 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 January Debentures Maturity Date and the date specified by the Company for redemption of the January Debentures at a conversion price of C$4.65 per common share, being a ratio of approximately 215.0538 common shares per C$1,000 principal amount of the January Debentures. Costs of the transaction were approximately C$2.7 million, including the underwriters’ commission.

On December 1, 2021, the Company completed a C$35.0 million ($27.4 million) bought-deal financing of convertible unsecured subordinated debentures with a syndicate of underwriters (the “December Debentures” and, together with the January Debentures, the “Debentures”). These December Debentures will mature and be repayable on December 31, 2026 (the “December Debentures Maturity Date”) and will 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 at a conversion price of C$4.20 per common share, being a ratio of approximately 238.0952 common shares per C$1,000 principal amount of the December Debentures. Costs of the transaction were approximately C$2.3 million, including the underwriters’ commission.

9. STOCK-BASED COMPENSATION

In May 2020, shareholders approved the DIRTT Environmental Solutions Ltd. Long-Term Incentive Plan (the “2020 LTIP”) at the annual and special meeting of shareholders. The 2020 LTIP gives the Company the ability to award options, share appreciation rights, restricted share units, restricted shares, dividend equivalent rights granted in connection with restricted share units, vested Share Awards (as defined below), 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 2020 LTIP, the sum of (i) 5,850,000 common shares plus (ii) the number of common shares subject to stock options previously granted under the Company’s Amended and Restated Incentive Stock Option Plan (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 2020 LTIP. Upon vesting of certain LTIP awards, the Company may withhold and sell 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.

Under the terms of the 2020 LTIP, the change of 100% of the Board of Directors combined with the prior Board declining to endorse the incoming board constituted a change of a control as of April 26, 2022. As a result, all outstanding and unvested LTIP awards granted under the 2020 LTIP plan for any holder terminated without cause within one year of the change of control vest immediately upon termination.

The Company also maintains the DIRTT Environmental Solutions Ltd. Deferred Share Unit Plan for NonEmployee Directors pursuant to which deferred share units (“DSUs”) are granted to the Company’s non-employee directors. DSUs are settled solely in cash.

Prior to the approval of the 2020 LTIP, the Company granted awards of options under the Stock Option Plan and awards of performance share units (“PSUs”) under the DIRTT Environmental Solutions Ltd. Performance Share Unit Plan (the “PSU Plan”). Following the approval of the 2020 LTIP, no further awards will be made under either the Stock Option Plan or the PSU Plan, but both remain in place to govern the terms of any awards that were granted pursuant to such plans and remain outstanding.

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Stock-based compensation expense

Stock-based compensation expense
	For the Three Months Ended June 30, 2022 2021		For the Six Months Ended June 30, 2022 2021
	2022		2022
Equity-settled awards	1,286	1,285	2,625	2,081
Cash-settled awards	40	576	3	874
	1,326	1,861	2,628	2,955

The following summarizes RSUs (as defined below), Share Awards, PSUs, and DSUs activity during the periods:

periods:
	RSU Time- Based Number of units		P	RSU erformance- Based Number of units		Share Awards Number of units		PSU Number of units		DSU Number of units
Outstanding at December 31, 2020	2,414,066			200,000		-		197,471		363,664
Granted	1,897,281			878,601		-		-		57,898
Vested	(630,042 )			(169 )		-		(9,314 )		(57,380 )
Withheld to settle employee tax obligations	(161,031)			-		-		-		-
Forfeited	(116,656	)		(9,635	)	-		(1,733	)	-
Outstanding at June 30, 2021	3,403,618			1,068,797		-		186,424		**364,182 **
Outstanding at December 31, 2021	3,216,536			1,021,739		-		157,200		361,577
Granted	2,140,605			863,279		162,682		-		386,083
Vested	(1,245,386 )			(303,568 )		(94,528 )		-		(468,654 )
Withheld to settle employee tax obligations	(526,259)			(242,460)		(68,154)		-		-
Forfeited	(685,229 )			(502,628 )		-		(157,200 )		-
Outstanding at June 30, 2022	2,900,267			836,362		-		-		279,006

Restricted share units (time-based vesting)

Restricted share units ("RSUs") that vest based on time have an aggregate time-based vesting period of three years and generally one-third of the RSUs vest every year over a three-year period from the date of grant. At the end of a three-year term, the RSUs will be settled 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 was C$2.39 (2021 – C$3.11) which was determined using the closing price of the Company’s common shares on their respective grant dates.

Restricted share units (performance-based vesting)

During 2022 and 2021, restricted share units were granted to executives with service and performance-based conditions for vesting (the “PRSUs”). If the Company’s share price increases to certain values for 20 consecutive trading days, as outlined below, a percentage of the PRSUs will vest at the end of the three-year service period. PRSUs awarded in 2020 were forfeited in January 2022 upon the departure of an executive from the Company.

The grant date fair value of the 2022 and 2021 PRSUs were valued using the Monte Carlo valuation method and determined to have a weighted average grant date fair value of C$1.87 and C$3.27, respectively.

Based on share price performance since the date of grant, none of the 2022 PRSUs and 66.7% of the 2021 PRSUs will vest upon completion of the three-year service period.

					% of PRSUs Vesting	% of PRSUs Vesting	% of PRSUs Vesting	% of PRSUs Vesting
					33.3	%	66.7 %		100.0 %		150.0 %
2022	and	2021	PRSUs	$	3.00	$	4.00	$	5.00	$	7.00

Share awards

During the first quarter of 2022, certain executives were issued share awards in lieu of cash paid variable incentive compensation (“Share Awards”). These Share Awards vested upon grant. The fair value of the Share Awards

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granted was C$2.40 ($1.88), which was determined using the closing price of the Company’s common shares on the grant date.

Deferred share units

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 year. DSUs outstanding at June 30, 2022 had a fair value of $0.3 million which is included in other liabilities on the balance sheet (December 31, 2021 – $0.8 million).

Options

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

	Number of options	Weighted average exercise price C$
Outstanding at December 31, 2020	4,774,328	6.52
Forfeited	(21,588)	7.21
Outstanding at June 30, 2021	4,752,740	6.52
Outstanding at December 31, 2021	4,064,489	6.64
Forfeited	(2,520,220 )	6.40
Outstanding at June 30, 2022	1,544,269	7.03
Exercisable at June 30, 2022	1,538,337	6.71

Range of exercise prices outstanding at June 30, 2022:

Range of exercise prices	Options outstanding Weighted Weighted average average Number remaining exercise outstanding life price C$	Options outstanding Weighted Weighted average average Number remaining exercise outstanding life price C$	Options outstanding Weighted Weighted average average Number remaining exercise outstanding life price C$	Options exercisable Weighted Weighted average average Number remaining exercise exercisable life price C$	Options exercisable Weighted Weighted average average Number remaining exercise exercisable life price C$	Options exercisable Weighted Weighted average average Number remaining exercise exercisable life price C$
C$4.01 – C$5.00	15,025	2.40	4.12	15,025	2.40	4.12
C$6.01 – C$7.00	789,017 1.56 6.33			783,085 1.55 6.33
C$7.01 – C$8.00	740,227	1.88	7.84	740,227	1.88	7.84
Total	1,544,269			1,538,337

Dilutive Instruments

For the three and six months ended June 30, 2022, 1.5 million options (2021 – 4.8 million), 3.7 million RSUs and PRSUs (2021 – 4.5 million) and 53.8 million shares, which would be issued if the principal amount of the Debentures were settled in our common shares at the quarter end share price (2021 – 8.7 million), were excluded from the diluted weighted average number of common shares calculation as their effect would have been anti-dilutive to the net loss per share.

10. 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 11 for the disaggregation of revenue by geographic region.

	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021
	2022
Product	38,098	36,462	71,291	62,298
Transportation	4,795	3,484	8,856	5,983
License fees from Construction Partners	198	141	395	348
Total product revenue	43,091	40,087	80,542	68,629
Installation and other services	1,610	1,015	2,445	1,938
	44,701	41,102	**82,987 **	70,567

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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 is based upon agreed contractual terms with the customer and is not subject to variability.

	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021
	2022
At a point in time	42,893		39,946	80,147	68,281
Overtime	1,808		1,156	2,840	2,286
	44,701		41,102	82,987	70,567

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

Contract Liabilities

Contract Liabilities
		As at	December 31, 2020
	June 30, 2022	December 31, 2021
Customer deposits	5,683	1,959	1,292
Deferredrevenue	439	461	527
Contract liabilities	6,122	2,420	1,819

Contract liabilities primarily relate to deposits received from customers and deferred revenue from license subscriptions. The balance of contract liabilities was higher as at June 30, 2022 compared to December 31, 2021 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2021 and 2020 totaling $2.3 million and $1.6 million, respectively, were recognized as revenue during the six months ended June 30, 2022 and 2021, 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.

	For the Three Months Ended June 30, 2022 2021	For the Three Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021	For the Six Months Ended June 30, 2022 2021
	2022		2022
Commercial	29,618	19,032	53,662	35,176
Healthcare	5,091	14,176	12,055	20,663
Government	5,041	4,249	8,322	8,430
Education	3,143	2,489	6,108	4,012
License fees from Construction Partners	198	141	395	348
Total product and transportation revenue	43,091	40,087	80,542	68,629
Installation and other services	1,610	1,015	2,445	1,938
	44,701	41,102	**82,987 **	70,567

11. SEGMENT REPORTING

The Company has one reportable and operating segment and operates in two 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, with periodic international projects from North American Construction Partners. The Company’s revenue from operations from external customers, based on location of operations, and information about its non-current assets, is detailed below.

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Revenue from external customers

For the Three Months Ended

	For the Three	Months Ended	Months Ended
	June	30, 2021		For the Six Months Ended June 30, 2022 2021
	2022			2022
Canada	7,417	4,461		12,668		7,456
U.S.	37,284	36,641		70,319		63,111
	44,701	41,102		82,987		70,567
Non-current assets(1)				As at
			June 30, 2022
Canada			32,304		34,912
U.S.			56,831		60,723
			89,135		95,635

(1) Amounts include property, plant and equipment, capitalized software, operating lease right-of-use assets, and other assets.

12. INCOME TAXES

As at June 30, 2022, the Company had a valuation allowance of $27.0 million against deferred tax assets as the Company has experienced cumulative losses in recent years (December 31, 2021 – $17.3 million).

13. COMMITMENTS

As at June 30, 2022, the Company had outstanding purchase obligations of approximately $5.8 million related to inventory and property, plant and equipment purchases (December 31, 2021 – $3.7 million). As at June 30, 2022, the Company had undiscounted operating lease liabilities of $49.0 million (December 31, 2021 – $49.7 million).

During the quarter ended June 30, 2022, the Company extended the term of the lease agreement for the Calgary headquarters by 5 years effective October 2022. Undiscounted rent obligations associated with this lease are $2.3 million.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim condensed consolidated financial statements and related notes and other financial information appearing in this Quarterly Report. This discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Quarterly Report.

Summary of Financial Results

• Revenues for the quarter ended June 30, 2022 were $44.7 million, an increase of $3.6 million or 9% from $41.1 million for the three months ended June 30, 2021. Revenues increased $12.4 million or 18% to $83.0 million for the six months ended June 30, 2022 from $70.6 million for the same period ended June 30, 2021.While the resurgence of COVID-19 infections due to the Omicron variant at the beginning of the year temporarily sent many employees back to their home offices and delayed return dates, DIRTT and its Construction Partners experienced an uptick in planning activity and opportunities for growth which began to translate into orders in March 2022 primarily in the commercial vertical space. The delivery of some second quarter orders were delayed into the third quarter due mainly to the impacts of a tight labor market on attraction and retention of manufacturing employees as the Company works to increase its labor capacity and productivity in light of improving demand. The full impact of the COVID-19 pandemic was incurred in the first quarter of 2021 when the impact of the contraction in construction activity was experienced and with most of our pre-pandemic projects in process completed in 2020.

• Gross profit and gross profit margin for the quarter ended June 30, 2022 was $6.3 million or 14.0% of revenue, a decrease of $2.9 million or 32% from $9.2 million or 22.4% of revenue for the quarter ended June 30, 2021. Gross profit and gross profit margin for the six months ended June 30, 2022 was $9.6 million or 11.5% of revenue compared to $12.6 million of 17.8% of revenue for the same period in 2021. The decrease in gross profit margin largely reflects the continued impact of significant inflationary increases in the realized cost of materials, transportation and packaging in excess of realized price increases and incremental fixed costs of our manufacturing facility in Rock Hill, South Carolina (the “South Carolina Facility”), as well as pressures on labor rates, partially offset by an improved fixed cost leverage as compared to the prior periods as a result of higher activity. The second quarter included labor costs and inefficiency associated with adding and training manufacturing employees in Calgary and Savannah following the closure of the Phoenix Facility. The Company also benefited from a weakening Canadian Dollar this quarter with a $0.8 million benefit on Canadian dollardenominated manufacturing costs. Gross profit for the six months ended June 30, 2022 also included $1.1 million of accelerated depreciation and amortization arising from a change in useful life of assets, which arose in the first quarter of the year.

• The Company implemented an approximate 6.5% overall increase in our product and transportation prices effective on new orders subsequent to November 15, 2021 to offset increased materials, transportation and packaging costs. The impact of these changes was partially realized in the three and six months ended June 30, 2022 and is expected to be further realized in the second half of 2022. Due to the continued inflationary pressures on material and labor costs, the Company implemented a further 5% price increase effective June 1, 2022 as well as an additional 10% price increase effective July 21, 2022 and eliminated the 20% pilot price reductions, implemented in February, on the Reflect and Inspire product lines.

• Adjusted Gross Profit and Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) for the quarter ended June 30, 2022 was $8.5 million or 18.9%, respectively, a decrease from $11.3 million or 27.4%, respectively, for the quarter ended June 30, 2021. Adjusted Gross Profit and Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) for the six months ended June 30, 2022 was $15.2 million or 18.3%, respectively, a decrease from $18.4 million or 26.1%, respectively, for the six months ended June 30, 2021, due to the reasons described above. For the six month period ended June 30, 2021, $1.8 million of overhead costs were excluded from Adjusted Gross Profit, as these costs were on account of operating at lower than normal capacity levels in the first quarter of 2021 and were accordingly charged directly and separately to cost of sales rather than as a cost attributable to production.

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• Operating expenses in the second quarter of 2022 increased by $4.2 million to $25.6 million from $21.3 million in the same period of 2021. This increase is largely due to $5.2 million of reorganization costs, $1.0 million of higher travel and entertainment costs due to increased business activity and the easing of travel restrictions and $0.3 million of incremental professional fees associated with the contested director elections, offset by lower salaries and wages, stock based compensation and depreciation and amortization. For the six months ended June 30, 2022, operating expenses increased by $9.8 million to $50.4 million from $40.6 million in the same period of 2021. This increase is largely due to $8.9 million in reorganization costs, $1.8 million of incremental professional fees associated with the contested director elections and $1.5 million increase in travel, meals and entertainment costs due to increased business activity and the easing of COVID-19 restrictions, offset by decreases in salaries and benefits associated with cost reduction measures. The Company also benefited from a weakening Canadian Dollar in the second quarter of 2022 with a $0.6 million benefit on Canadian dollar- denominated operating costs.

• Net loss for the three months ended June 30, 2022 was $19.3 million compared to $9.7 million for the three months ended June 30, 2021. The higher net loss is primarily the result of the lower gross profit margin explained above, $4.2 million increase in operating expenses, a $3.4 million reduction in government subsidies, and a $0.5 million increase in interest expense offset by a $1.3 million increase in foreign exchange gain.

• Net loss for the six months ended June 30, 2022 was $42.3 million compared to $22.2 million for the six months ended June 30, 2021. The higher net loss is primarily the result of the lower gross profit margin explained above, $9.8 million increase in operating expenses, a $6.9 million reduction in government subsidies and a $1.4 million increase in interest expense offset by a $0.8 million increase in foreign exchange gain.

• On February 22, 2022, we announced a plan to close the Phoenix Facility, shifting related manufacturing to both our Savannah and Calgary aluminum facilities. The closure of the Phoenix Facility was substantially completed in the second quarter of 2022. Of the initial estimate of cost savings of approximately $2.4 million from this closure, we expect to realize annualized savings of approximately $1.0 million as $1.4 million of work force reductions were offset by additions in Calgary and Savannah due to increased demand. No amounts were realized in the second quarter. Additionally, we eliminated approximately 14% of the expected 18% reduction of our salaried workforce including manufacturing and office positions which, along with other cost reduction initiatives, are expected to yield annualized savings of approximately $13.0 million. Of these cost reduction initiatives, $9.0 million was implemented during the first and second quarters of 2022, $3.0 million will be implemented in the second half of 2022, and $1.0 million, comprised of certain manufacturing positions, has been deferred as we work to increase manufacturing headcount in light of increased demand. One-time costs associated with these reductions and other costs savings measures were previously estimated to be $4.4 million for the second quarter, and $8.1 million for the year. For the three and six months ended June 30, 2022, we incurred $5.2 million and $8.9 million in reorganization costs, respectively. Actual costs for the quarter ended June 30, 2022 are higher due to additional termination benefits arising in June 2022 with the departure of two executives.

• Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the quarter ended June 30, 2022 was a $9.4 million loss or (21.1)%, a decline of $2.6 million from a $6.8 million loss or (16.6)% for the quarter ended June 30, 2021. Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the six months ended June 30, 2022 was a $21.4 million loss or (25.8%), a decline of $3.2 million from a $18.2 million loss or (25.8)% for the six months ended June 30, 2021. Reductions for the quarter and year-to-date periods were due to the above noted reasons. For the three and six months ended June 30, 2022, reorganization costs of $5.2 million and $8.9 million respectively, were added back in the calculation of Adjusted EBITDA.

Outlook

On April 26, 2022, at the Company’s 2022 annual and special meeting of shareholders, shareholders of the Company elected to replace the then-existing board of directors with seven new individuals, all of whom were nominated by 22 NW Fund, LP and other participants named in the definitive proxy statement filed on January 7, 2022, as amended. Following the election and appointment, the Board of Directors terminated the employment of Todd Lillibridge as Interim Chief Executive Officer and appointed Geoffrey Krause and Jeffrey Calkins as Interim Co-Chief Executive Officers, in each case effective as of April 26, 2022.

The Board of Directors in cooperation with management immediately commenced an in-depth review of the Company’s commercial and manufacturing operations, financial performance and outlook as well as accelerated its search for a permanent Chief Executive Officer. That review identified risks to DIRTT that are now being addressed (see “Item 1A. Risk Factors” below). As a result of this review, on June 3, 2022, the Company announced the departure

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of Jennifer Warawa as Chief Commercial Officer and Jeffrey Calkins as Chief Operating Officer and Interim CoChief Executive Officer. The Company has commenced a search for a permanent Chief Operating Officer.

On June 22, 2022, the Company announced the appointment of Benjamin Urban as DIRTT’s new Chief Executive Officer, effective June 27, 2022 and along with Mr. Urban, the appointment of Shaun Noll to the Board of Directors. With the addition of Messrs. Urban and Noll, the Board of Directors is now comprised of nine highly qualified individuals.

On July 27, 2022, the Company announced additional leadership changes, including the departures of Charles Kraus, Senior Vice President and General Counsel and Colin Blehm, Vice President Product Development, and the promotion of Trevor Didluck to Vice President Product Development. Nandini Somayaji has been promoted to Senior Vice President Talent, General Counsel & Corporate Secretary. Geoffrey Krause, DIRTT’s current Chief Financial Officer, announced his intention to retire from the Company, effective September 30, 2022. A search for a suitable replacement has commenced.

Second quarter 2022 revenues were $44.7 million, an increase of 16.8% and 8.8% over the first quarter of 2022 and the second quarter of 2021, respectively, and within the guidance range of between $43 million and $47 million. As at July 1, 2022, our 12-month forward pipeline, which represents known projects and leads at various stages of maturation which our sales teams are working to convert into orders, increased by 13% to $359 million from $318 million at April 1, 2022, comprised of 65% commercial, 16% healthcare, 8% education and 11% government verticals. The relative split between verticals remains consistent with pre-pandemic actual percentage results. It is important to note that these figures do not reflect the impact of the 10% price increase nor termination of the Reflect and Inspire pilot price reduction. These pricing changes are expected to increase the Company’s gross margins; however, the net positive or negative impacts on the 12-month forward pipeline are not yet known. Although the current 12-month forward pipeline is a positive indicator of the Company’s future revenue potential, in the context of continued global macroeconomic uncertainty and possible recession risks, our fiscal year 2022 revenue guidance remains unchanged at $175 to $185 million. The midpoint of our 2022 guidance represents an approximate 22% increase over actual 2021 revenue of $147.6 million.

With demand for DIRTT’s product continuing to increase, the Company’s current and immediate focus is to unlock manufacturing capacity, improve revenues and profitability and accelerate the Company’s near-term progress towards cashflow breakeven and beyond. Under new leadership, the following actions have been taken and discussed in more detail below:

• Identifying and taking steps to unlock manufacturing capacity through additions to our hourly workforce and implementation of manufacturing improvements for Reflect and Inspire product lines, which comprise approximately 10% of DIRTT product revenue;

• Implementing an additional 10% price increase effective July 21, 2022 to mitigate the impact of ongoing inflationary pressures on raw material and labor costs;

• Increasing governance over discounting and other similar activities;

• Executing on $5.0 million of incremental annualized cost reductions through elimination of 36 salaried positions, including the aforementioned leadership changes;

• Launching a new website, branding and associated sales collateral to generate increased awareness and demand; and

• Continuing close collaboration with our Construction Partners through the Partner Advisory Council.

In the second quarter, we increased our overall manufacturing headcount in Calgary by 9%, following the closure of the Phoenix Facility, where we have commenced a night shift for certain operations. We are experiencing the effects of a tight labor market, which has made it more difficult than expected to attract and retain skilled labor. This has been particularly the case at our Savannah facility. As a result of these challenges, some of our orders were pushed to the third quarter from June 2022 while we worked to ramp up our hourly work force. To increase our competitiveness, we have raised hourly wages in both Calgary and Savannah, established headcount targets and factored in attrition rates in hiring and retention strategies. We are continuing to add to our work force in anticipation of higher activity in the third and fourth quarters to avoid manufacturing capacity constraints that we experienced in the second quarter of 2022. We also commenced operational improvements on our Reflect and Inspire product lines to increase overall productive capacity and improve lead times, with such improvements expected to be complete by

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August 2022. Finally, we completed the closure of our Phoenix Facility in June 2022 and sublet the associated factory space in July 2022 at a premium to the prior rent commitment.

In June 2022, in addition to a 5% price increase effective June 1, 2022, the Company announced a further 10% increase in prices on its products effective July 21, 2022 to further address the impact of ongoing inflationary pressure on raw material and labor costs. DIRTT also terminated the 20% pilot price reduction program on its Reflect and Inspire product lines, which comprise approximately 10% of product revenue for the six months ended June 30, 2022, that it announced in February 2022. This program termination is a result of the combination of increased aluminum prices and the unanticipated impact that the increased demand placed on our productive capacity due to the immaturity of production processes related to these product lines.

Through the course of the pandemic, the Company increased its use of discounting in an attempt to drive higher revenues, with approximately 10.5% of discounts on total revenue in the second quarter of 2022 compared to 8.7% in the same period of 2020. A pricing oversight committee was established in the second quarter to provide increased scrutiny of discounting behaviors and pricing decision making, with the goal of significantly reducing the amount of discounting provided on a go forward basis.

Under the leadership of its new Chief Executive Officer, the Company took further steps in July 2022 to flatten its organization to increase its overall effectiveness and to optimize its fixed salaried cost base in light of current activity levels and strategic needs. This resulted in annualized cost savings of $5.0 million and the elimination of 36 salaried positions, including the leadership changes described earlier. Key objectives of this process include breaking down interdepartmental silos, increasing cross functional communication and joint accountabilities, improving overall productivity across the organization and enhancing DIRTT’s overall approach to Construction Partner recruitment, onboarding, management and accountability. We are making additional investments in the ICE team and investing to support the long-term success of our Partners. These changes include but are not limited to:

• Reintegration of supply chain, quality and safety under plant management and elimination of non-core positions;

• Reallocation of resources to increase order engineering throughput and capacity;

• Flattening of overall organization and removal of unnecessary layers;

• Reorganization of Construction Partner development function under new leadership; and

• Redefining approach to strategic account and market segment management.

While revenues were in line with expectations and grew sequentially over the first quarter and the same period last year, the Company used approximately $19.1 million of cash in the second quarter compared to $21.3 million in the first quarter 2022. This included approximately $6.0 million in the quarter ($11.1 million year to date) of one-time reorganization and contested director election costs and DSU payments. Excluding these amounts, net of working capital, cash used would have been $13.7 million in the second quarter of 2022 compared to $18.3 million in the first quarter of 2022. From a working capital management perspective, we continued to experience a buildup in inventory, primarily in aluminum extrusions, reflecting our difficulty in increasing productive capacity relative to expectations as described above. Inventory increased by $3.7 million and $3.2 million in the first and second quarter of 2022, respectively. We have taken steps to moderate such supply and expect to begin to reduce our inventory levels in the third and fourth quarters. As a result of the steps mentioned, we expect cash usage to improve as 2022 progresses and to approach monthly cashflow breakeven in the fourth quarter of 2022 (see “–Liquidity and Capital Resources").

As revenues improve, including the effect of the price increases above, and the cost reduction initiatives take hold, we expect to continue to progress toward an improvement in net loss and Adjusted EBITDA breakeven in the fourth quarter of 2022. Unrestricted cash and net working capital at June 30, 2022 was $19.7 million and $31.6 million, compared to $38.9 million and $49.3 million at March 31, 2022, respectively, and $60.3 million and $66.7 million at December 31, 2021, respectively. The Company’s asset backed credit facility, which is based upon a percentage of accounts receivable and inventory, remains undrawn at June 30, 2022 with approximately $11.3 million available . The Company continues to focus on revenue growth and cost initiatives to positively affect DIRTT’s balance sheet, cash flow and profitability and expects to see a trend of increasing monthly working capital by year end.

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Non-GAAP Financial Measures

Note Regarding Use of Non-GAAP Financial Measures

Our condensed consolidated interim financial statements are prepared in accordance with GAAP. These GAAP financial statements include non-cash charges and other charges and benefits that we believe are unusual or infrequent in nature or that we believe may make comparisons to our prior or future performance difficult.

As a result, we also provide financial information in this Quarterly Report that is not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. Management uses these non-GAAP financial measures in its review and evaluation of the financial performance of the Company. We believe that these non-GAAP financial measures also provide additional insight to investors and securities analysts as supplemental information to our GAAP results and as a basis to compare our financial performance period-over-period and to compare our financial performance with that of other companies. We believe that these non-GAAP financial measures facilitate comparisons of our core operating results from period to period and to other companies by removing the effects of our capital structure (net interest income on cash deposits, interest expense on outstanding debt and debt facilities, or foreign exchange movements), asset base (depreciation and amortization), the impact of under-utilized capacity on gross profit, tax consequences, reorganization expense and stock-based compensation. We remove the impact of all foreign exchange from Adjusted EBITDA. Foreign exchange gains and losses can vary significantly period-to-period due to the impact of changes in the U.S. and Canadian dollar exchange rates on foreign currency denominated monetary items on the balance sheet and are not reflective of the underlying operations of the Company. We remove the impact of under-utilized capacity from gross profit, and 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 recognized as an expense in the period in which they are incurred. In addition, management bases certain forward-looking estimates and budgets on non-GAAP financial measures, primarily Adjusted EBITDA.

Government subsidies, depreciation and amortization, stock-based compensation expense, reorganization expense, foreign exchange gains and losses and impairment expenses are excluded from our non-GAAP financial measures because management considers them to be outside of the Company’s core operating results, even though some of those receipts and expenses may recur, and because management believes that each of these items can distort the trends associated with the Company’s ongoing performance. We believe that excluding these receipts and expenses provides investors and management with greater visibility to the underlying performance of the business operations, enhances consistency and comparativeness with results in prior periods that do not, or future periods that may not, include such items, and facilitates comparison with the results of other companies in our industry.

The following non-GAAP financial measures are presented in this Quarterly Report, and a description of the calculation for each measure is included.

Adjusted Gross Profit Gross profit before deductions for costs of under-utilized capacity, depreciation and amortization Adjusted Gross Profit Margin Adjusted Gross Profit divided by revenue EBITDA Net income before interest, taxes, depreciation and amortization

EBITDA Net income before interest, taxes, depreciation and amortization Adjusted EBITDA EBITDA adjusted to remove foreign exchange gains or losses; impairment expenses; reorganization expenses, stock-based compensation expense; government subsidies, and any other non-core gains or losses

Adjusted EBITDA Margin

Adjusted EBITDA divided by revenue

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You should carefully evaluate these non-GAAP financial measures, the adjustments included in them, and the reasons we consider them appropriate for analysis supplemental to our GAAP information. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider any of these non-GAAP financial measures in isolation or as substitutes for an analysis of our results as reported under GAAP. You should also be aware that we may recognize income or incur expenses in the future that are the same as, or similar to, some of the adjustments in these non-GAAP financial measures. Because these non-GAAP financial measures may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Results of Operations

Three and Six Months Ended June 30, 2022, Compared to Three and Six Months Ended June 30, 2021

	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands) 44,701 41,102 9 6,276 9,224 (32) 14.0 % 22.4 % 7,777 7,564 3 6,877 7,780 (12) 2,528 2,213 14 1,879 1,924 (2) 1,326 1,861 (29 ) 5,163 - 100	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands) 44,701 41,102 9 6,276 9,224 (32) 14.0 % 22.4 % 7,777 7,564 3 6,877 7,780 (12) 2,528 2,213 14 1,879 1,924 (2) 1,326 1,861 (29 ) 5,163 - 100	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands) 44,701 41,102 9 6,276 9,224 (32) 14.0 % 22.4 % 7,777 7,564 3 6,877 7,780 (12) 2,528 2,213 14 1,879 1,924 (2) 1,326 1,861 (29 ) 5,163 - 100	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands) 82,987 70,567 18 9,563 12,594 (24 ) 11.5 % 17.8 % 15,005 14,234 5 14,870 15,021 (1 ) 5,026 4,510 11 4,019 3,859 4 2,628 2,955 (11 ) 8,855 - 100	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands) 82,987 70,567 18 9,563 12,594 (24 ) 11.5 % 17.8 % 15,005 14,234 5 14,870 15,021 (1 ) 5,026 4,510 11 4,019 3,859 4 2,628 2,955 (11 ) 8,855 - 100	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands) 82,987 70,567 18 9,563 12,594 (24 ) 11.5 % 17.8 % 15,005 14,234 5 14,870 15,021 (1 ) 5,026 4,510 11 4,019 3,859 4 2,628 2,955 (11 ) 8,855 - 100
	2022 2021 ($ in thousands) 44,701 41,102 6,276 9,224 14.0 % 22.4 % 7,777 7,564 6,877 7,780 2,528 2,213 1,879 1,924 1,326 1,861 5,163 -			2022 82,987 9,563 11.5 % 15,005 14,870 5,026 4,019 2,628 8,855	2021 ($ in thousands) 70,567 12,594 17.8 % 14,234 15,021 4,510 3,859 2,955 -
Revenue	44,701
Gross Profit	6,276
Gross Profit Margin	14.0 %
Operating Expenses
Sales and Marketing	7,777
General and Administrative	6,877
Operations Support	2,528
Technology and Development	1,879
Stock-Based Compensation	1,326
Reorganization	5,163
Total Operating Expenses	25,550	21,342 (12,118)	20 59	50,403 (40,840)	40,579 (27,985)	24 46
Operating Loss	(19,274)
Operating Margin	(43.1 **)% **	(29.5 **)% **		(49.2 )%	(39.7 **)% **

Revenue

Revenue reflects sales to our Construction Partners for resale to their clients and, in limited circumstances, our direct sales to clients. Our revenue is generally affected by the timing of when orders are executed, particularly large orders, which can add variability to our financial results and shift revenue between quarters.

The following table sets forth the contribution to revenue of our DIRTT product and service offerings:

	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)
	2022 2021 ($ in thousands)						2022 2021 ($ in thousands)
Product	38,098		36,462		4		71,291	62,298		14
Transportation	4,795		3,484		38		8,856	5,983		48
License fees from Construction
	198		141		40		395	348		14
Partners
Total product revenue	43,091		40,087		7		80,542	68,629		17
Installation and other services	1,610		1,015		59		2,445	1,938		26
	44,701		**41,102 **		9		82,987	70,567		18

Our sales activity and associated revenues continue to be impacted by the severe economic and social impact of the COVID-19 pandemic since March 2020, including a major contraction in construction activity levels in North America due to work-from-home requirements, lock-down measures and other regulatory responses implemented by governments and public health officials.

During the quarter ended June 30, 2022, revenue was $44.7 million, an increase of $3.6 million or 9% from the same period in 2021. Revenue for the six months ended June 30, 2022 was $83.0 million an increase of 12.4 million

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or 18% from the six months ended June 30, 2021. The first quarter of 2022 marked the transition of the COVID-19 pandemic to an endemic with the broad easing of health restrictions, including work-from-home mandates, across North America. While the resurgence in COVID-19 infections due to the Omicron variant at the beginning of the year temporarily sent many employees back to their home offices and delayed return dates, the Company and our Construction Partners experienced an uptick in planning activity and opportunity growth in our commercial vertical which began to translate into orders in March 2022 that has continued into the second quarter. In response, the Company began efforts to increase its manufacturing labor headcount to enable it to capture the increase in demand but experienced the ongoing effects of a tight labor market. This has made it more difficult than expected to attract and retain skilled labor particularly, the case at our Savannah facility. As a result of these challenges in combination with the time to fully onboard new hires up to productive status, some orders had to be pushed to the third quarter from June 2022 while we worked to ramp up our hourly workforce.

We remain uncertain as to the ongoing impact of the pandemic, including effects of resurgent infection rates due to variants, on future projects that are either in the planning or conceptual stage. It is likely that future projects will experience similar delays as the COVID-19 pandemic runs its course and as DIRTT works through the aforementioned hiring and training challenges. See Item 1A. “Risk Factors”.

In response to significant increases in the costs of raw materials, shipping materials, labor and freight, effective November 16, 2021, DIRTT increased product and transportation prices on new projects by approximately 6.5%, with the benefits largely expected to be realized in 2022. On February 17, 2022, we implemented a further price increase of 5% that came into effect June 1, 2022. Based on experience to date, these increases were not sufficient to offset the significant inflationary impacts on raw materials. Accordingly, on June 21, 2022 an additional price increase of 10% was announced effective July 21, 2022. The benefits of this additional increase are largely expected to be realized in the second half of 2022. DIRTT also terminated the 20% pilot price reduction program on its Reflect and Inspire product lines that it announced in February 2022 as a result of the combination of increased aluminum prices and the unanticipated impact that the increased demand placed on our productive capacity due to the immaturity of production processes related to these product lines.

Installation and other services revenue was $1.6 million and $2.4 million for the three and six months ended June 30, 2022 respectively, compared to $1.0 million and $1.9 million in the same period of 2021. Except in limited circumstances, our Construction Partners, rather than the Company, perform installation services, and accordingly, we are not anticipating significant growth in this revenue stream.

Our success is partly dependent on our ability to profitably develop our Construction Partner network to expand our market penetration and ensure best practices are shared across local markets. At June 30, 2022, we had 69 (December 31, 2021: 69) Construction Partners servicing multiple locations. During 2021 and the first quarter of 2022, we made several changes and upgrades to our Construction Partner network, expanding our relationships with new and existing partners and ending our relationships with others. In February 2022, we announced the establishment of a Partner Advisory Council to provide a greater link with Construction Partners and end clients who they service. The Partner Advisory Council will offer advice on sales and marketing effectiveness, product issues and new market needs, market conditions, competitive landscape, marketing support and other related areas of mutual interest.

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We periodically analyze our revenue growth by vertical markets in the defined markets of commercial, healthcare, government and education. The following table presents our product and transportation revenue by vertical market:

	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)
	2022 2021 ($ in thousands)					2022 2021 ($ in thousands)
Commercial	29,618		19,032		56	53,662	35,176	53
Healthcare	5,091		14,176		(64)	12,055	20,663	(42)
Government	5,041		4,249		19	8,322	8,430	(1 )
Education	3,143 198 43,091		2,489 141 40,087		26 40 7	6,108 395 80,542	4,012 348 68,629	52 14 17
License fees from Construction	198
Partners
Total product revenue
Service revenue	1,610		1,015		59	2,445	1,938	26
	44,701		**41,102 **		9	82,987	70,567	18

	For the Three Months Ended June 30, 2022 2021 (in %)	For the Three Months Ended June 30, 2022 2021 (in %)	For the Six Months Ended June 30, 2022 2021 (in %)	For the Six Months Ended June 30, 2022 2021 (in %)
Commercial	69	47	67	52
Healthcare	12	36	15	30
Government	12	11	10	12
Education	7	6	8	6
Total Product Revenue(1)	100	100	100	100

(1) Excludes license fees from Construction Partners.

Commercial revenues increased by 56% and 53% in the three and six month periods ended June 30, 2022 from the same prior year periods, reflecting improving market conditions as health restrictions and work-from-home requirements ease and include one large customer in the technology sector with revenue of $2.3 million and $5.6 million for the respective periods. Healthcare decreased by 64% and 42% in the three and six months ended June 30, 2022, respectively, from the same periods in 2021. Such sales tend to be larger individual projects and are subject to timing due to a typically longer sales cycle, resulting in variability in sales levels. In 2021, we had one large healthcare project with revenue of $6.9 million in the second quarter which did not recur in 2022.

Education sales in the three and six months ended June 30, 2022 increased by 26% and 52%, respectively, over the prior periods. At the beginning of the pandemic, education spending effectively paused with many institutions suspending in-person classes. There were no individually significant education projects and the increases represent higher volumes of projects due to the easing of health restrictions and many students returning to in-person learning. Government revenues in the three months ended June 30, 2022 increased by 19% and decreased by 1% for the six month period then ended over the prior year periods.

Revenue continues to be derived almost exclusively from projects in North America and predominantly from the United States. The following table presents our revenue dispersion by geography:

	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Three Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)	For the Six Months Ended June 30, 2022 2021 % Change ($ in thousands)
	2022 2021 ($ in thousands)			2022 2021 ($ in thousands)
Canada	7,417	4,461	66	12,668	7,456	70
U.S.	37,284	36,641	2	70,319	63,111	11
	44,701	**41,102 **	9	82,987	70,567	18

Historically, approximately 15-25% and 75-85% of revenues are derived from sales to Canada and the United States, respectively. In the quarter ended June 30, 2020, revenues from Canada fell to 10% of total sales while sales

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to the United States increased to 90%. The geographical split for the quarter ended June 30, 2022 began to return to historical averages and reflects the easing of health restrictions in Canada which was later than the United States.

Sales and Marketing Expenses

Sales and marketing expenses increased by $0.2 million and $0.8 million to $7.8 million and $15.0 million for the three and six months ended June 30, 2022, from $7.6 million and $14.2 million for the three and six months ended June 30, 2021 respectively. The increase was largely related to an increase of $0.9 million and $1.3 million for the three and six months ended June 30, 2022, respectively, in travel, meals and entertainment expenses as business activity has increased and restrictions on travel have eased, offset by lower salary and benefit expenses due to planned headcount reductions as part of the cost savings initiatives.

General and Administrative Expenses

General and administrative expenses decreased $0.9 million to $6.9 million and $0.1 million to $14.9 million for the three and six months ended June 30, 2022 from $7.8 million and $15.0 million for the three and six months ended June 30, 2021. In the three months ended June 30, 2022, approximately $0.3 million of professional fees associated with the contested election of directors was more than offset by lower salaries and benefits costs. For the six month period ended June 30, 2022, approximately $1.8 million of incremental professional fees associated with the contested election of directors was offset by lower salaries and benefits cost. Reductions in salaries and benefits includes planned headcount reductions as part of cost savings initiatives as well as the impact of the Chief Executive Officer vacancy in the periods.

Operations Support Expenses

Operations support is comprised primarily of project managers, order entry and other professionals that facilitate the integration of our Construction Partner project execution and our manufacturing operations. Operations support expenses increased by $0.3 million and $0.5 million from $2.2 million and $4.5 million for the three and six months ended June 30, 2021, respectively, to $2.5 million and $5.0 million for the three and six months ended June 30, 2022. The increase was due to lower costs capitalized to internal projects with the completion of the South Carolina Facility and the DIRTT Experience Centre ("DXC") in Dallas and an increase in salaries and benefits of $0.2 million and $0.3 million for the three and six month period ended June 30, 2022 compared to the previous year same period.

Technology and Development Expenses

Technology and development expenses relate to non-capitalizable costs associated with our product and software development teams and are primarily comprised of salaries and benefits of technical staff.

Technology and development expenses for the three and six month period ended June 30, 2022 were consistent with prior period costs as $0.2 million and $0.5 million of lower capitalized costs due to fewer internal projects, respectively, were offset by reductions in salaries and benefits expense.

Stock-Based Compensation

Stock-based compensation expense for the three and six months ended June 30, 2022 was $1.3 million and $2.6 million compared to $1.9 million and $3.0 million for the same periods in 2021. The movement in this expense was largely the impact of grants of RSUs to the Company's employees, including those in lieu of cash compensation to the Company’s former interim Chief Executive Officer in January 2022 and DSUs granted to the Board of Directors, lowered by the impact of fair value adjustments on cash settled awards as a result of our share price decreasing during the quarter and six months ended June 30, 2022. The Board of Directors receives 100% of their remuneration in DSUs.

Reorganization

On February 22, 2022, we announced a plan to close the Phoenix Facility, shifting related manufacturing to both our Savannah and Calgary aluminum facilities. The closure of the Phoenix Facility was substantially completed in the second quarter of 2022. Of the initial estimate of cost savings of approximately $2.4 million from this closure, we expect to realize annualized savings of approximately $1.0 million as $1.4 million of work force reductions were offset by additions in Calgary and Savannah due to increased demand. No amounts were realized in the second quarter. Additionally, we eliminated approximately 14% of the expected 18% reduction of our salaried workforce including manufacturing and office positions, which, along with other cost reduction initiatives, are expected to yield annualized

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savings of approximately $13.0 million. Of these cost reduction initiatives, $9.0 million was implemented during the first and second quarters of 2022, $3.0 million will be implemented in the second half of 2022, and $1.0 million, comprised of certain manufacturing positions, has been deferred as we work to increase manufacturing headcount in light of increased demand. One-time costs associated with these reductions and other costs savings measures were previously estimated to be $4.4 million for the second quarter, and $8.1 million for the year. For the three and six months ended June 30, 2022, we incurred $5.2 million and $8.9 million in reorganization costs, respectively. Actual costs for the quarter ended June 30, 2022 are higher due to additional termination benefits arising in June 2022 with the departure of two executives.

Government Subsidies

The Company was not eligible and did not receive any new government subsidies in the three and six months ended June 30, 2022 compared to $3.4 and $7.5 million of subsidies received during the three and six months ended June 30, 2021. Upon finalization of 2021 compensation to specified executives, approximately C$0.5 million ($0.4 million) of previously-received subsidies were repaid to the Canadian authorities in the second quarter of 2022. The amount was fully provided for in the third quarter of 2021 and the Company reversed a $0.6 million incremental provision related to this that was no longer necessary in the first quarter of 2022. The last claim period under the CEWS and CERS programs expired on October 23, 2021.

The Company is currently evaluating its eligibility for the Employer Retention Tax Credit in the United States, which, if eligible, could provide additional subsidies to the Company.

Interest expense

Interest expense increased by $0.5 million from $0.8 million for the three months ended June 30, 2022 to $1.3 million compared to June 30, 2021 and by $1.4 million from $1.3 million in the six months ended June 30, 2022 to $2.7 million compared to June 30, 2021. The increased interest expense is a result of the issuance of C$35.0 million ($27.4 million) of Debentures in December 2021 and draws on the Leasing Facilities.

Income Tax

The provision for income taxes is comprised of U.S. and Canadian federal, state and provincial taxes based on pre-tax income. The Company incurred no income tax expense or recovery during the three and six months ended June 30, 2022, compared to a $0.2 million and $0.3 million expense for the same period of 2021. As at June 30, 2022 the Company had a valuation allowance of $27.0 million (December 31, 2021 $17.3 million) against deferred tax assets due to ongoing near term uncertainties on the business caused by the COVID-19 pandemic and the related decline in business activity which impacted our ability to generate sufficient taxable income in Canada and the United States to fully deduct historical losses. As at June 30, 2022, we had C$89.8 million of non-capital loss carry-forwards in Canada and $60.4 million in the United States. These loss carry-forwards will begin to expire in 2032.

Net Loss

Net loss increased to $19.3 million or $0.22 net loss per share in the three months ended June 30, 2022 from a net loss of $9.7 million or $0.11 net loss per share for the quarter ended June 30, 2021. The increased loss is primarily the result of a $2.9 million decrease in gross profit, a $4.2 million increase in operating expenses (which includes $5.2 million of reorganization expenses and $0.3 million of incremental professional fees described previously), a $0.5 million increase in interest expense and a $3.4 million decrease in government subsidies offset by a $1.3 million increase in foreign exchange gain.

Net loss increased to $42.3 million or $0.49 net loss per share in the first half of 2022 from a net loss of $22.2 million or $0.26 net loss per share for the six months ended June 30, 2021. The increased loss is primarily the result of a $3.0 million decrease in gross profit, a $9.8 million increase in operating expenses (which includes $8.9 million of reorganization expenses and $1.8 million of incremental professional fees as described previously), a $1.4 million increase in interest expense and a $6.9 million decrease in government subsidies offset by a foreign exchange gain of $0.8 million.

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EBITDA and Adjusted EBITDA for the Three and Six Months Ended June 30, 2022 and 2021

The following table presents a reconciliation for the second quarter and year to date results of 2022 and 2021 of EBITDA and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure for the periods presented:

	For the Three Months Ended June 30, 2022 2021 ($ in thousands)	For the Three Months Ended June 30, 2022 2021 ($ in thousands)	For the Three Months Ended June 30, 2022 2021 ($ in thousands)	For the Three Months Ended June 30, 2022 2021 ($ in thousands)	For the Six Months Ended June 30, 2022 2021 ($ in thousands)	For the Six Months Ended June 30, 2022 2021 ($ in thousands)	For the Six Months Ended June 30, 2022 2021 ($ in thousands)	For the Six Months Ended June 30, 2022 2021 ($ in thousands)
Net loss for the period	(19,288 )		(9,738 )		(42,330 )		(22,237 )
Add back (deduct):
Interest Expense	1,329		794		2,659		1,294
Interest Income	(20)		(23)		(31)		(42)
Income Tax Expense	-		220		-		259
DepreciationandAmortization	3,344		3,421		7,966		6,823
EBITDA	(14,635 )		(5,326 )		(31,736 )		(13,903 )
Foreign Exchange (Gains) Losses	(1,246)		60		(514)		240
Stock-Based Compensation	1,326		1,861		2,628		2,955
Government Subsidies	(49)		(3,431)		(624)		(7,499)
Reorganization Expense	5,163		-		8,855		-
Adjusted EBITDA	(9,441)		(6,836)		(21,391)		(18,207)
Net Loss Margin(1)	(43.1 **)% **		(23.7 )%		(51.0 )%		(31.5 **)% **
Adjusted EBITDA Margin	(21.1)%		(16.6)%		**(25.8)% **		**(25.8)% **

(1) Net loss divided by revenue.

For the three months ended June 30, 2022, Adjusted EBITDA and Adjusted EBITDA Margin decreased by $2.6 million to a $9.4 million loss or (21.1)% from $6.8 million loss or (16.6)% in the same period of 2021. This primarily reflects a $2.8 million decrease in Adjusted Gross Profit, $1.0 million increase in travel and entertainment costs, $0.3 million of incremental professional fees as described previously and, $0.3 million reduction in capitalized costs due to fewer internal projects, offset by $1.4 million of lower salaries and benefits costs due to headcount reductions and other cost savings.

For the six months ended June 30, 2022, Adjusted EBITDA and Adjusted EBITDA Margin decreased by $3.2 million to a $21.4 million loss or (25.8)% from $18.2 million loss or (25.8)% in the same period of 2021. This primarily reflects a $3.2 million decrease in Adjusted Gross Profit, $1.8 million of incremental professional fees as described previously, $1.5 million increase in travel and entertainment costs, and $0.7 million reduction in capitalized costs due to fewer internal projects, offset by $1.8 million of costs of underused capacity in the first quarter of 2021 which did not re-occur and $2.6 million lower salaries and benefits costs due to headcount reductions.

Adjusted Gross Profit and Adjusted Gross Profit Margin for the Three and Six Months Ended June 30, 2022 and 2021

The following table presents a reconciliation for the three and six months ended June 30, 2022 and 2021 of Adjusted Gross Profit to our gross profit, which is the most directly comparable GAAP measure for the periods presented:

	For the Three Months Ended June 30, 2022 2021 ($ in thousands)	For the Three Months Ended June 30, 2022 2021 ($ in thousands)	For the Six Months	For the Six Months
Gross profit	6,276	9,224	9,563	12,594
Gross profit margin	14.0%	22.4%	11.5%	17.8%
Add: Depreciation and amortization expense	2,188	2,033	5,660	4,062
Add: Costs ofunder-utilized capacity	-	-	-	1,756
Adjusted Gross Profit	8,464	11,257	15,223	18,412
Adjusted Gross Profit Margin	**18.9% **	**27.4% **	**18.3% **	26.1%

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Gross profit and gross profit margin decreased to $6.3 million or 14.0% for the three months ended June 30, 2022, from $9.2 million or 22.4% for the three months ended June 30, 2021. Adjusted Gross Profit and Adjusted Gross Profit Margin decreased to $8.5 million or 18.9% for the three months ended June 30, 2022, from $11.3 million or 27.4% for the three months ended June 30, 2021.

For the six month period ended June 30, 2022, gross profit and gross profit margin decreased to $9.6 million or 11.5% from $12.6 million or 17.8% for the six month period ended June 30, 2021. Adjusted Gross Profit and Adjusted Gross Profit Margin decreased to $15.2 million or 18.3% for the six months ended June 30, 2022, from $18.4 million or 26.1% for the six months ended June 30, 2021.

The decrease in gross profit margin largely reflects significant and industry wide inflationary increases in the realized cost of materials, transportation, labor and packaging. In addition, in the second quarter and in response to a sustained increase in demand that began in the first quarter of 2022, the Company began efforts to increase its manufacturing labor headcount but experienced the ongoing effects of a tight labor market. This has made it more difficult than expected to attract and retain skilled labor, particularly at our Savannah facility, and as a result the Company increased hourly rates by 6% on average to increase its overall competitiveness.

To address these cost increases, the Company implemented a series of price increases, including a 6.5% increase effective November 1, 2021 and an additional 5% price increase effective June 1, 2022. As these increases were not sufficient to offset the continuing inflationary pressure, the Company announced a further 10% price increase effective July 21, 2022 and will continue to monitor raw material, labor and other costs to determine whether further action is necessary.

For the three month period ended June 30, 2022, gross profit margin decreased by 8.4% from the same period in 2021 as material, transportation and packaging costs increased by approximately 5.4% as a percentage of revenue and a negative labor efficiency of 2.3% was realized due to higher labor rates and increased inefficiencies resulting from training and onboarding of new employees. In addition, the Company had previously announced intentions to extend its scheduling lead times, while removing deposit requirements, and accordingly reduce standby production labor capacity by up to 20%. Following further discussions with our Construction Partners, including the importance of short lead times, we reversed this decision in the second quarter of 2022. Other cost increases negatively impacted the gross profit by 1.1% partially offset by marginal fixed cost leverage on account of the 9% increase in revenue compared to the same period last year.

For the six month period ended June 30, 2022, gross profit margin decreased by 6.3% from the same period in 2021 as material, transportation and packaging costs increased by approximately 6.7% as a percentage of revenue. Other cost increases negatively impacted the gross profit by 1.4% and gross profit was reduced by approximately 1% due to incremental South Carolina Facility fixed costs. Additional depreciation and amortization due to revision to the useful lives of assets, including the Phoenix Facility, contributed $1.1 million or 1.1% of the gross margin. This increased cost impact was offset by 2.8% of improved fixed cost leverage on account of the $12.4 million or 18% increase in revenue compared to the same period in 2021.

During the fourth quarter of 2019, we determined that we were carrying abnormal excess capacity in our manufacturing facilities as a result of the slowdown in sales and determined certain production overheads should be directly expensed in cost of sales, representing production overheads that were not attributable to production. In the first quarter of 2021, we experienced the full impact of the slowdown in non-residential construction activity on our business. In anticipation of a recovery in demand for our products and services and to preserve our skilled workforce, we deliberately maintained manufacturing headcount, while implementing selective furlough days, in the first quarter of 2021 despite the shortfall in revenues relative to capacity. As a result, in the first quarter of 2021 we separately classified $1.8 million as costs related to our under-utilized capacity (1.2% of 2021 first quarter gross profit margin) in cost of sales. For the remaining quarters of 2021 and 2022, we did not have abnormal excess capacity as our workforce was better aligned with current production volumes.

Liquidity and Capital Resources

Cash and cash equivalents at June 30, 2022 totaled $19.7 million, a decrease of $40.5 million from December 31, 2021. The decrease in cash over the six month period primarily reflects the impact of $36.8 million cash used in

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operations, of which $1.8 million related to one-time costs associated with the contested director election and $8.9 million of reorganization costs. In addition, capital expenditures totaled $3.0 million and scheduled Leasing Facilities repayments totaled $1.2 million. These outflows were offset by a C$0.9 million ($0.7 million) draw under the Canada Leasing Facility received in April 2022.

The impact of COVID-19 on the Company’s sales and operations has been severe, including a contraction of demand since the beginning of the pandemic and more recently, significant inflation on raw material costs. This has resulted in a significant usage of cash which we have financed through existing cash on hand and financings as described further below. Furthermore, we have implemented multiple initiatives to reduce our overall fixed cost base, including the closure of our Phoenix Facility in the second quarter of 2022, reduction in our hourly headcount in 2021 and salaried headcount reductions and other cost savings initiatives in February 2022 and July 2022. We have also implemented three price increases to mitigate the inflationary effect, comprised of 6.5% effective November 1, 2021, 5% effective June 1, 2022 and a further 10% effective July 21, 2022. We continue to monitor the cost of our raw materials and labor to determine whether further price increases are warranted. Since March 2022, however, the Company and its Construction Partners have experienced a significant increase in demand, particularly within its commercial and education verticals, with the broad lifting of health restrictions across North America. In response the Company began efforts to increase manufacturing headcount within its Calgary and Savannah facilities to enable it to meet both near-term demand and anticipated sustained increases. We have increased wage rates in both Canada and the United States to increase our competitiveness in what is proving to be a tight labor market, particularly in Savannah. We are also taking steps to decongest our manufacturing processes to return productivity to pre-pandemic levels. We believe the benefits of the price increases, manufacturing headcount additions, training and debottlenecking will begin to be realized in the middle of the third quarter 2022, continuing throughout the balance of the year.

We have assessed the Company’s liquidity using multiple downside and upside scenarios, taking into account these circumstances, our sales outlook for the next twelve months and actions in combination with existing cash balances and available credit facilities. Based upon this analysis, we believe the Company has sufficient liquidity to remain a going concern for at least the next 12 months. However, a number of factors, including our ability to satisfy the expected growth in pipeline demand and those discussed below could impact our liquidity over such period.

Should the recovery of the North American construction activities from the pandemic be delayed, a sustained economic depression and its adverse impacts on customer demand occur, significant inflationary pressure on raw materials and transportation costs continue that we are unable to recover through price increases or should we be unable to economically increase manufacturing labor headcount and related capacity, this could continue to adversely affect our liquidity. To the extent that existing cash and cash equivalents and increased liquidity from the aforementioned facilities are not sufficient to fund future activities, we may seek to raise additional funds through equity or debt financings. If additional funds are raised through the incurrence of indebtedness, such indebtedness may have rights that are senior to holders of our Debentures and our equity securities or contain instruments that may be dilutive to our existing shareholders. Any additional equity or debt financing may be dilutive to our existing shareholders.

During 2021, we completed financings to increase our liquidity in light of the highly uncertain economic conditions caused by the pandemic. In January 2021, we issued C$40.3 million of the January Debentures for net proceeds after costs of C$37.6 million ($29.5 million). The January Debentures accrue interest at a rate of 6.00% per annum and are convertible into common shares of DIRTT at an exercise price of C$4.65 per common share, or if not converted will mature and be repayable on the January Debenture Maturity Date. Interest and principal are payable in cash or shares at the option of the Company.

In February 2021, we entered into the RBC Facility, a C$25.0 million senior secured revolving credit facility with RBC. Under the RBC Facility, the “Borrowing Base” is a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of 75% of the book value of eligible inventory and 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims. Available borrowings under the RBC Facility at June 30, 2022 were C$14.5 million or $11.3 million.

In December 2021, we issued C$35.0 million of the December Debentures for net proceeds after costs of C$32.7 million ($25.6 million). The December Debentures accrue interest at a rate of 6.25% per annum and are convertible into common shares of DIRTT at an exercise price of C$4.20 per common share, or if not converted will mature and

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be repayable on the December Debenture Maturity Date. Interest and principal are payable in cash or shares at the option of the Company.

The Company has a C$5.0 million Canada Leasing Facility of which C$4.5 million ($3.4 million) has been drawn, and a $14.0 million U.S. Leasing Facility of which $13.3 million has been drawn with RBC and one of its affiliates. The Leasing Facilities are available for equipment expenditures and certain equipment expenditures already incurred.

The following table summarizes our consolidated cash flows for the periods indicated:

	For the Three Months Ended June 30, 2022 2021 ($ in thousands)	For the Three Months Ended June 30, 2022 2021 ($ in thousands)	For the Six Months Ended June 30, 2022 2021 ($ in thousands)	For the Six Months Ended June 30, 2022 2021 ($ in thousands)
Net cash flows (used in) provided by operating activities	(17,800 )	86	(36,842 )	(12,008 )
Net cash flows used in investing activities	(1,331)	(6,430)	(2,951)	(10,019)
Net cash flows (used in) provided by financing activities	(63 )	7,266	(890 )	36,603
Effect of foreign exchange on cash, cash equivalents and restricted cash	54	408	220	711
Net (decrease) increase in cash, cash equivalents and
	(19,140 )	1,330	(40,463 )	15,287
restricted cash
Cash, cash equivalents and restricted cash, beginning of period	42,085	59,803	63,408	45,846
Cash, cash equivalents and restricted cash, end of
	22,945	61,133	22,945	61,133
period

Operating Activities

Net cash flows used in operating activities were $17.8 million for the three months ended June 30, 2022 compared to $0.1 million cash flows provided by operating activities in the three months ended June 30, 2021. Included in the $17.8 million used in operating activities in the second quarter of 2022 are $5.2 million of reorganization costs, $0.3 million of professional fees associated with the contested director election, and $3.7 million of increased inventory where the Company took on incremental reserves to mitigate against potential supply chain disruption, offset by the receipt of a $3.2 million income tax refund related to 2020. We have since taken steps to adjust our aluminum supply and expect to begin drawing down such inventory in the third and fourth quarter. Excluding these amounts, cashflow from operations would have been $11.8 million in the second quarter of 2022 compared to $0.1 million cash provided by operations in the same period of 2021, with the decrease reflecting $3.4 million of government subsidies that did not re-occur in 2022, $2.8 million of lower Adjusted Gross Profit, higher interest payments and working capital timing. Apart from the above noted items, working capital changes primarily reflect the timing of insurance renewals and increased accounts payable due to higher activity and timing of payments.

Net cash flows used in operating activities were $36.8 million for the six months ended June 30, 2022 compared to $12.0 million in the six months ended June 30, 2021. Included in the $36.8 million used in operating activities in the first half of 2022 are $8.9 million of reorganization costs, $1.8 million of professional fees associated with the contested director election, and $7.1 million of increased inventory where the Company took on incremental inventory from suppliers to mitigate against potential supply chain disruption, offset by the receipt of a $3.2 million income tax refund related to 2020. We have since taken steps to adjust our aluminum supply and expect to begin drawing down such inventory in the third and fourth quarter. Excluding these amounts, cashflow from operations would have been $22.2 million in the first half of 2022 compared to $12.0 million cash used in operations in the same period of 2021, with the decrease reflecting $7.5 million of government subsidies that did not re-occur in 2022, $1.4 million lower Adjusted Gross Profit before underutilized capacity, higher interest payments and working capital timing. Apart from the above noted items, working capital changes primarily reflect the timing of insurance renewals and increased accounts receivable, accounts payable and customer deposits due to higher activity and timing of payments.

Investing Activities

We invested $0.9 million and $1.9 million in property, plant and equipment during the three and six months ended June 30, 2022, respectively, compared to $5.8 million and $8.7 million during the three and six months ended

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June 30, 2021. This expenditure for the three months ended June 30, 2022 comprised of $0.1 million of working capital changes, $0.5 million of manufacturing upgrades, $0.1 million related to our website redesign, $0.1 million of leasehold improvements and $0.1 million of DXC refreshes. The expenditure for the six months ended June 30, 2022 comprised of $1.0 million of working capital changes, $0.6 million of manufacturing upgrades, $0.2 million related to our website design and $0.1 million related to DXC refreshes and IT equipment.

We invested $0.4 million on capitalized software during the three months ended June 30, 2022, as compared to $0.6 million in the three months ended June 30, 2021 and $0.9 million for the six months ended June 30, 2022 compared to $1.3 million for the comparative period.

Our 2022 capital expenditure program comprises approximately $2.5 million related to refreshes of DXCs, continued enhancement of our customer relationship management system and website redesign, approximately $2.5 million on software development and approximately $2.0 million on manufacturing and other capital upgrades. The decrease in cash flows used in investing activities is largely due to reduced spending as the South Carolina Facility and Dallas DXC were completed in 2021.

Financing Activities

For the three and six months ended June 30, 2022, $0.1 million and $0.9 million of cash was used in financing activities, comprising mainly of $0.6 million and $1.2 million of scheduled payments under the Leasing Facilities for the three and six month period ended June 20, 2022. During the second quarter, we received C$0.9 million ($0.7 million) under the Canada Leasing Facility. For the three and six months ended June 30, 2021, $7.3 million and $36.6 million of cash was provided by financing activities, respectively, mainly due to the proceeds received from the issuance of C$40.3 million of Debentures in January 2021 and the receipt of $8.4 million of cash consideration under the U.S. Leasing Facility.

We currently expect to fund anticipated future investments with available cash, including the proceeds from Debentures issued in 2021, and drawings on our Credit Facility. We do not expect to make any significant further draws under the Leasing Facilities. Apart from cash flow from operations, issuing equity and debt has been our primary source of capital to date. Additional debt or equity financing may be pursued in the future as we deem appropriate. We may also use debt or pursue equity financing depending on the price of our common shares at the time, interest rates, and nature of the investment opportunity and economic climate.

Credit Facility

On February 12, 2021, the Company entered into the RBC Facility. Under the RBC Facility, the Borrowing Base is up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of 75% of the book value of eligible inventory and 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims. At June 30, 2022, available borrowings are C$14.5 million ($11.3 million), of which no amounts have been drawn. Interest is 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 is less than C$5.0 million, the Company is subject to a FCCR covenant of 1.10:1 on a trailing twelve-month basis. Additionally, if the FCCR has been below 1.10:1 for the three immediately preceding months, the Company is required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Leasing Facilities. The Company did not meet the three-month FCCR requirement during the second quarter of 2022, which resulted in requiring the restriction of $3.2 million of cash. Should an event of default occur, or the Aggregate Excess Availability be less than C$6.25 million for five 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 set-off any borrowings and any remaining amounts made available to the Company.

During 2020, the Company entered into the Leasing Facilities, consisting of the C$5.0 million Canada Leasing Facility and the $14.0 million U.S. Leasing Facility with RBC, which are available for equipment expenditures and certain equipment expenditures already incurred. The Leasing Facilities, respectively, have seven and five-year terms and bear interest at 4.25% and 5.59%. The U.S. Leasing Facility is amortized over a six-year term and is extendible at the Company’s option for an additional year.

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The Company has drawn $13.3 million of cash consideration under the U.S. Leasing Facility and commenced the lease term in 2020 for the equipment at the South Carolina Facility. The Company has drawn C$4.5 million ($3.4 million) of cash consideration under the Canada Leasing Facility and commenced the lease term for the Canadian equipment expenditures during 2020. C$0.9 million ($0.7 million) of the Canada Leasing Facility was drawn in the three months ended June 30, 2022.

We are restricted from paying dividends unless Payment Conditions (as defined in the RBC Facility) are met, including having a net borrowing availability of at least C$10 million over the proceeding 30-day period, and having a trailing twelve-month fixed charge coverage ratio above 1.10:1 and certain other conditions. The RBC Facility is currently secured by substantially all of our real property located in Canada and the United States.

Contractual Obligations

There have been no material changes in our contractual obligations during the three months ended June 30, 2022, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” in our Annual Report on Form 10-K, other than the forthcoming additional commitments related to the extension of our headquarters lease in Calgary. See Note 13, “Commitments” to our interim condensed consolidated financial statements in this Quarterly Report for additional information.

Significant Accounting Policies and Estimates

There have been no material changes in our significant accounting policies during the three months ended June 30, 2022, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Accounting Policies and Estimates” in our Annual Report on Form 10-K. For information regarding significant accounting policies and estimates, please refer to Item 7 and Item 8 in our Annual Report on Form 10-K. As disclosed in Note 5, “Adoption of New and Revised Accounting Standards” to our condensed consolidated interim financial statements appearing in this Quarterly Report, we adopted Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The ASU provides guidance on required disclosures with respect to government assistance in a company’s notes to the annual financial statements. The amendments in the ASU are effective for periods beginning after December 15, 2021. The Company has adopted this standard effective January 1, 2022 and notes there is no impact of this standard on our accounting or disclosures of government assistance.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, please refer to Note 5, “Adoption of New and Revised Accounting Standards” to our condensed consolidated interim financial statements and “–Significant Accounting Policies and Estimates” appearing in this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risk exposures since our disclosures in our Annual Report on Form 10-K. For information regarding our exposure to certain market risks, please refer to Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officers and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

33

As required by Rule 13a-15 under the Exchange Act, our principal executive officers and principal financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based upon their evaluation, our principal executive officers and principal financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are pursuing multiple lawsuits against our former founders, Mogens Smed and Barrie Loberg, their new company Falkbuilt Ltd., and other related individual and corporate defendants for violations of fiduciary duties and noncompetition and non-solicitation covenants contained in their executive employment agreements, and the misappropriation of our confidential and proprietary information in violation of numerous Canadian and U.S. state, and federal laws pertaining to the protection of our trade secrets and proprietary information and the prevention of false advertising and deceptive trade practices. There have been no material developments in the legal proceedings previously disclosed in our Annual Report on Form 10-K, as supplemented by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 4, 2022.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Annual Report on Form 10-K, as supplemented by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 4, 2022, which could materially affect our businesses, financial condition, or results of operations. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and results of operations.

We are under the leadership of a reconstituted Board of Directors who plan to implement a variety of operational, organizational, cultural and other changes to our business, and we may not be able to achieve some or all of the anticipated benefits of this transformation plan. We are also undergoing changes at a senior management level, including the appointment of a new Chief Executive Officer in June 2022.

Our Board of Directors was entirely reconstituted at our annual and special meeting of shareholders held on April 26, 2022 and, following that meeting, Geoffrey Krause and Jeffrey Calkins were appointed Interim Co-Chief Executive Officers. In June 2022, Jeffrey A. Calkins and Jennifer Warawa departed the company and a new Chief Executive Officer, Benjamin Urban was appointed. Messrs. Urban and Noll were also appointed to our Board of Directors in June 2022. On July 27, 2022, the Company announced additional leadership changes, including the departures of Charles Kraus, Senior Vice President and General Counsel and Colin Blehm, Vice President Product Development, and the promotion of Trevor Didluck to Vice President Product Development. Nandini Somayaji has been promoted to Senior Vice President Talent, General Counsel & Corporate Secretary. Geoffrey Krause, DIRTT’s current Chief Financial Officer, announced his intention to retire from the Company, effective September 30, 2022. A search for a suitable replacement has commenced. As a result of these events, the timely integration of senior management will be critical in the successful implementation of the Board of Directors' plans. There can be no assurance that we will be able to successfully implement the plan or otherwise realize the anticipated benefits of the plan, and we may encounter short-term disruptions of certain aspects of our business as elements of the plan are implemented.

In addition to overseeing the changes to DIRTT’s leadership described above, since its election, the reconstituted Board of Directors has undertaken an extensive review of DIRTT’s operations, a process which is still ongoing (see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook”, above), and are in the process of implementing a variety of operational, organizational, cultural and other changes to our business, including plans to meet pipeline demand and expand revenues. We may not be successful in achieving some or all of the anticipated benefits of these plans, which may have an adverse effect on our results from operations and financial condition. Specifically, we are addressing the following issues:

• Ability to increase manufacturing capacity to service current pipeline:

As at July 1, 2022, DIRTT’s 12-month forward pipeline, which represents known projects and leads at various stages of maturation which our sales teams are working to convert into orders, increased by 13% to $359 million from $318 million as at April 1, 2022. Servicing of this pipeline and capturing the underlying revenue growth is dependent upon the Company's ability to ramp up production capabilities on a timely basis. The Board of Directors and DIRTT’s management team have prioritized removing constraints in DIRTT’s manufacturing processes and are pursuing a number of initiatives including increased hourly labor, improved hourly labor

35

retention and streamlined manufacturing processes. DIRTT may not be successful in implementing such initiatives and may be negatively impacted by the competitive nature of attracting personnel and other current market conditions. DIRTT may not be able meet such demand and capture the underlying revenue growth which could adversely affect the Company’s results of operations and financial condition.

• Discounting and raw material cost inflation impacts on profitability:

DIRTT's gross margins and resulting profitability have been negatively affected by the impacts of material cost inflation and the use of increased discounting to drive higher demand. DIRTT has taken steps to improve gross margin by reducing discounts and increasing prices, including a 5% price increase at June 1, 2022 and a further 10% price increase at July 21, 2022. If we are unable to realize the effects of reduced discounting or price increases, if inflationary increases continue without corresponding increases in our pricing or if such reduced discounting and price increases cause a material impact on demand, DIRTT’s results of operations and financial condition could be adversely impacted.

• The effectiveness of certain elements of DIRTT’s administrative systems:

DIRTT has identified the need to upgrade its inventory management and cost accounting systems. Other information technology may require investment in the future. However, the success, in whole or in part, of this investment cannot be guaranteed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Not Applicable.

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit No. 3.1 3.2 4.1 4.2 4.3 10.1 10.2¥ 10.3+ 10.4+ 10.5 31.1 31.2 32.1 32.2 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 104	Description
	Restated Articles of Amalgamation of DIRTT Environmental Solutions Ltd. (incorporated by reference to Exhibit
	3.1 to the Registrant’s Registration Statement on Form 10, File No. 001-39061, filed on September 20, 2019). Amended and Restated Bylaw No. 1 of DIRTT Environmental Solutions Ltd. (incorporated by reference to Exhibit
	3.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on May 22, 2020). Base Indenture, dated January 25, 2021, by and among DIRTT Environmental Solutions Ltd., Computershare Trust
	Company of Canada and Computershare Trust Company, National Association as Trustees (incorporated by
	reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on January 29,
	2021). Supplemental Indenture, dated January 25, 2021, by and among the Company, Computershare Trust Company of
	Canada and Computershare Trust Company, National Association as Trustees (incorporated by reference to Exhibit
	4.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on January 29, 2021). Second Supplemental Indenture, dated December 1, 2021, by and among the Company, Computershare Trust
	Company of Canada and Computershare Trust Company, National Association as Trustees (incorporated by
	reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on December
	1, 2021). DIRTT Environmental Solutions Ltd. Employee Share Purchase Plan (incorporated by reference to Exhibit 10.2 to
	the Registrant’s Quarterly Report on Form 10-Q File No. 001-39061, filed on May 4, 2022). Lease Amending Agreement, dated April 6, 2022, by and between Piret (7303-30th Street SE) Holdings Inc. and
	DIRTT Environmental Solutions Ltd. Executive Employment Agreement, dated May 1, 2019 by and between DIRTT Environmental Solutions Ltd. and
	Jeffrey Metcalf. Executive Employment Agreement, dated June 22, 2022 by and between DIRTT Environmental Solutions Ltd. and
	Benjamin Urban. Indemnity Agreement, dated June 22, 2022, between DIRTT Environmental Solutions Ltd and Benjamin Urban,
	together with a schedule identifying other substantially identical agreements between the Company and each of the
	other persons identified on the schedule Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities
	Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities
	Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of the Principal Executive Officer required by 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of
	the Sarbanes-Oxley Act of 2002. Certification of the Principal Financial Officer required by 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of
	the Sarbanes-Oxley Act of 2002. Inline XBRL Instance Document Inline XBRL Taxonomy Extension Schema Document Inline XBRL Taxonomy Extension Calculation Linkbase Document Inline XBRL Taxonomy Extension Definition Linkbase Document Inline XBRL Taxonomy Extension Label Linkbase Document Inline XBRL Taxonomy Extension Presentation Linkbase Document Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

• Filed herewith

** Furnished herewith

+ Compensatory plan or agreement

¥ Information in this exhibit identified by brackets is confidential and has been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is not material and is the type of information that the Company customarily treats as private or confidential. An unredacted copy of this exhibit will be furnished to the Securities and Exchange Commission on a supplemental basis upon request.

37

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DIRTT ENVIRONMENTAL SOLUTIONS LTD.

By: /s/ Geoffrey D. Krause Geoffrey D. Krause Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

Date: July 27, 2022

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Exhibit 10.2

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS OF THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. THIS REDACTED INFORMATION HAS BEEN MARKED IN THIS EXHIBIT WITH THREE ASTERISKS [***]

LEASE AMENDING AGREEMENT

THIS AGREEMENT made as of the 6th day of April, 2022,

B E T W E E N:

PIRET (7303-30TH STREET SE) HOLDINGS INC.

(hereinafter called " Landlord ")

• and -

DIRTT ENVIRONMENTAL SOLUTIONS LTD.

(hereinafter called " Tenant ")

WHEREAS:

A. By a lease dated September 15, 2012 between Landlord and Tenant (such lease hereinafter called the " Lease "), Landlord leased to Tenant for a term of approximately ten (10) years (the " Term "), expiring on September 30, 2022, certain premises (the " Leased Premises ") (as more particularly described in the Lease) comprising a Rentable Area of approximately [] square feet and located in the building (the " _*Building_ ") municipally known as 7303 & 7403 30th Street SE, Calgary, Alberta; and

B. The parties have agreed to extend the Term of the Lease for a further period of five (5) years, commencing on October 1, 2022 and expiring on September 30, 2027, and to amend certain other provisions of the Lease.

NOW THEREFORE this Agreement witnesses that in consideration of the covenants and agreements herein contained (the receipt and sufficiency of which are hereby acknowledged) the parties hereto covenant and agree with each other as follows:

1. Interpretation : The recitals are true in fact and in substance. Except as otherwise expressly provided in this Agreement the terms used herein shall have the meanings attributed to them in the Lease. Terms defined herein, including in the recitals, will be incorporated by reference into the Lease unless there is something in the subject matter or context inconsistent therewith.

2. Extended Term : The Term of the Lease shall be and is hereby extended for a further period of five (5) years (the " Extended Term "), commencing on October 1, 2022 and expiring on September 30, 2027. Tenant acknowledges and agrees that there shall be no further right to renew or extend, and the provisions of Section 3.2 of the Lease relating to Tenant being entitled to extend the Term are hereby deleted.

3. Use : Tenant shall use the Leased Premises throughout the Extended Term only as permitted in the Lease.

4. Minimum Rent : For the Extended Term, Tenant shall pay to Landlord, in equal monthly instalments in advance on the first day of each month in accordance with the Lease, annual Minimum Rent with respect to the Leased Premises equal to:

Period		Annual Rate	Annual Amount	Monthly Amount
		(per sq. ft. of	(plus taxes)	(plus taxes)
		Rentable
		Area)
October 1, 2022 to	$[***]		$[***]	$[***]
September 30, 2023
October 1, 2023 to	$[***]		$[***]	$[***]
September 30, 2024
October 1, 2024 to	$[***]		$[***]	$[***]
September 30, 2025
October 1, 2025 to	$[***]		$[***]	$[***]
September 30, 2026
October 1, 2026 to	$[***]		$[***]	$[***]
September 30, 2027

1. Additional Rent : For the Extended Term, the Lease shall continue to be fully net to Landlord. In addition to the payment of Minimum Rent, Tenant shall pay to Landlord Additional Rent as provided for and in accordance with the Lease.

2. Minimum Rent Free Period : Provided this Agreement has been executed and delivered by Tenant in a form acceptable to Landlord and Tenant is not in default of the Lease, as amended by this Agreement, Tenant shall not be responsible for Minimum Rent during the first three (3) months of the Extended Term (namely the months of October 2022, November 2022 and December 2022) (the " Minimum Rent Free Period "). Tenant shall continue to be responsible for all other amounts payable during the Minimum Rent Free Period including, without limitation, Operating Costs, Taxes and Utilities. This Minimum Rent free provision shall not apply to any extension or renewal of this Lease beyond the Extended Term.

3. Condition of Leased Premises : Tenant accepts the Leased Premises in an "as-is" condition and acknowledges and agrees that there shall be no rent concessions, no Landlord's work required, no fixturing period and no tenant allowance or any other amount payable by Landlord to Tenant, except to the extent specifically provided for in this Agreement.

4. Amendments to Lease : Landlord and Tenant agree that effective as of the date of this Agreement, the Lease is amended as follows:

5. (a) by inserting the following at the end of sub-subsection 1.1(o)(ix): " without the prior written approval of the Landlord, acting reasonably (the Tenant hereby acknowledging that Rent shall remain payable at all times) ";

2

• (b) by deleting the second, third, fourth and fifth paragraphs of Section 3.2 commencing with the words " Subject to the following terms hereof " and ending with the words " in force at the time of the arbitration ";

• (c) by inserting a new sub-subsection (v) after sub-subsection (iv) in subsection 6.2(a) as follows:

• " (v) all reasonable costs that are out of the Tenant's control for preparing for and responding to a Public Health Emergency, including, without limitation, all costs of purchasing and maintaining applicable equipment and supplies, all costs of additional personnel for testing, screening and enhanced security measures, and all costs of decontamination and sanitization procedures, if any; ";

• (d) by inserting a new sub-subsection (vi) after sub-subsection (v) in subsection 6.2(a) as follows:

• " (vi) all costs incurred in the reduction of greenhouse gas emissions with respect to the Lands and the Building and all costs incurred in the furtherance of the Landlord's environmental sustainability initiatives. Any improvements made with respect to reducing greenhouse gas emissions and environmental sustainability initiatives shall be reasonable. Capital costs made with respect to reducing greenhouse gas emissions and environmental sustainability initiatives for improvements shall be amortized over the useful life of the improvements in question in accordance with generally accepted accounting principles. "

• (e) by deleting, in the second line of Section 17.1(d)(ii), the word " twice " and replacing it with the words and figures " one hundred and fifty percent (150%) of ";

• (f) by inserting, between the words "laws or regulations" and "riots" in the in the fourth line of Section 17.13, the words " a Public Health Emergency ";

• (g) by deleting Section 18.1 (Letter of Credit) in its entirety;

• (h) by adding a new Section 18.5 as follows:

" 18.5 Reporting of Energy Consumption and Water Use

Not later than February 15th each year during the Term and any exercised extension term(s), where the Tenant is purchasing Utilities directly from a supplier with the Landlord's consent in accordance with this Lease, the Tenant shall submit to the Landlord copies of original invoices showing the Tenant's water, natural gas and electricity consumption in the Leased Premises during the immediately prior calendar year. In addition, the Tenant covenants and agrees from time to time and within seven (7) days of request, to provide to the Landlord all energy consumption and water use information regarding the Leased Premises that the Landlord may require. ";

• (i) by adding a new Section 18.6 as follows:

" 18.6 Public Health Emergency

3

The Landlord and the Tenant agree that in anticipation of, during, and for a period of time following (each as the Landlord shall determine, in its sole discretion) a Public Health Emergency, in addition to the Landlord's rights in this Lease, the following shall apply:

• (a) The Landlord shall have the right, in its sole discretion and having regard to the type of Public Health Emergency, to implement all such measures and/or restrictions to the Leased Premises and Building (including, but not limited to, changes to the Operating Standards) as required or advised by an Authority.

• (b) If required by an Authority the Tenant shall promptly notify the Landlord in writing of the diagnosis of any infectious disease that is referenced in the Public Health Emergency (excluding common cold and common flu) among the Tenant, its employees and invitees who have accessed the Building or the Leased Premises within a prior thirty (30) day time period.

• (c) All costs incurred by the Landlord in respect of the Building or any part or parts thereof and which are incurred in connection with or related to the Public Health Emergency shall be included in Operating Costs.

• (d) The Landlord and the Tenant shall act reasonably and co-operatively and in good faith to minimize the impact of the Public Health Emergency on the Leased Premises and the Building and its operations. The Landlord's response, if any, to a Public Health Emergency, may differ from, supplement, modify, reduce or augment the recommendations of any Authority, having regard to the nature of the Building and the permitted uses of the tenants and occupants therein.

• (e) This Section 18.6 shall not impose any duty, obligation or liability on the Landlord in respect of a Public Health Emergency or the Landlord's response thereto, if any.

For the purposes of this Lease, " Public Health Emergency " means and includes an epidemic, pandemic (including without limitation, COVID-19), other situations where persons in or entering the Lands or Building are or may be exposed to imminent danger from a disease or virus or other biological or physical agents which pose a threat to human health, and states of emergency or public health emergency declared by an Authorities and affecting the City in which the Building is located. ";

• (j)

by adding a new Section 18.7 as follows:

" 18.7 Warehousing and Storage of Related Chemical Products

The Tenant acknowledges, covenants and agrees that:

• (a) all Related Chemical Products at the Leased Premises shall be disclosed in writing by the Tenant to the Landlord including, without limitation, as part

4

of the Environmental Questionnaire to be provided by the Tenant to the Landlord from time to time pursuant to this Lease;

• (b) all Related Chemical Products kept at the Leased Premises shall be received pre-packaged in packaging mandated by the applicable Authorities and ready for use, and shall not be handled in unprocessed form at any time within any portion of the Building or the Lands;

• (c) all Related Chemical Products shall be stored in accordance with all Environmental Laws and in accordance with the requirements of the applicable Authorities and shall be kept in a discrete, clearly identified area of the warehouse portion of the Leased Premises being identifiable from the majority of the warehouse portion of the Leased Premises;

• (d) the Related Chemical Products shall be stored and handled in strict accordance with the MSDS and the requirements of the WHMIS, and every person delivering or handling the Related Chemical Products shall be trained in accordance with the WHMIS guidelines and shall follow the MSDS;

• (e) no container, vessel, receptacle or box containing Related Chemical Products may be open at the Building and the Lands and there shall be no mixing or preparation involving any Related Chemical Products at the Building or the Lands;

• (f) the Related Chemical Products shall be stored on skids in dedicated areas for each Related Chemical Product. The Related Chemical Products shall be loaded into and out of the Leased Premises directly onto the truck which will be entering into the Leased Premises through the same door;

• (g) The Landlord may make inquiries from time to time of any Authorities with respect to the Tenant's compliance with the WHMIS and the MSDS, and Tenant will from time to time provide to the Landlord such written authorizations as the Landlord may require in order to facilitate the Landlord obtaining such information; and

• (h) any spill, release, escape or leak of Related Chemical Products shall be remediated in strict accordance with the MSDS and the requirements of each Authority having jurisdiction and the Tenant hereby agrees to indemnify and hold harmless the Landlord from all expenses, claims and liabilities relating in any way to any and all Related Chemical Products at the Building and the Lands.

For the purposes of this Lease:

" MSDS " means the applicable material safety data sheet or product safety data sheet for a material or product which: (i) lists information relating to occupational safety and health for the use of the material or product; or (ii) catalogues information on chemicals, chemical compounds and chemical mixtures; or (iii)

5

contains information on the potential hazards (health, fire, safety, reactivity and environmental) and how to work safely with chemicals, chemical compounds or chemical mixtures;

" Related Chemical Products " means pre-packaged chemicals stored or utilized by Tenant at the Leased Premises and which are directly related to Tenant's specific use of the Leased Premises as permitted in this Lease."; and

" WHMIS " means the "Workplace Hazardous Materials Information System" hazard communications system used in Canada. "; and

• (k) by deleting Schedule "F" (Letter of Credit Terms Summary) in its entirety.

• Notices : The Lease is further amended such that the address for notice of Landlord is deleted and replaced with the following:

Landlord: 121 King Street West Suite 2100 P.O. Box 112 Toronto, Ontario M5H 3T9

1. Environmental Questionnaire : The Environmental Questionnaire attached to this Agreement as Schedule "A" has been certified by a senior officer of Tenant as complete and accurate responses and which are hereby deemed to be representations and warranties of Tenant upon which Landlord is relying.

2. Ratification of Lease : Except as herein provided, the terms and conditions of the Lease shall continue in full force and effect and the Lease as extended and amended herein is hereby ratified and affirmed by each of Landlord and Tenant and shall be binding upon the parties hereto and their respective successors and permitted assigns.

3. General : Time, in all respects, shall remain of the essence. The section headings in this Agreement have been inserted for convenience of reference only and shall not be referred to in the interpretation of this Agreement nor the Lease. This Agreement shall be interpreted according to and governed by the laws having application in the Province of Alberta.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

6

1. Signatures : A facsimile or PDF or electronic signature shall constitute a valid and binding signature with the same effect as if it were an original signature endorsed on this Agreement. A signed copy of this Agreement transmitted by PDF or other electronic means of transmission shall be deemed to have been validly delivered and shall bind the parties. The parties agree that execution of this Agreement by use of digital signature software shall constitute valid execution. At Landlord's request, Tenant shall ensure that this Agreement is executed and delivered in hard copy within five (5) days of the acceptance or execution hereof by PDF or other electronic means of transmission.

IN WITNESS WHEREOF the parties hereto have executed this Agreement.

LANDLORD: PIRET (7303-30TH STREET SE) HOLDINGS INC.

7

Per: /s/ David Owen Name: David Owen Title: Authorized Signing Officer I have authority to bind the Corporation.

TENANT: DIRTT ENVIRONMENTAL SOLUTIONS LTD.

Per: /s/ Geoff Krause Name: Geoff Krause Title: Authorized Signing Officer

Per: Name: Title:

I/We have authority to bind the Corporation.

8

SCHEDULE "A"

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Exhibit 10.3

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT is made as of the 1[st] day of May 2019 (the "Effective Date")

BETWEEN:

DIRTT ENVIRONMENT AL SOLUTIONS, LTD.

(the "Company")

• and-

JEFF METCALF

(the "Executive")

RECITALS:

• A. The Executive is currently an employee of the Company and the Company wishes to retain the Executive and to promote the Executive to the role of Vice President, Finance and to employ the Executive pursuant to this Executive Employment Agreement.

• B. The Executive wishes to accept the promotion and continue employment with the Company under this Agreement.

• C. The parties agree that their employment relationship will be governed by the terms and conditions of this Agreement, commencing the Effective Date (as hereinafter defined).

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and, other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Company and the Executive agree as follows:

1. Definitions

In this Agreement,

• (a) "Accrued Entitlements" has the meaning set out in Section 9(a)(iv).

• (b) "Affiliate" means any person or entity Controlling, Controlled by, or Under Common Control with the Company. The term "Control," including the correlative terms "Controlling,""Controlled By," and "Under Common Control with" means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any Company or other ownership interest, by contract or otherwise) of a person or entity. For the purposes of the preceding sentence, Control shall be deemed to exist when a person or entity possesses, directly or indirectly, through one or more intermediaries (i) in the case of a Company more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited

liability company, partnership or joint venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); or (iii) in the case of any other person or entity, more than 50% of the economic or beneficial interest therein. The term Affiliate includes, without limitation, DIRTT Environmental Solutions Inc.

• (c) "Agreement" means this Executive Employment Agreement, as may be amended or supplemented from time to time as provided for herein, and the expressions "hereof', "herein", "hereto", "hereunder", "hereby" and similar expressions refer to this Agreement and unless otherwise indicated, references to Sections are to sections of this Agreement.

• (d). "Board" means the Board of Directors of the Company.

• (e) "Bonus" has the meaning set out in Section 5(c).

• (f) "Business" means the business of designing, manufacturing and installing prefabricated interiors in commercial and residential buildings, and includes, for greater certainty and without limitation: (i) the following products which can be integrated with interior wall solutions: (A) pre-fabricated modular network data cable distribution, (B) pre-fabricated and electrical power cable distribution,

• (C) pre-fabricated modular case goods, and (D) pre-fabricated low-profile flooring;

• (ii) the development and sale or license to third parties of3D computer aided design software for the design, construction and maintenance of buildings and the design, construction, modification and furnishing of building interiors; and (iii) such other business as the Company or any of its Affiliates becomes engaged in during the Term that is related in a material way to the duties and responsibilities of the Executive, and which the Corporation advises the Executive in writing within Twenty (20) days following the Termination Date is part of the Business.

• (g) "Confidential Information" means all confidential or proprietary information, intellectual property (including trade secrets) and confidential facts relating to the business and affairs of the Company and its Affiliates, whether oral or in writing, or presented visually or electronically, and includes, without limitation, business and technical information, marketing and business plans, strategies, research and development materials and matters, databases, specifications, formulations, tooling, prototypes, sketches, models, drawings, specifications, procurement requirements, engineering information, samples, computer software (source and object codes), forecasts, identity of or details about actual or potential customers or projects, techniques, inventions, discoveries, know-how, and trade secrets. Notwithstanding the foregoing, Confidential Information does not include any information:

• (i) that becomes publicly available through no fault or breach of this Agreement by the Executive; or

• (ii) that the Executive possesses prior to the date on which the Executive first became employed or engaged by the Company or any of its Affiliates.

2

• (h) "Distribution Partner" means a Person engaged in the sale of products or services produced or distributed by the Company or any of its Affiliates.

• (i) "ESC" means the Employment Standards Code (Alberta) or such other employment standards legislation as may apply, as amended from time to time.

• G) "Good Reason" means:

• (i) a material diminution in Executive's Salary or authority, duties and responsibilities with the Company and any of the Company's other direct or indirect subsidiaries; provided, however, that if the Executive is serving as an officer or member of the board of Directors (or similar governing body) of the Company or any of its Affiliates, in no event shall the removal of the Executive as an officer or board member, regardless of the reason for such removal, constitute Good Reason;

• (ii) a material breach by the Company of any of its obligations under this Agreement; or

• (iii) the relocation of the geographic location of the Executive's principal place of employment by more than fifty (50) miles from the location of the Executive's principal place of employment as of the Effective Date; provided, however, that travel in the course of Executive's employment (including to other locations of the Company or any of its Affiliates in the United States and Canada) shall not be considered to be a Good Reason event under this Section lG)(iii).

Notwithstanding the foregoing provisions of this Section 1G) or any other provision of this Agreement to the contrary, any assertion by the Executive of a termination for Good Reason shall not be effective unless all of the following conditions are satisfied: (A) the condition described in Section lG)(i), (ii) or (iii) giving rise to the Executive's termination of employment must have arisen without the Executive's consent; (B) the Executive must provide written notice to the Board of the existence of such condition(s) within thirty (30) days after the initial occurrence of such condition(s); (C) the condition(s) specified in such notice must remain uncorrected for thirty (30) days following the Board's receipt of such written notice; and (D) the date of the Executive's termination of employment must occur within sixty (60) days after the initial occurrence of the condition(s) specified in such notice.

• (k) "Just Cause" means any gross negligence, willful misconduct or breach of fiduciary duty by the Executive in relation to the performance of the Executive's duties under this Agreement, any material neglect by the Executive of his duties under this Agreement, or any of the following:

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• (i) fraud, misappropriation, embezzlement or malfeasance on the part of the Executive with respect to the property, interests or funds of the Company or its Affiliates;

• (ii) any misfeasance or nonfeasance in office which is willfully or grossly negligent on the part of the Executive;

• (iii) the material breach by the Executive of any policy of the Company or its Affiliates or the breach by the Executive of any policy or law relating to non-discrimination, non-retaliation or anti-harassment (including without limitation sexual harassment);

• (iv) the breach by the Executive of his obligations under any noncompetition, nonsolicitation, confidentiality or company property covenants under this Agreement;

• (v) the Executive's conviction for an indictable offense or any other crime involving fraud or moral turpitude, or a plea of no contest with regard to any of the same; or

• (vi) any other act or omission by the Executive that would entitle the Company to terminate the Executive's employment for cause under the common law.

• (1) "Materials" has the meaning set out in Section 14(a).

• (m) "Person" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation, with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted.

• (n) "Restricted Period" means twelve (12) months from the Termination Date.

• (o) "Restricted Territory" means: (i) Canada, the United States of America and the countries listed in Schedule "A" hereto; and (ii) any other countries where the Company or any of its Affiliates develop business interests during the Term, and which the Company advises the Executive in writing within twenty (20) days following the Termination Date are part of the Restricted Territory.

• (p) "Salary" has the meaning set out in Section S(a).

• (q) "Severance Period" means twelve (12) months from the Termination Date.

• (r) "Term" has the meaning set out in Section 4.

• (s) "Termination Date" has the meaning set out in Section 8(b).

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2. Employment of the Executive and Position

Commencing on the Effective Date, the Executive shall hold the position of Vice President, Finance and shall report directly to the Chief Financial Officer (CFO). As Vice President, Finance of the Company, the Executive shall perform those duties set forth in any applicable position description adopted and amended by the Company from time to time, and such other duties as the Executive shall reasonably be directed to perform by the Company from time to time in respect of the business and operations of the Company and its Affiliates.

3. Performance of Duties

• (a) During the Term, the Executive shall devote substantially all of his working time and attention to the performance of his duties on behalf of the Company and its Affiliates, shall faithfully, honestly and diligently serve the Company and its Affiliates and shall use his best efforts and skill to promote the best interests of the Company and its Affiliates at all times. Notwithstanding the foregoing, the Executive may devote a reasonable amount of time during non-business hours to charitable organizations and boards, provided that such participation does not adversely impact the performance of his duties hereunder or breach any of the other terms of this Agreement or any other obligation that the Executive owes the Company or any of its Affiliates.

• (b) In performing his duties under this Agreement, the Executive shall comply with any written policies, procedures or rules established by the Company from time to time, as may be amended by the Company at their discretion.

4. Employment Period

The Executive shall be employed by the Company hereunder commencing on the Effective Date, and the Executive's employment hereunder will terminate when written notice of such termination is provided by either the Company or the Executive to the other party. The period that the Executive is employed hereunder is referred to as the "Term".

5. Remuneration

• (a) Base Salary. For the Executive's services under this Agreement, during the Term the Company shall pay the Executive an annualized base salary of $240,000, less required statutory deductions and applicable withholdings (the "Salary").

• (b) Benefits. During the Term, the Executive shall be eligible to participate in the benefit plans made available by the Company to its similarly situated employees from time to time in accordance with, and subject to, the terms and conditions of such plans, as may be amended by the Company at its discretion from time to time. The Company shall not, by reason of this Section 5(b), be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such plan, so long as such changes are similarly applicable to any similarly situated Company employees generally.

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• (c) Bonus. During the Term, the Executive will be eligible to participate in the Company's Variable Pay Plan ("VPP"), as amended from time to time and in accordance with and subject to the terms and conditions thereof and as set out herein. The Executive's annual target bonus opportunity shall be equal to 30% of Salary as in effect at the beginning of the applicable calendar year (the "Target Bonus"). The amount of the Executive's payment under the VPP, if any, in respect of a calendar year (the "Bonus") is dependent upon and calculated in reference to the achievement of applicable performance objectives as set out and evaluated by the Board under the VPP, in its sole discretion. The Bonus, if any, will be paid to the Executive in accordance with the terms of the VPP.

• (d) Equity Based Incentive Compensation. The Executive shall be eligible to receive periodic grants of equity-based incentive compensation from the Company, in such amounts and on such terms as may be established by the Company at its sole discretion, subject to the terms and conditions of the applicable plan (as may be amended by the Company from time to time) and the terms and conditions of the applicable award agreements.

6.

Expenses

The Company shall pay or reimburse the Executive for all reasonable travel and other out-of- pocket expenses incurred or paid by the Executive in the performance of his duties, upon the presentation of expense statements or other supporting documentation as the Company may reasonably require, in accordance with any expense reimburse policies implemented by the Company from time to time. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of such documentation (but in any event not later than the close of the Executive's taxable year following the taxable year in which the expense is incurred by the Executive). In no event shall any reimbursement be made to the Executive for any expenses incurred after the date of the Executive's termination of employment with the Company.

7. Vacation

As of the Effective Date, the Executive shall be eligible for vacation with pay of four (4) weeks per complete calendar year (pro-rated for partial calendar years) that the Executive is employed hereunder. Vacation shall accrue and be taken in accordance with Company vacation policies as in effect from time to time. The Executive may carry forward a maximum of ten (10) vacation days from one year to the next, provided that in each vacation year the Executive shall take or be paid out at least the minimum statutory vacation entitlement under the ESC. Any vacation carried- over must be used in the first quarter of the following calendar year.

8. Termination

• (a) Notice. The Executive's employment hereunder:

(i) may be terminated by the Company at any time for Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 10 of this Agreement;

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• (ii) will terminate automatically upon the death of the Executive;

(iii) may be terminated by the Company at any time without Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 9 of this Agreement;

(iv) may be terminated by the Executive for Good Reason; or

• (v) may be terminated by resignation of the Executive without Good Reason upon providing one (1) month's prior written notice to the Company; provided, however, that if the Executive has provided notice to the Company of the Executive's termination of employment without Good Reason, the Company may determine, in its sole discretion, that such termination shall be effective on any date prior to the effective date of termination provided in such notice subject only to any minimum notice requirements in the ESC (and, if such earlier date is so required, then it shall not change the basis for the Executive's termination of employment nor be construed or interpreted as a termination of employment pursuant to Section 8(a)(iii)).

(b) Effective Date of Termination. The effective date on which the Executive's employment hereunder is terminated (the "Termination Date") shall be:

• (i) in the case of termination under Section 8(a)(i) or Section 8(a)(iii), the day specified by the Company in writing;

• (ii) in the case of termination under Section 8(a)(ii), the date of death; or

• (iii) in the case of termination under Section 8(a)(v), the last day of the applicable notice period referred to in Section l(j); or

• (iv) in the case of termination under Section 8(a)(v), the last day of the applicable notice period referred to therein (unless an earlier date is designated by the Company pursuant to Section 8(a)(v)).

(c) Return of Property, etc. On the Termination Date, the Executive shall (A) be deemed to have resigned from all offices and Directorships held by the Executive with the Company and its Affiliates and agrees to execute, immediately upon request, any such written resignations or other documentation as may be customary to give effect thereto, (B) deliver to the Company (and not retain any copies of) all Materials in the Executive's possession or under the Executive's control, and (C) deliver to the Company any keys, access cards, business cards, credit and charge cards, computer, cell phone or other property or device issued or provided to him by or on behalf of the Company or any Affiliate.

9. Rights on Termination (without Just Cause or for Good Reason)

Upon termination of the Executive's employment by the Company without Just Cause or by the Executive for Good Reason, the following provisions shall apply:

• (a) the Executive shall receive from the Company:

• (i) payment of the Executive's accrued but unpaid Salary up to the Termination Date;

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• (ii) reimbursement of all expenses incurred in accordance with Section 6 up to the Termination Date;

• (iii) provision of all benefits up to the Termination Date in accordance with Section S(b);

• (iv) payment of the Executive's accrued but unused vacation entitlement existing as of the Termination Date (subsections (i) through (iv) are hereinafter referred to as the "Accrued Entitlements");

• (v) subject to Sections 9(a)(viii), (c), (d) and (f), payment of the Bonus earned (if any) for the year in which the termination occurs, pro-rata from the start of that Bonus year to the Termination Date, based on actual performance during the entire Bonus year, as determined by the Company following the Bonus year and payable to the Executive in accordance with Section 5(c) following completion of the Bonus year (the "Accrued Bonus Payment");

• (vi) subject to Sections 9(a)(viii), (c), (d) and (f), the continued payment of Salary during the Severance Period (the "Severance Payment");

• (vii) any equity-based incentive compensation awards held by the Executive shall be dealt with in accordance with the applicable plan terms then in effect; and

• (viii) subject to Section 9(b), (c), (d) and (f), continued eligibility to participate in the benefits provided to the Executive by the Company under Section S(b), not including any short-term disability, long term disability, ad&d, optional life insurance coverages or, in the event any benefits cannot be continued, payment of any amount equal to the Company's cost for such benefits, payable monthly or on a pro-rata basis for any partial months, until the earlier of the conclusion of the statutory notice period or the date the Executive obtains any alternative benefit coverage (the "Benefit Continuation").

• (b) The Accrued Bonus Payment (if any), the Severance Payment and the Benefit Continuation are subject to and conditioned upon the Executive: (A) executing, on or before the Release Expiration Date (as defined below), a release of all claims in a form acceptable to the Company (the "Release"), which Release shall release the Company and each of its Affiliates, and the foregoing entities' respective shareholders, members, partners, officers, managers, Directors, fiduciaries, employees, representatives, agents and benefit plans (and fiduciaries of such plans) from any and all claims, including any and all causes of action arising out of the Executive's employment and engagement with the Company and any of its Affiliates or the termination of such employment and engagement, but excluding those payments and benefits agreed to be made or provided by the Company under Section 9(a)(v), (vi), (vii) and (viii) ; and (B) abiding by the terms of each of Sections 11, 12, 13, 14 and 15.

• (c) The Severance Payment will be divided into a number of substantially equal installments equal to the number of months during the applicable Severance Period, subject only to the requirements of the ESC regarding the payment of minimum statutory termination pay.

• (d) If the Release is not executed and returned to the Company on or before the Release Expiration Date, then the Executive shall not be entitled to any portion of the Accrued

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Bonus Payment (if any), the Severance Payment or the Benefit Continuation, subject only to the minimum requirements of the ESC regarding termination notice or pay in lieu of notice. As used herein, the "Release Expiration Date" is that date that is twenty-one (21) days following the date upon which the Company delivers the Release to the Executive (which shall occur no later than seven (7) days after the Termination Date).

• (e) The payments and benefits referred to in Section 9 are not subject to mitigation and will not be reduced by any amounts received by the Executive in mitigation during the Severance Period.

• (f) Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that the Executive is eligible to receive the Accrued Bonus Payment (if any), the Severance Payment or the Benefit Continuation pursuant to this Section 9 but, after such determination, the Company subsequently acquires evidence or determines that: (i) the Executive has failed to abide by the terms of Sections 11, 12, 13, 14 or 15; (ii) a Cause condition existed prior to the Termination Date that, had the Company been fully aware of such condition, would have given the Company the right to terminate the Executive's employment pursuant to Section 8(a)(i); or (iii) the Executive has failed to advise the Company that the Executive has obtained alternative benefit coverage, then the Company shall have the right to cease the payment of the Accrued Bonus Payment (if any), any future installments of the Severance Payment and the Benefit Continuation and the Executive shall promptly return to the Company: (A) in the case of Section 9(f)(i) or (ii) the full Accrued Bonus Payment (if any), all installments of the Severance Payment and the full value of the Benefit Continuation received by the Executive; or (B) in the case of Section 9(f)(iii), the full value of the Benefit Continuation received by the Executive.

10. Rights on Termination for Just Cause or Resignation without Good Reason

Upon resignation by the Executive other than for Good Reason or termination by the Company for Just Cause, the Executive shall be entitled only to the Accrued Entitlements.

11. Non-Competition

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive's employment or the party causing it), within the Restricted Territory, be engaged or participate, either directly or indirectly in any manner including, without limitation, as an officer, Director, shareholder, owner, partner, member, joint venturer, employee, independent contractor, consultai1t, advisor or sales representative, in any business or enterprise that competes with or is intending to compete with the Business of the Company or any of its Affiliates. Notwithstanding the foregoing, the Executive shall be permitted to own (as a passive investment) not more than two percent (2%) of the issued shares of a Company (including unexercised options or similar rights to acquire shares at a later date), the shares of which are listed on a recognized stock exchange or traded in the over the counter market, which carries on a business which is the same as or substantially similar to or which competes with or reasonably would compete with the Business.

12. Non-Solicitation and No Hire

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive's employment or the party causing it):

• (a) solicit, entice or attempt to solicit or entice, either directly or indirectly, any customer or prospective customer of the Company or any of its Affiliates as at the Termination Date,

9

or at any time during the twelve (12) months prior to the Termination Date, to become a customer of any business or enterprise that competes with the Company or any of its Affiliates for any Business, or to limit or cease doing any Business with the Company or its Affiliate; or

• (b) solicit or entice, or attempt to solicit or entice, or hire, either directly or indirectly, any employee or Distribution Partner of the Company or an Affiliate as at the Termination Date, or during the twelve (12) months prior to the Termination Date, to become employed or engaged by any business or enterprise that competes with the Company or any of its Affiliate for any Business, or solicit or entice such employee or Distribution Partner to limit or cease their employment or engagement with the Company or any of its Affiliate.

13. Confidentiality

In the course of the Executive's employment hereunder, the Company will provide the Executive with (and the Executive will have access to) Confidential Information. The Executive shall not, either during the Term or at any time thereafter, directly or indirectly, use or disclose to any Person any Confidential Information, provided, however, that nothing in this section shall preclude the Executive from disclosing or using Confidential Information if:

• (a) the Confidential Information is disclosed in the course of performing the Executive's duties on behalf of the Company or any of its Affiliates;

• (b) the Confidential Information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement;

• (c) the Confidential Information was in the possession of or known to the Executive, without any obligation to keep it confidential, before it was disclosed to the Executive by the Company or any of its Affiliates; or

• (d) disclosure of the Confidential Information is required to be made by any law, regulation, governmental body or authority, or by court order.

Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict the Executive from lawfully (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to the Executive from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law.

14. Proprietary and Moral Rights

• (a) Proprietary Rights. The Executive recognizes the Company's and its Affiliates' proprietary rights in the tangible and intangible property of the Company and its Affiliates and acknowledges that the Executive has not obtained or acquired and shall not obtain or acquire any right, title or interest, in any of the property of the Company or its Affiliates or any of their respective predecessors, successors, affiliates or related companies. Accordingly, any writing, communications, manuals, documents, instruments, contracts, agreements, files, literature, data, information, formulas, products, devices, apparatuses, trademarks, trade names, trade styles, service marks, logos, and any other intellectual property created, developed, made or conceived by the Executive either alone or in

10

conjunction with others: (i) in connection with the Executive's duties or responsibilities under this Agreement; and/or (ii) resulting from the use of any information, equipment, materials or premises owned, leased, or contracted for by the Company or any of its Affiliates (collectively, the "Materials") shall be the sole and exclusive property of the Company and its Affiliates (as applicable).

• (b) Waiver of Moral Rights. The Executive irrevocably waives, to the greatest extent permitted by law, all of the Executive's moral rights whatsoever in the Materials, including any right to the integrity of any Materials, any right to be associated with any Materials, and any right to restrict or prevent the modification or use, of any Materials in any way whatsoever. To the extent applicable, the Executive irrevocably transfers to the Company all rights to restrict any violations of moralrights in any of the Materials, including any distortion, mutilation or other modification.

• (c) Assignment of Rights. To the extent that the Executive may own or otherwise acquire any right, title or interest in and to any Materials (including any intellectual property rights in the Materials) during the term of this Agreement and thereafter, the Executive agrees to assign, and hereby irrevocably assigns, all such right, title and interest automatically to the Company, including any renewals, extensions or reversions relating thereto and any right to bring an action or to collect compensation for past infringements, automatically upon the creation, development, making, or conception of same. At the expense and request of the Company, the Executive shall, both during and after the Executive's employment with the Company, promptly execute all documents and do all other acts necessary in order to enable the Company to perfect its rights in any such assignment of Executive's rights in the Materials.

• (d) Registrations. The Company will have the exclusive right to obtain copyright registrations, letters patent, industrial design registrations, trade-mark registrations or any other protection in respect of the Materials and the intellectual property rights relating to the Materials anywhere in the world. At the expense and request of the Company, the Executive shall, both during and after the Executive's employment with the Company, promptly execute all documents and do all other acts necessary in order to enable the Company to protect its rights in any of the Materials and the intellectual property rights relating to the Materials.

15. Fiduciary and other Obligations

The Executive acknowledges that the obligations contained in Sections 11, 12, 13 and 14 of this Agreement are in addition to any statutory, fiduciary and other common law obligations that the Executive also owes to the Company and its Affiliates, during and after the Term. For greater certainty, nothing contained in this Agreement is a waiver, release or reduction of any statutory, fiduciary or common law obligations owed by the Executive to the Company and its Affiliates.

16. Indemnification

If the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a "Proceeding"), other than any Proceeding initiated by the Executive or the Company or any of its Affiliates related to any contest or dispute between the Executive and the Company or any of its Affiliates with respect to this Agreement or the Executive's

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employment or service hereunder, the Executive shall be indemnified and held harmless by the Company to the maximum extent permitted under the Company's governing documents from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys' fees); provided, however, that the Executive shall not be indemnified and held harmless pursuant to this Agreement if there has been a final and non-appealable judgment entered by an arbitrator or court of competent jurisdiction determining that, in respect of the matter for which the Executive is seeking indemnification pursuant to this Agreement, the Executive acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Executive's conduct was unlawful, or if the Executive would otherwise not be entitled to indemnification pursuant to any applicable governing document of the Company.

17. Notices

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by hand delivery or express overnight courier service or internationally- recognized secondday courier service or email as hereinafter provided. Notice of change of address shall also be governed by this section. Notices shall be deemed to have been duly received

(a) when delivered in person if given by hand delivery, (b) when sent by email transmission on a business day to the email address set forth below, if applicable; provided, however, that if a notice is sent by email transmission after normal business hours of the recipient or on a non-business day, then it shall be deemed to have been received on the next business day after it is sent, (c) on the first business day after such notice is sent by express overnight courier service, or (d) on the second business bay following deposit with an internationally-recognized second-day courier service with proof of receipt maintained. Notices and other communications shall be addressed as follows:

• (a) if to the Executive:

JEFF METCALF

• (b) if to the Company:

DIRTT Environmental Solutions 7303 30[th] Street, SE Calgary AB T2C 1N6 Attention: General Counsel

18. Headings

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.

19. Applicable Deductions and Withholdings

The payments and benefits set forth in this Agreement are subject to all applicable statutory deductions and withholdings including, without limitation: (a) all federal, provincial, local and other taxes as may be required pursuant to any law or governmental regulation or ruling and (b) any deductions consented to in writing by the Executive.

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20. Reasonableness and Enforceability of Restrictions

• (a) The Company shall provide the Executive access to Confidential Information for use only during the Term, and the Executive acknowledges and agrees that the Company and its Affiliates will be entrusting the Executive, in the Executive's unique and special capacity, with developing the goodwill of the Company and its Affiliates, and as an express incentive for the Company to enter into this Agreement and employ the Executive hereunder, the Executive has voluntarily agreed to the covenants set forth in Section 11 and Section 12.

• (b) The Executive acknowledges and agrees that all of the restrictions contained in Sections 11, 12, 13 and 14 of this Agreement (including without limitation the definition of Business, the definition of Restricted Territory (which fairly reflects the geographic scope of the Business activities carried on by the Company and its Affiliates) and the length of the Restricted Period) are reasonable in all respects and necessary to protect the Confidential Information and other legitimate interests of the Company and its Affiliates, and will not unduly restrict the Executive's ability to secure alternative employment following the termination of the Executive's employment for any reason. If any covenant or provision (or part thereof) of this Agreement is determined by a court of competent jurisdiction to be void or unenforceable in whole or in part, for any reason, it shall be interpreted to provide the broadest possible restriction permitted by law and will be deemed not to affect or impair the validity of any other covenant or provision of this Agreement, which shall remain in full force and effect.

• (c) The Executive acknowledges and agrees the Company and the Affiliate will suffer irreparable harm in the event that the Executive breaches any of its obligations under Sections 11, 12, 13, 14 or 15 of this Agreement, and that monetary damages would be impossible to quantify and inadequate to compensate the Company and its Affiliates for such a breach. Accordingly, the Executive agrees that in the event of any breach or a threatened breach by the Executive of any of the provisions of this Agreement, the Company and each of its Affiliates shall be entitled to seek, in addition to any other rights, remedies or damages available to the Company at law or in equity, an interim and permanent injunction, in order to prevent or restrain any such breach or threatened breach by the Executive, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security.

• (d) The restrictions and obligations of the Executive under Sections 11, 12, 13, 14 or 15 of this Agreement shall survive the termination of this Agreement for any reason.

21. Third-Party Beneficiaries

Each other Affiliate of the Company that is not a signatory to this Agreement shall be a third-party beneficiary of the Executive's representations, covenants, and obligations under Sections 11, 12, 13, 14 and 15 and shall be entitled to enforce such representations, covenants, and obligations as if a party hereto.

22. Entire Agreement, Amendment, No Waiver

This Agreement constitutes the entire agreement between the parties hereto and between the Executive and any other Affiliate of the Company regarding the subject matter hereof, and shall supersede and replace any and all prior agreements, undertakings, representations or negotiations. There are no warranties, representations or agreements between the parties except as specifically set forth or referred to in this Agreement. Except as expressly provided in this Agreement, no amendment or waiver of this Agreement

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shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall the waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

23. Assignment

Neither the Executive nor the Company may assign its rights hereunder without the consent of the other party; provided, however, that the Company may assign its rights hereunder without the Executive's consent to any Affiliate of the Company or to a successor Company which acquires (whether directly or indirectly, by purchase, amalgamation, arrangement, merger, consolidation, dissolution or otherwise) all or substantially all of the business and/or assets of the Company and expressly assumes and agrees to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

24. Currency

All amounts in this Agreement are in Canadian currency unless otherwise specified

25. Governing Law; Submission to Jurisdiction

This Agreement shall be governed by and construed in accordance with the laws of the Province of Albe1ia and the laws of Canada applicable therein. The Corporation and the Executive irrevocably submit to the executive jurisdiction of the courts of Alberta in respect of all matters relating to this Agreement, with the exception of any obligations of the Executive under Sections 11, 12, 13, 14 or 15 of this Agreement, which the Corporation may enforce in the courts of another jurisdiction where warranted in the opinion of the Corporation.

26. Severability

If court of competent jurisdiction determines that any provision of this Agreement (or portion thereof) is invalid or unenforceable, then the invalidity or unenforceability of that provision (or portion thereof) shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

27. Waiver or Breach

Any waiver of this Agreement must be executed by the party to be bound by such waiver. No waiver by either party hereto of a breach of any provision of this Agreement by the other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of either party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time.

28. Clawback

Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company, whether in existence as of the Effective Date or later adopted, pursuant to any

14

such law, government regulation or stock exchange listing requirement), subject only to any minimum statutory requirements of the ESC.

29. Counterparts

This Agreement may be signed in counterparts and by facsimile or .pdf electronic mail transmission and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument.

IN WITNESS WHEREOF the parties acknowledge and agree that they have read and understand the terms of this Agreement, and that they have had an opportunity to seek independent legal advice prior to entering into this Agreement and have executed this Agreement as of the Effective Date.

DIRTT ENVIRONMENTAL SOLUTIONS LTD

By : /s/ Geoff Krause Geoffrey D. Krause Chief Financial Officer By : /s/ Jeff Metcalf Jeff Metcalf

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SCHEDULE "A"

List of additional countries in the Restricted Territory as of the Effective Date of this Agreement:

• Saudi Arabia

• United Arab Emirates

• Yemen

• Qatar

• Kuwait

• Oman

• Jordan

• Lebanon

• Syria

• Iraq

• Egypt

• Libya

• Sudan

• Territory generally known as Kurdistan

Exhibit 10.4

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is entered into on June 22, 2022

BETWEEN:

DIRTT ENVIRONMENTAL SOLUTIONS, INC.

(the “ Company ”)

• and -

Benjamin N. Urban (the “ Executive ”)

RECITALS:

• A. The Company wishes to employ the Executive pursuant to this Employment Agreement.

• B. The Executive wishes to accept employment with the Company under this Agreement.

• C. The parties agree that their employment relationship will be governed by the terms and conditions of this Agreement, commencing the Effective Date.

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Company and the Executive agree as follows:

1. Definitions

In this Agreement,

• (a) “ Accrued Entitlements ” has the meaning set out in Section 9(a)(iv).

• (b) “ Affiliate ” means any person or entity Controlling, Controlled by, or Under Common Control with the Company. The term “ Control ,” including the correlative terms “ Controlling ,” “ Controlled By ,” and “ Under Common Control with ” means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any Company or other ownership interest, by contract or otherwise) of a person or entity. For the purposes of the preceding sentence, Control shall be deemed to exist when a person or entity possesses, directly or indirectly, through one or more intermediaries (i) in the case of a company, more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership or joint venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); or (iii) in the case of any other person or entity, more than 50% of the economic or beneficial interest therein. For the avoidance of doubt, with respect to the Company, the term Affiliate includes the Parent.

• (c) “ Agreement ” means this Employment Agreement, as may be amended or supplemented from time to time as provided for herein.

• (d) “ Board ” means the Board of Directors of the Parent.

• (e) “ Bonus ” has the meaning set out in Section 5(c).

• (f) “ Business ” means the business of designing, manufacturing and installing prefabricated interiors in commercial and residential buildings, and includes, for greater certainty and without limitation: (i) the following products which can be integrated with interior wall

solutions: (A) pre-fabricated modular network data cable distribution, (B) pre-fabricated and electrical power cable distribution, (C) pre-fabricated modular case goods, and (D) prefabricated low-profile flooring; (ii) the development and sale or license to third parties of 3D

computer aided design software for the design, construction and maintenance of buildings and the design, construction, modification and furnishing of building interiors; and (iii) such other business as the Company or any of its Affiliates becomes engaged in during the Term that is related in a material way to the duties and responsibilities of the Executive.

• (g) “ Confidential Information ” means all confidential or proprietary information, intellectual property (including trade secrets) and confidential facts relating to the business and affairs of the Company and its Affiliates, whether oral or in writing, or presented visually or electronically, and includes business and technical information, marketing and business plans, strategies, research and development materials and matters, databases, specifications, formulations, tooling, prototypes, sketches, models, drawings, specifications, procurement requirements, engineering information, samples, computer software (source and object codes), forecasts, identity of or details about actual or potential customers or projects, techniques, inventions, discoveries, know-how, and trade secrets. Notwithstanding the foregoing, Confidential Information does not include any information:

• (i) that becomes publicly available through no fault or breach of this Agreement by the Executive; or

• (ii) that the Executive possesses prior to the date on which the Executive first became employed or engaged by the Company or any of its Affiliates and that the Executive obtained from a source other than the Company or any of its Affiliates.

• (h) “ Distribution Partner ” means a Person engaged in the sale of products or services produced or distributed by the Company or any of its Affiliates.

• (i) “ Good Reason ” means:

• (i) a material diminution in the Executive’s Salary or authority, duties and responsibilities with the Company, the Parent and any of the Parent’s other direct or indirect subsidiaries; provided, however, that if the Executive is serving as an officer or member of the board of directors (or similar governing body) of the Parent, the Company or any of their Affiliates, in no event shall the removal of the Executive as an officer or board member, regardless of the reason for such removal, constitute Good Reason;

• (ii) a material breach by the Company of any of its obligations under this Agreement; or

• (iii) subject to section 3(c), the relocation of the geographic location of the Executive’s principal place of employment by more than fifty (50) miles from the location of the Executive’s principal place of employment as of the Effective Date; provided , however , that travel in the course of Executive’s employment (including to other locations of the Company and Parent in the United States and Canada) shall not be considered to be a Good Reason event under this Section 1(i)( iii ).

Notwithstanding the foregoing provisions of this Section 1(i) or any other provision of this Agreement to the contrary, any assertion by the Executive of a termination for Good Reason shall not be effective unless all of the following conditions are satisfied: (A) the condition described in Section 1(i)( i ), ( ii ) or ( iii ) giving rise to the Executive’s termination of employment must have arisen without the Executive’s consent; (B) the Executive must provide written notice to the Board of the existence of such condition(s) within thirty (30) days after the initial occurrence of such condition(s); (C) the condition(s) specified in such

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notice must remain uncorrected for thirty (30) days following the Board’s receipt of such

written notice; and (D) the date of the Executive’s termination of employment must occur within sixty (60) days after the initial occurrence of the condition(s) specified in such notice.

• (j) “ Just Cause ” means any gross negligence, willful misconduct or breach of fiduciary duty by the Executive in relation to the performance of the Executive’s duties under this Agreement, any material neglect by the Executive of her duties under this Agreement, or any of the following:

• (i) fraud, misappropriation, embezzlement or malfeasance on the part of the Executive with respect to the property, interests or funds of the Company or its Affiliates;

• (ii) any misfeasance or nonfeasance in office which is willfully or grossly negligent on the part of the Executive;

• (iii) the breach by the Executive of any policy of the Company or its Affiliates or the breach by the Executive of any policy or law relating to non-discrimination, nonretaliation or anti-harassment (including sexual harassment);

• (iv) the breach by the Executive of her obligations under any noncompetition, nonsolicitation, confidentiality or company property covenants under this Agreement; or

• (v) the Executive’s conviction for a felony or indictable offense or any other crime involving fraud or moral turpitude, or a plea of no contest with regard to any of the same.

• (k) “ Materials ” has the meaning set out in Section 14(a).

• (l) “ Parent ” means DIRTT Environmental Solutions Ltd.

• (m) “ Person ” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation, with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted.

• (n) “ Restricted Period ” means twelve (12) months from the Termination Date, plus one (1) month per completed year of service from the Effective Date, to a maximum of eighteen (18) months.

• (o) “ Restricted Territory ” means: Canada, the United States of America and any other countries as the Company or any of its Affiliates develop business interests during the Term, and which the Company advises the Executive in writing within twenty (20) days following the Termination Date are part of the Restricted Territory.

• (p) “ Salary ” has the meaning set out in Section 5(a).

• (q) “ Severance Period ” means twelve (12) months from the Termination Date, plus one month per completed year of service from the Effective Date, to a maximum of eighteen (18) months.

• (r) “ Term ” has the meaning set out in Section 4.

• (s) “ Termination Date ” has the meaning set out in Section 8(b).

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2. Employment of the Executive and Position

Commencing on June 27, 2022 (the “ Effective Date ”), the Executive shall hold the position of Chief Executive Officer and shall report directly to the Board. As Chief Executive Officer of the Company, the Executive shall perform those duties set forth in any applicable position description adopted and amended by the Company from time to time, and such other duties as the Executive shall reasonably be directed to perform by the Company from time to time in respect of the business and operations of the Company, the Parent and their Affiliates.

3. Performance of Duties

• (a) During the Term, the Executive shall devote his full working time and attention to the performance of his duties on behalf of the Company and its Affiliates, shall faithfully, honestly and diligently serve the Company and its Affiliates and shall use his best efforts and skill to promote the best interests of the Company and its Affiliates at all times. Notwithstanding the foregoing, the Executive may devote a reasonable amount of time during non-business hours to charitable organizations and boards, provided that such participation does not adversely impact the performance of his/her duties hereunder or breach any of the other terms of this Agreement or any other obligation that the Executive owes the Company or any of its Affiliates.

• (b) In performing his duties under this Agreement, the Executive shall comply with any written policies, procedures or rules established by the Company or Parent from time to time, as may be amended by the Company or Parent at their discretion.

• (c) The Executive’s principal place of employment as of the Effective Date shall be the Company’s offices in Plano, Texas; provided, however , the Executive will be required to relocate to the Company’s offices in Calgary, Alberta no later than September 1, 2022 and such relocation will not constitute a Good Reason event under Section 1(i)( iii ). The Executive also acknowledges and agrees that business travel will be required in the course of performing his duties. Parent will assist the Executive with obtaining a Canadian work permit to enable Executive to relocate to the Company’s offices in Calgary, Alberta, and upon obtaining such work permit, the Executive and Parent will enter into an amended and restated Employment Agreement with such changes as are necessary to give effect to such relocation.

4. Employment Period

The Executive shall be employed by the Company hereunder commencing on the Effective Date, and the Executive’s employment hereunder will terminate upon the Termination Date (as defined below). The period that the Executive is employed hereunder is referred to as the “ Term ”.

1. Remuneration

2. (a) Base Salary. For the Executive’s services under this Agreement, during the Term, the Company shall pay the Executive an annualized base salary of Three Hundred Seventyfive Thousand Dollars ($375,000), less required deductions and applicable withholdings (the “ Salary ”).

3. (b) Benefits. During the Term, the Executive shall be eligible to participate in the benefit plans made available by the Company to its similarly situated employees from time to time in accordance with, and subject to, the terms and conditions of such plans as may be amended by the Company at its discretion from time to time. The Company shall not, by reason of this Section 5(b), be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such plan, so long as such changes are similarly applicable to any similarly situated Company employees generally.

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• (c) Bonus. During the Term, the Executive will be eligible to participate in the Parent’s Variable Pay Plan (“ VPP ”), as amended from time to time and in accordance with and subject to the terms and conditions thereof and as set out therein. The Executive’s annual target bonus opportunity (the “ Bonus ”) will be as established by the Board from time to time. For the 2022 calendar year, Executive will not participate in the VPP, but instead will be eligible for a special Bonus with a target payout of 300% of Executive’s prorated 2022 annual Salary (the “ 2022 Bonus Opportunity ”). The amount of the Executive’s payment under either the VPP or the 2022 Bonus Opportunity, if any, in respect of a calendar year shall be dependent upon, calculated in reference to, and paid in accordance with, the achievement of applicable performance objectives as set out and evaluated by the Board in its sole discretion.

• (d) Equity Based Incentive Compensation. The Executive will be eligible to receive grants of equity-based incentives under the Company's 2020 Long Term Incentive Plan or other equity-based incentive arrangements, each as amended from time to time and in accordance with and subject to the terms thereof, provided, however, that Executive shall not be entitled to any equity-based incentives for the 2022 calendar year. The amount and type of the equity-based incentives for any year will be determined by the Board and may change from year to year.

6. Expenses

• (a) General. The Company shall pay or reimburse the Executive for all reasonable travel and other out-of-pocket expenses incurred or paid by the Executive in the performance of his duties hereunder.

• (b) Relocation Expenses. The Company shall pay or reimburse the Executive for all reasonable, standard and customary moving expenses incurred between the Effective Date and December 31, 2022, up to a maximum of $15,000, and Executive shall be entitled to an additional $2,500 for use towards his relocation (together, the “ Relocation Payment ”). If any portion of the Relocation Payment provided to or for the benefit of the Executive results in taxable income to the Executive, the Company shall provide the Executive with an amount equal to any income and other taxes payable by the Executive upon the provision of such Relocation Payment (and an additional amount equal to any taxes imposed on such tax gross-up amount), such that the Executive shall not incur any tax costs with respect to such Relocation Payment.

• (c) Tax Preparation Expenses. The Company shall reimburse the Executive for reasonable and necessary legal and/or accounting fees incurred in the preparation of the Executive’s income tax returns, up to a maximum of $5,000 per year.

The payment or reimbursement of expenses in this Section 6 shall be made upon the presentation of expense statements or other supporting documentation as the Company may reasonably require, in accordance with any expense reimburse policies implemented by the Company from time to time. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of such documentation (but in any event not later than the close of the Executive’s taxable year following the taxable year in which the expense is incurred by the Executive). In no event shall any reimbursement be made to the Executive for any expenses incurred after the date of the Executive’s termination of employment with the Company.

7. Vacation

As of the Effective Date, the Executive shall be eligible for vacation with pay of up to four (4) weeks per complete calendar year (pro-rated for partial calendar years) that the Executive is employed hereunder. Vacation eligibility will be increased by 1 (one) week per year for every five (5) completed years of the Executive’s service from the Effective Date, to a maximum of up to six (6) weeks per complete calendar

year. Vacation shall accrue and be taken in accordance with Company vacation policies as in effect from

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time to time. The Executive may carry forward a maximum of ten (10) vacation days from one year to the next. Any vacation carried over must be used in the first quarter of the following calendar year.

8. Termination

• (a) Notice. The Executive’s employment hereunder:

• (i) may be terminated by the Company at any time for Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 10 of this Agreement;

• (ii) will terminate automatically upon the death of the Executive;

• (iii) may be terminated by the Company at any time without Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 9 of this Agreement;

• (iv) may be terminated by the Executive for Good Reason; or

• (v) may be terminated by resignation of the Executive without Good Reason upon providing one (1) month’s prior written notice to the Company; provided , however , that if the Executive has provided notice to the Company of the Executive’s termination of employment without Good Reason, the Company may determine, in its sole discretion, that such termination shall be effective on any date prior to the effective date of termination provided in such notice (and, if such earlier date is so required, then it shall not change the basis for the Executive’s termination of employment nor be construed or interpreted as a termination of employment pursuant to Section 8(a)(iii)).

• (b) Effective Date of Termination. The effective date on which the Executive’s employment hereunder is terminated (the “ Termination Date ”) shall be:

• (i) in the case of termination under Section 8(a)(i) or Section 8(a)(iii), the day specified by the Company in writing;

• (ii) in the case of termination under Section 8(a)(ii), the date of death; or

• (iii) in the case of termination under Section 8(a)(iv), the last day of the applicable notice period referred to in Section 1(i); or

• (iv) in the case of termination under Section 8(a)(v), the last day of the applicable notice period referred to therein (unless an earlier date is designated by the Company pursuant to Section 8(a)(v)).

• (c) Return of Property, etc. On the Termination Date, the Executive shall (i) be deemed to have automatically resigned from all offices and directorships held by the Executive with the Company and its Affiliates and agrees to execute, immediately upon request, any such written resignations or other documentation as may be requested by the Company with respect thereto, (ii) deliver to the Company (and not retain any copies of) all Materials in the Executive’s possession or under the Executive’s control, and (iii) deliver to the Company any keys, access cards, business cards, credit and charge cards, computer, cell phone or other property or device issued or provided to him by or on behalf of the Company or any Affiliate.

9. Rights on Termination (without Just Cause or for Good Reason)

Upon termination of the Executive’s employment by the Company without Just Cause or by the Executive for Good Reason, the following provisions shall apply:

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• (a) the Executive shall receive from the Company:

• (i) payment of the Executive’s accrued but unpaid Salary up to the Termination Date;

• (ii) reimbursement of all expenses incurred in accordance with Section 6 up to the Termination Date;

• (iii) provision of all benefits up to the Termination Date in accordance with Section 5(b);

• (iv) payment of the Executive’s accrued but unused vacation entitlement existing as of the Termination Date (subsections (i) through (iv) are hereinafter referred to as the “ Accrued Entitlements ”);

• (v) subject to the final sentence of Section 5(c), and Sections 9(b), and (d), payment of the Bonus earned (if any) for the year in which the termination occurs, pro-rata from the start of that Bonus year to the Termination Date, based on actual performance during the entire Bonus year, as determined by the Company following the Bonus year and payable to the Executive in accordance with Section 5(c) following completion of the Bonus year (the “ Accrued Bonus Payment ”);

• (vi) subject to Sections 9(b), (c), and (d), the continued payment of Salary during the Severance Period (such payment, the “ Severance Payment ”), in accordance with the Company’s ordinary payroll practices;

• (vii) any equity-based incentive compensation awards held by the Executive shall be dealt with in accordance with the applicable plan terms then in effect; and

• (viii) subject to Section 9(b), and (d), for the portion, if any, of the Severance Period that the Executive elects to continue coverage for the Executive and the Executive’s spouse and eligible dependents, if any, under the Company’s group health plans pursuant to Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), the Company shall promptly reimburse the Executive on a monthly basis for the difference between the amount the Executive pays to effect and continue such coverage and the employee contribution amount that similarly situated employees of the Company pay for the same or similar coverage under such group health plans (the “ COBRA Benefit ”). Each payment of the COBRA Benefit shall be paid to Executive on the Company’s first regularly scheduled pay date in the calendar month immediately following the calendar month in which the Executive submits to the Company documentation of the applicable premium payment having been paid by the Executive, which documentation shall be submitted by the Executive to the Company within thirty (30) days following the date on which the applicable premium payment is paid. The Executive shall be eligible to receive such reimbursement payments until the earliest of: (x) the last day of the Severance Period; (y) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (z) the date on which the Executive becomes eligible to receive coverage under a group health plan sponsored by another employer (and any such eligibility shall be promptly reported to the Company by the Executive); provided, however, that the election of COBRA continuation coverage and the payment of any premiums due with respect to such COBRA continuation coverage shall remain the Executive’s sole responsibility,

and the Company shall not assume any obligation for payment of any such premiums relating to such COBRA continuation coverage. Notwithstanding the foregoing, if the provision of the benefits described in this paragraph cannot be provided in the manner described above without penalty, tax or other adverse impact on the Company or any of its Affiliates, then the Company and the Executive shall negotiate in good faith to determine an alternative manner in which

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the Company may provide substantially equivalent benefits to the Executive without such adverse impact on the Company or such other Affiliate.

• (b) The Accrued Bonus Payment (if any), the Severance Payment and the COBRA Benefit are subject to and conditioned upon the Executive: (i) executing, on or before the time provided by the Company to do so (which shall not be less than ten (10) days), and not revoking within any time provided by the Company to do so, a release of all claims in favor of, and in a form acceptable to the Company.

• (c) To the extent, if any, that the aggregate amount of the installments of the Severance Payment that would otherwise be paid after March 15 of the calendar year following the calendar year in which the Termination Date occurs (the “ Applicable March 15 ”) exceeds the maximum exemption amount under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), then such excess shall be paid to the Executive in a lump sum on the Applicable March 15 (or the first Business Day preceding the Applicable March 15 if the Applicable March 15 is not a Business Day) and the installments of the Severance Payment payable after the Applicable March 15 shall be reduced by such excess (beginning with the installment first payable after the Applicable March 15 and continuing with the next succeeding installment until the aggregate reduction equals such excess), and (ii) all remaining installments of the Severance Payment, if any, that would otherwise be paid pursuant to the preceding provisions of this Section 9(c) after December 31 of the calendar year following the calendar year in which the Termination Date occurs shall be paid with the installment of the Severance Payment, if any, due in December of the calendar year following the calendar year in which the Termination Date occurs.

10. Rights on Termination for Just Cause or Resignation without Good Reason

Upon resignation by the Executive other than for Good Reason or termination by the Company for Just Cause, the Executive shall be entitled only to the Accrued Entitlements.

11. Non-Competition

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it), within the Restricted Territory, be engaged or participate, either directly or indirectly in any manner including as an officer, director, shareholder, owner, partner, member, joint venturer, employee, independent contractor, consultant, advisor or sales representative, in any business or enterprise that competes with or is intending to compete with the Business of the Company or any of its Affiliates. Notwithstanding the foregoing, the Executive shall be permitted to own (as a passive investment) not more than two percent (2%) of the issued shares of a Company (including unexercised options or similar rights to acquire shares at a later date), the shares of which are listed on a recognized stock exchange or traded in the over the counter market, which carries on a business which is the same as or substantially similar to or which competes with or reasonably would compete with the Business.

12. Non-Solicitation and No Hire

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it):

• (a) solicit, entice or attempt to solicit or entice, either directly or indirectly, any customer or prospective customer of the Company or any of its Affiliates about whom or which the

Executive obtains Confidential Information or for whom or which the Executive has responsibility as at the Termination Date, or at any time during the twelve (12) months prior to the Termination Date, to become a customer of any business or enterprise that competes with the Company or any of its Affiliates for any Business, or to limit or cease doing any Business with the Company or its Affiliate; or

• (b) solicit or entice, or attempt to solicit or entice, or hire, either directly or indirectly, any

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employee or Distribution Partner of the Company or an Affiliate as at the Termination Date, or during the twelve (12) months prior to the Termination Date, to become employed or engaged by any business or enterprise that competes with the Company or any of its Affiliate for any Business, or solicit or entice such employee or Distribution Partner to limit or cease their employment or engagement with the Company or any of its Affiliate.

13. Confidentiality

In the course of the Executive’s employment hereunder, the Company will provide the Executive with (and the Executive will have access to) Confidential Information. The Executive shall not, either during the Term or at any time thereafter, directly or indirectly, use or disclose to any Person any Confidential Information, provided, however, that nothing in this section shall preclude the Executive from disclosing or using Confidential Information if:

• (a) the Confidential Information is disclosed in the course of performing the Executive’s duties on behalf of the Company or any of its Affiliates;

• (b) the Confidential Information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement;

• (c) the Confidential Information was in the possession of or known to the Executive, without any obligation to keep it confidential, before it was disclosed to the Executive by the Company or any of its Affiliates; or

• (d) disclosure of the Confidential Information is required to be made by any law, regulation, governmental body or authority, or by court order.

Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict the Executive from lawfully (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to the Executive from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires the Executive to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify the Company that the Executive has engaged in any such conduct.

14. Proprietary and Moral Rights

• (a) Proprietary Rights. The Executive recognizes the Company’s and its Affiliates’ proprietary rights in the tangible and intangible property of the Company and its Affiliates and acknowledges that the Executive has not obtained or acquired and shall not obtain or

acquire any right, title or interest, in any of the property of the Company or its Affiliates or any of their respective predecessors, successors, affiliates or related companies. Accordingly, any writing, communications, manuals, documents, instruments, contracts, agreements, files, literature, data, information, formulas, products, devices, apparatuses, trademarks, trade names, trade styles, service marks, logos, and any other intellectual property created, developed, made or conceived by the Executive either alone or in conjunction with others: (i) in connection with the Executive’s duties or responsibilities under this Agreement; and/or (ii) resulting from the use of any information, equipment,

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materials or premises owned, leased, or contracted for by the Company or any of its Affiliates (collectively, the “ Materials ”) shall be the sole and exclusive property of the Company and its Affiliates (as applicable).

• (b) Waiver of Moral Rights. The Executive irrevocably waives, to the greatest extent permitted by law, all of the Executive’s moral rights whatsoever in the Materials, including any right to the integrity of any Materials, any right to be associated with any Materials, and any right to restrict or prevent the modification or use, of any Materials in any way whatsoever. To the extent applicable, the Executive irrevocably transfers to the Company all rights to restrict any violations of moral rights in any of the Materials, including any distortion, mutilation or other modification.

• (c) Assignment of Rights. To the extent that the Executive may own or otherwise acquire any right, title or interest in and to any Materials (including any intellectual property rights in the Materials) during the term of this Agreement and thereafter, the Executive agrees to assign, and hereby irrevocably assigns, all such right, title and interest automatically to the Company, including any renewals, extensions or reversions relating thereto and any right to bring an action or to collect compensation for past infringements, automatically upon the creation, development, making, or conception of same.

• (d) Registrations. The Company will have the exclusive right to obtain copyright registrations, letters patent, industrial design registrations, trade-mark registrations or any other protection in respect of the Materials and the intellectual property rights relating to the Materials anywhere in the world. At the expense and request of the Company, the Executive shall, both during and after the Executive’s employment with the Company, execute all documents and do all other acts necessary in order to enable the Company to protect its rights in any of the Materials and the intellectual property rights relating to the Materials.

15. Fiduciary and other Obligations

The Executive acknowledges that the obligations contained in Sections 11, 12, 13 and 14 of this Agreement are in addition to any statutory, fiduciary and other common law obligations that the Executive also owes to the Company and its Affiliates, during and after the Term. For greater certainty, nothing contained in this Agreement is a waiver, release or reduction of any statutory, fiduciary or common law obligations owed by the Executive to the Company and its Affiliates.

16. Notices

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by hand delivery or express overnight courier service or internationally-recognized second-day courier service or email as hereinafter provided. Notice of change of address shall also be governed by this section. Notices shall be deemed to have been duly received (a) when delivered in person if given by hand delivery, (b) when sent by email transmission on a business day to the email address set forth below, if applicable; provided , however , that if a notice is sent by email transmission after normal business hours of the recipient or on a non-business day, then it shall be deemed to have been received on the next business day after it is sent, (c) on the first business day after such notice is sent by express overnight courier service, or (d) on the second business bay following deposit with an internationally-recognized

second-day courier service with proof of receipt maintained. Notices and other communications shall be addressed as follows:

• (a) if to the Executive: Benjamin N.Urban

(b) if to the Company

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DIRTT Environmental Solutions Suite 1000, 6105 Tennyson Pkwy Plano, TX 65024

Attn: General Counsel

17. Headings; Construction

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. Any and all Schedules referred to in this Agreement are, by such reference, incorporated herein and made a part hereof for all purposes. Unless the context requires otherwise, all references to laws, regulations, contracts, documents, agreements and instruments refer to such laws, regulations, contracts, documents, agreements and instruments as they may be amended from time to time, and references to particular provisions of laws or regulations include a reference to the corresponding provisions of any succeeding law or regulation. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement, including all Schedules attached hereto, and not to any particular provision hereof. Unless the context requires otherwise, the word “or” is not exclusive. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. All references to “including” shall be construed as meaning “including without limitation.” Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

18. Applicable Deductions and Withholdings

The payments and benefits set forth in this Agreement are subject to all applicable statutory deductions and withholdings including: (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling and (b) any deductions consented to in writing by the Executive.

19. Reasonableness and Enforceability of Restrictions

• (a) The Company shall provide the Executive access to Confidential Information for use only during the Term, and the Executive acknowledges and agrees that the Company and its Affiliates will be entrusting the Executive, in the Executive’s unique and special capacity, with developing the goodwill of the Company and its Affiliates, and as an express incentive for the Company to enter into this Agreement and employ the Executive hereunder, the Executive has voluntarily agreed to the covenants set forth in Section 11 and Section 12.

• (b) The Executive acknowledges and agrees that all of the restrictions contained in Sections 11, 12, 13, 14 and 15 of this Agreement (including the definition of Business, the definition of Restricted Territory (which fairly reflects the geographic scope of the Business activities carried on by the Company and its Affiliates and the length of the Restricted Period) are reasonable in all respects and necessary to protect the Confidential Information and other legitimate interests of the Company and its Affiliates, and will not unduly restrict the Executive’s ability to secure alternative employment following the termination of the

Executive’s employment for any reason. If any covenant or provision (or part thereof) of this Agreement is determined by a court of competent jurisdiction to be void or unenforceable in whole or in part, for any reason, it shall be interpreted to provide the broadest possible restriction permitted by law and will be deemed not to affect or impair the validity of any other covenant or provision of this Agreement, which shall remain in full force and effect.

• (c) The Executive acknowledges and agrees the Company and the Affiliate will suffer irreparable harm in the event that the Executive breaches any of its obligations under Sections 11, 12, 13, 14 or 15 of this Agreement, and that monetary damages would be impossible to quantify and inadequate to compensate the Company and its Affiliates for

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such a breach. Accordingly, the Executive agrees that in the event of any breach or a threatened breach by the Executive of any of the provisions of this Agreement, the Company and each of its Affiliates shall be entitled to seek, in addition to any other rights, remedies or damages available to the Company at law or in equity, an interim and permanent injunction, in order to prevent or restrain any such breach or threatened breach by the Executive, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security.

(d) The restrictions and obligations of the Executive under Sections 11, 12, 13, 14 and 15 of this Agreement shall survive the termination of this Agreement for any reason.

20. Third-Party Beneficiaries

The Parent and each other Affiliate of the Company that is not a signatory to this Agreement shall be a third-party beneficiary of the Executive’s representations, covenants, and obligations under Sections 11, 12, 13, 14 and 15 and shall be entitled to enforce such representations, covenants, and obligations as if a party hereto.

21. Entire Agreement, Amendment, No Waiver

This Agreement constitutes the entire agreement between the parties hereto and between the Executive and any other Affiliate of the Company regarding the subject matter hereof, and shall supersede and replace any and all prior agreements, undertakings, representations or negotiations (including the offer letter from the Parent to the Executive dated February 21, 2020). There are no warranties, representations or agreements between the parties except as specifically set forth or referred to in this Agreement. Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall the waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

22. Assignment

Neither the Executive nor the Company may assign its rights hereunder without the consent of the other party; provided, however, that the Company may assign its rights hereunder without the Executive’s consent to any Affiliate of the Company or to a successor Company which acquires (whether directly or indirectly, by purchase, amalgamation, arrangement, merger, consolidation, dissolution or otherwise) all or substantially all of the business and/or assets of the Company and expressly assumes and agrees to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

23. Currency

All amounts in this Agreement are in United States currency unless otherwise specified.

24. Governing Law; Submission to Jurisdiction

This Agreement shall in all respects be construed according to the laws of the State of Texas without regard to its conflict of laws principles that would result in the application of the laws of another jurisdiction. With respect to any claim or dispute related to or arising under this Agreement, the parties hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts (as applicable) located in Dallas County, Texas. THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT THEY ARE KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVING THEIR RIGHTS TO A JURY TRIAL.

25. Severability

If an arbitrator or court of competent jurisdiction determines that any provision of this Agreement (or portion thereof) is invalid or unenforceable, then the invalidity or unenforceability of that provision (or portion thereof) shall not affect the validity or enforceability of any other provision of this Agreement, and all other

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provisions shall remain in full force and effect.

26. Waiver of Breach

Any waiver of this Agreement must be executed by the party to be bound by such waiver. No waiver by either party hereto of a breach of any provision of this Agreement by the other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of either party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time.

27. Section 409A

• (a) Notwithstanding any provision of this Agreement to the contrary, all provisions of this Agreement are intended to comply with Section 409A of the Internal Revenue Code of 1986 (the “ Code ”), and the applicable Treasury regulations and administrative guidance issued thereunder (collectively, “ Section 409A ”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of the Executive’s employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.

• (b) To the extent that any right to reimbursement of expenses or payment of any benefit inkind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by the Company no later than the last day of the Executive’s taxable year following the taxable year in which such expense was incurred by the Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period in which the arrangement is in effect.

• (c) Notwithstanding any provision in this Agreement to the contrary, if any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if the Executive’s receipt of such payment or benefit is not delayed until the earlier of (i) the date of the Executive’s death or (ii) the date that is six (6) months after the Termination

Date (such date, the “ Section 409A Payment Date ”), then such payment or benefit shall not be provided to the Executive (or the Executive’s estate, if applicable) until the Section 409A Payment Date. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall the Company or any of its Affiliates be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

28. Clawback

Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy

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adopted by the Company, whether in existence as of the Effective Date or later adopted, pursuant to any such law, government regulation or stock exchange listing requirement).

29. Counterparts

This Agreement may be signed in counterparts and by facsimile or .pdf electronic mail transmission and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument.

[ Signature page follows ]

IN WITNESS WHEREOF the parties acknowledge and agree that they have read and understand the terms of this Agreement, and that they have had an opportunity to seek independent legal advice prior to entering into this Agreement and have executed this Agreement as of the Effective Date.

DIRTT ENVIRONMENTAL SOLUTIONS, INC.

By: /s/ Ken Sanders Name: Ken Sanders Title: Board Chair

/s/ Benjamin Urban Name: Benjamin Urban

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Exhibit 10.5

INDEMNITY AGREEMENT

THIS INDEMNITY AGREEMENT is made as of this 22nd day of June, 2022

BETWEEN:

DIRTT ENVIRONMENTAL SOLUTIONS LTD. , a corporation governed by the laws of the Province of Alberta (the “ Corporation ”)

-and-

Benjamin Urban , (the “ Indemnified Party ”)

RECITALS:

• A. The Indemnified Party serves as a director and/or officer of the Corporation or the Indemnified Party is a former director or officer of the Corporation or acts or has acted at the Corporation’s request as a director, officer or similar capacity of any subsidiary or affiliate of the Corporation or any entity of which the Corporation is or was a shareholder, partner, member or creditor (each an “ Entity ”);

• B. The Corporation considers it desirable and in the best interests of the Corporation to enter into this Agreement to set out the circumstances and manner in which the Indemnified Party may be indemnified in respect of certain liabilities and expenses which the Indemnified Party may incur as a result of acting or having acted as a director or officer of the Corporation or, at the Corporation’s request, as a director, officer or similar capacity of an Entity; and

• C. The by-laws of the Corporation contemplate that the Indemnified Party may be indemnified in certain circumstances.

NOW THEREFORE, IN CONSIDERATION OF the promises and mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and the Indemnified Party acting as a director or officer of the Corporation or, at the Corporation’s request, as a director, officer or similar capacity of an Entity, the Corporation and the Indemnified Party do hereby covenant and agree as follows:

ARTICLE 1

DEFINITIONS AND PRINCIPLES OF INTERPRETATION

1.1 Definitions

Whenever used in this Agreement, the following words and terms shall have the meanings set out below:

• (a) “ Act ” means the Business Corporations Act (Alberta) as of the date hereof, provided that if the Act is amended after the date hereof in a manner which permits the Corporation to provide broader rights of indemnification than are permitted on the date hereof, this Agreement shall be construed so as to give effect to such broader rights;

• (b) “ Agreement ” means this indemnity agreement and all amendments or restatements as permitted under this Agreement, and references to “ Article ” or “ Section ” mean the specified Article or Section of this Agreement, and “ paragraph ” means the specified paragraph of this Agreement;

• (c) “ Claims ” means any claim, demand, suit, action, cause of action, proceeding, inquiry, arbitration, mediation, alternative dispute resolution mechanism, hearing, discovery or investigation of whatever nature, whether anticipated, threatened, pending, commenced, continuing or completed of whatever kind including any civil, criminal, administrative, arbitrative, regulatory, investigative (formal or informal) or other claim of any nature whatsoever; any appeal in or related to any such claim, demand, suit, action, cause of action, proceeding, inquiry, arbitration, mediation, alternative dispute resolution mechanism, hearing, discovery or investigation; and any inquiry or investigation (including discovery) whether conducted by or in the right of the Corporation or any other person that the Indemnified Party in good faith believes could lead to any such claim, demand, suit, action, cause of action, proceeding, inquiry, arbitration, mediation, alternative dispute resolution mechanism, hearing, discovery or investigation or appeal thereof;

• (d) “ Court ” means the Court of Queen’s Bench of Alberta (Judicial District of Calgary), including any appeal courts arising therefrom;

• (e) “ ERISA ” means the United States Employee Retirement Income Security Act of 1974, as amended;

• (f) “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended;

• (g) “ Expenses ” means all legal fees and disbursements, retainers, accountant’s fees and disbursements, private investigator fees and disbursements, other professionals’ fees and disbursements, court costs, transcript costs, fees and expenses of experts, witness fees and expenses, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, penalties, and all other disbursements, costs or expenses of the types customarily incurred in connection with prosecuting, defending (including affirmative defences and counterclaims), preparing to prosecute or defend, investigating, being or preparing to be a witness in, or participating in or preparing to participate in a Claim and all interest or finance charges attributable to any thereof. Without limiting the foregoing, “Expenses” also shall include Expenses incurred in connection with any appeal resulting from any Claim, including the principal, premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Should any payments by the Corporation under this Agreement be determined to be subject to any national, provincial, federal, state or local income or excise tax, “Expenses” shall also include such amounts as are necessary to place the Indemnified Party in the same after-tax position (after giving effect to all applicable taxes) as the Indemnified Party would have been in had no such tax been determined to apply to such payments. Also, in this Agreement “witness” includes responding (or objecting) to a discovery or similar request, whether in writing or in an oral deposition, in any Claim.

• (h) “ Losses ” means any and all amounts related to all costs, charges and Expenses reasonably incurred by the Indemnified Party, which shall include all losses, damages (including

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incidental and consequential damages), fees (including any legal, professional or advisory fees, retainers, charges or disbursements and including costs of services of any experts), claims, awards, statutory obligations, amounts paid to settle or dispose of any Claim or satisfy any judgment, fines, penalties or liabilities (including all interest, assessments and other charges paid or payable in connection with or in respect of such losses, damages, fees, claims, awards, statutory obligations, amounts paid to settle or dispose of any Claim or satisfy any judgment, fines, penalties or liabilities), without limitation, and whether incurred alone or jointly with others, including any amounts which the Indemnified Party may reasonably suffer, sustain, incur or be required to pay in respect of the investigation, defence, settlement or appeal of or preparation for any Claim or with any action to establish a right to indemnification under this Agreement, and for greater certainty, includes all Taxes, interest, penalties and related outlays of the Indemnified Party arising from any indemnification of the Indemnified Party by the Corporation pursuant to this Agreement;

• (i) “ Parties ” means the Corporation and the Indemnified Party collectively and “ Party ” means any one of them;

• (j) “ Policy ” means the directors’ and officers’ errors and omissions insurance policy of the Corporation; and

• (k) “ Taxes ” includes any assessment, reassessment, claim or other amount for taxes, charges, duties, levies, imposts, ERISA excise taxes or penalties, or similar amounts, including any interest and penalties in respect thereof.

1.2 Certain Rules of Interpretation

In this Agreement:

• (a) Governing Law – This Agreement is a contract made under and shall be governed by and construed in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable in the Province of Alberta. The Parties hereby irrevocably submit and attorn to the exclusive jurisdiction of the Court with respect to all matters arising out of or relating to this Agreement and all matters, agreements or documents contemplated by this Agreement. The Parties hereby waive any objections they may have to the venue being in such Court, including any claim that any such venue is in an inconvenient forum. For greater certainty, all references to “applicable law” in this Agreement shall refer to the laws of the Province of Alberta and the federal laws of Canada applicable in the Province of Alberta.

• (b) Headings – Headings of Articles and Sections are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

• (c) Number and Inclusion – Unless the context otherwise requires, words importing the singular include the plural and vice versa. Whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation.”

• (d) Severability – If, in any jurisdiction, any provision of this Agreement or its application to any Party or circumstance is restricted, prohibited or unenforceable, such provision shall,

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as to such jurisdiction, be ineffective only to the extent of such restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement and without affecting the validity or enforceability of such provision in any other jurisdiction or without affecting its application to other Parties or circumstances.

• (e) Entire Agreement – This Agreement constitutes the entire agreement between the Parties and sets out all the covenants, promises, warranties, representations, conditions, understandings and agreements between the Parties pertaining to the subject matter ofthis Agreement and supersedes all prior agreements, understandings, negotiations and discussions, oral or written. There are no covenants, promises, warranties, representations, conditions, understandings or other agreements, oral or written, between the Parties in connection with the subject matter of this Agreement except as specifically set forth in this Agreement, including Section 2.8.

ARTICLE 2 OBLIGATIONS

2.1 Obligations of the Corporation

• (a) General Indemnity – The Corporation will, to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, including to the extent permitted under the Act, exonerate, indemnify and hold the Indemnified Party and the Indemnified Party’s respective heirs, executors, administrators and other legal representatives of the Indemnified Party (each of which is included in any reference hereinafter made to the Indemnified Party) harmless from and against, and will pay to the Indemnified Party, any and all Losses which the Indemnified Party may suffer, sustain, incur or be required to pay in respect of any Claim to which a director or officer is made a party by reason of being a director or officer of the Corporation or director, officer or in similar capacity of an Entity at the Corporation’s request.

• (b) Conditions – The indemnity provided for in Section 2.1(a) will only be available if the Indemnified Party:

• (i) acted honestly and in good faith with a view to the best interest of the Corporation or as the case may be, to the best interest of an Entity for which the Indemnified Party acted as a director, officer or in a similar capacity at the Corporation’s request; and

• (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing the Indemnified Party’s conduct was lawful.

The Indemnified Party shall be presumed to have fulfilled the foregoing conditions unless it is determined by the Court that the Indemnified Party has not (and the burden of proof shall be on the Corporation to rebut such presumption).

• (c) Derivative Claims – The Corporation shall to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, provided the Indemnified Party fulfills the conditions in Section 2.1(b), with the approval of the Court if such approval is required exonerate, indemnify and hold the

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Indemnified Party harmless, and advance moneys under Section 2.1(k) to the Indemnified Party, in respect of a Claim by or on behalf of the Corporation or other entity to procure a judgment in the Corporation’s favour to which the Indemnified Party is made a party by reason of being or having been a director or officer of the Corporation or director, officer or in similar capacity of an Entity at the Corporation’s request. The Corporation will advance or reimburse, as applicable, all Losses incurred by the Indemnified Party in connection with the Indemnified Party’s participation in such Claim as provided in this Section 2.1(c). The Corporation shall pay to the Indemnified Party, if applicable, a reasonable per diem amount for time spent in connection with a Claim under this Section 2.1(c) as provided in Section 2.1(l).

• (d) Indemnity as of Right – Notwithstanding anything in this Agreement, provided the Indemnified Party fulfills the conditions in Section 2.1(b), the Corporation shall be required to indemnify the Indemnified Party in respect of all Losses incurred by the Indemnified Party in respect of any Claim to which the Indemnified Party is made a party by reason of being or having been a director or officer of the Corporation or director, officer or in similar capacity of an Entity at the Corporation’s request, if after the final disposition of such Claim, the Indemnified Party has not been reimbursed for those Losses.

• (e) Incidental and Additional Expenses – The Corporation shall to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit pay or reimburse the Indemnified Party for (i) the Indemnified Party’s reasonable and necessary travel, lodging or accommodation costs, charges or expenses paid or incurred by or on behalf of the Indemnified Party in connection with a Claim where such Claim is subject to indemnification hereunder; (ii) the Indemnified Party’s reasonable fees and Expenses incurred in connection with efforts to recover under any directors and officers liability insurance policies maintained by the Corporation; and (iii) the Indemnified Party’s reasonable fees and Expenses incurred in connection with enforcement of, or claims for breaches of, any provision of this Agreement.

• (f) Witness Expenses – The Corporation shall to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit pay or reimburse the Indemnified Party for the reasonable and necessary Expenses incurred by Indemnified Party, including a reasonable per diem amount as provided in Section 2.1(l), in connection with time spent in the investigation or as a witness for the Corporation or an Entity with respect to any Claim, by reason of the Indemnified Party being a director or officer of the Corporation or director, officer or in similar capacity of an Entity at the Corporation’s request.

• (g) Specific Indemnity for Statutory Obligations – Without limiting the generality of the preceding Sections 2.1(a) through 2.1(f) of this Agreement, the Corporation agrees, to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, to exonerate, indemnify and hold the Indemnified Party harmless from and against any and all Losses arising by operation of statute and incurred by or imposed upon the Indemnified Party in relation to the affairs of the Corporation in the Indemnified Party’s capacity as a director or officer thereof, including all statutory obligations to creditors, employees, suppliers, contractors, subcontractors, and any government or any agency or division of any government,

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whether federal, provincial, state, regional or municipal, or which in any way involve the business or affairs of the Corporation or an Entity for which the Indemnified Party acted as a director, officer or similar capacity at the Corporation’s request, provided that the indemnity provided for in this Section 2.1(g) will be available unless it is determined by the Court that the Indemnified Party has not fulfilled the conditions in Section 2.1(b) above.

• (h) Change of Law – In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of an Alberta corporation to indemnify a director or officer, it is the intent of the parties hereto that the Indemnified Party shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change after that date of this Agreement in any applicable law, statute or rule which narrows the rights of an Alberta corporation to indemnify a director or officer, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ right and obligations hereunder except as set forth in Section 2.9.

• (i) Partial Indemnification – If the Indemnified Party is determined by the Court to be entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Losses incurred in respect of any Claim but not for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnified Party for the portion thereof to which the Indemnified Party is determined by the Court to be so entitled.

• (j) Indemnification for Losses of an Indemnified Party Who Is Wholly or Partly Successful – To the extent the Indemnified Party is a party to (or a participant in) a Claim and is successful, on the merits or otherwise, in the defence of any Claim or any issue or matter therein, the Corporation shall, to the fullest extent permitted by applicable law, exonerate, indemnify, and hold the Indemnified Party harmless against all Losses incurred by the Indemnified Party therewith. If the Indemnified Party is not wholly successful in such Claim but is successful, on the merits or otherwise, as to one or more but less than all the issues or matters in such Claim, the Corporation shall, to the fullest extent permitted by applicable law, exonerate, indemnify, and hold the Indemnified Party harmless against all Losses incurred by the Indemnified Party in connection with each successfully resolved issue or matter. For purposes of this Section 2.1(j), without limitation, the termination of any issue or matter in a Claim by dismissal, with or without prejudice, shall be deemed to be a successful result as to such issue or matter.

• (k) Advance of Expenses – The Corporation shall, at the request of the Indemnified Party, to the maximum extent permitted under the Act or otherwise by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, promptly: (i) reimburse the Indemnified Party for all Losses incurred by the Indemnified Party in relation to a Claim claimed by the Indemnified Party to be subject to indemnification hereunder; and (ii) pay reasonable and customary advance payments and costs and expenses to service providers of the Indemnified Party; in each case, prior to any settlement or resolution of such Claim to enable the Indemnified Party to properly investigate, defend or appeal such Claim. The Corporation shall pay such advances within ten (10) days after the receipt by the Corporation of a written request from the Indemnified Party requesting such payment or payments from time to time, whether prior to or after final disposition of a Claim. If it is ultimately determined in a final judgment

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of a court of competent jurisdiction or final arbitration award of an applicable arbitration proceeding that has become non-appealable that the Indemnified Party did not fulfill the conditions in Section 2.1(b) or that the Indemnified Party was not entitled to be fully so indemnified, such advance, or the appropriate portion thereof, upon written notice of such determination being given by the Corporation to the Indemnified Party detailing the basis for such determination, shall be repayable on demand without interest. The Indemnified Party shall not be required to provide collateral or otherwise secure the Indemnified Party’s agreement to repay described in the prior sentence. If and to the extent the Indemnified Party makes any such repayment to the Corporation, the obligation of the Corporation to indemnify the Indemnified Party will continue in accordance with the terms of this Agreement.

• (l) Per Diem Charge – In addition to any other amount payable to the Indemnified Party under this Agreement, the Indemnified Party shall be entitled to receive from the Corporation a per diem payment (the “ Per Diem Charge ”) for time spent with respect to any Claim for which the Indemnified Party is otherwise entitled to indemnification pursuant to any one of the foregoing provisions of Section 2.1 of this Agreement. For directors, the Per Diem Charge shall be an amount equal to US$350 per hour. For officers, the Per Diem Charge shall be zero if the Indemnified Party is still employed on a full time basis by the Corporation at the time the Per Diem Charge is payable or has been terminated for cause by the Corporation, and the Per Diem Charge shall be in an amount equal to US$350 per hour if the Indemnified Party is not employed on a full time basis by the Corporation at the time the Per Diem Charge is payable other than as a result of termination for cause.

• (m) Taxes – For greater certainty, a Claim subject to indemnification pursuant to Article 2 of this Agreement shall include any Taxes which the Indemnified Party may be subject to or suffer or incur as a result of, in respect of, arising out of or referable to any indemnification of the Indemnified Party by the Corporation pursuant to this Agreement; provided, however , that any amount required to be paid with respect to such Taxes shall be payable by the Corporation only upon the Indemnified Party remitting or being required to remit any amount payable on account of such Taxes.

• (n) Right to Access – The Indemnified Party (and its legal representatives) is entitled to have access to and inspect the Corporation’s records and documents which are under its control and which may be reasonably necessary in order to defend the Indemnified Party against a Claim which has been or which the Indemnified Party reasonably anticipates may be made against the Indemnified Party, provided that the Indemnified Party (and its legal representatives) maintains all such information in the strictest confidence except to the extent necessary for the defence of the Indemnified Party. The Corporation shall provide the Indemnified Party (and its legal representatives) with access to the relevant documents and records during the regular business hours of the Corporation as soon as practicable following a request for such access by or on behalf of the Indemnified Party. The Indemnified Party (and its legal representatives) shall be entitled to make and receive copies (including electronic copies) of any of such records and documents of the Corporation at the cost of the Corporation and such copies shall be provided as soon as practicable following a request therefor by or on behalf of the Indemnified Party. If the Indemnified Party is the subject of or is implicated in any way during the proceeding of any Claim, the Corporation will share with the Indemnified Party (and its legal

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representatives) any information that it has turned over to any third parties in connection therewith.

• (o) Enforcement – The Indemnified Party’s right to indemnification and other rights under this Agreement shall be specifically enforceable by the Indemnified Party in a “court” (as defined in the Act) and shall be enforceable notwithstanding any adverse determination by or on behalf of the Corporation’s board of directors and no such determination shall create a presumption that the Indemnified Party is not entitled to be indemnified hereunder. In any such action, the Corporation shall have the burden of proving that indemnification is not required or permitted under this Agreement.

• (p) Court Approvals – If the payment of an indemnity under any provision of this Agreement requires any court or other approvals, the Corporation shall make the application or seek such other required approvals and use reasonable best efforts to obtain such order or other required approvals, including paying the costs of such application or seeking such other required approvals and paying the expenses of the Indemnified Party, to the extent permitted by applicable law, in connection with any such order or approval process. If the Corporation fails to do so, the Indemnified Party may apply to the Court or other applicable court, agency or body for an order or seek such other required approvals approving the indemnity of the Indemnified Party pursuant to this Agreement, and the Corporation shall pay the expenses of the Indemnified Party, to the extent permitted by applicable law, in connection with any such order or approval process.

2.2 Notice of Proceedings

• (a) The Indemnified Party shall give notice in writing to the Corporation as soon as practicable upon being served with any statement of claim, writ, notice of motion, indictment, subpoena, investigation order or other document commencing, threatening or continuing any Claim which may result in a claim for indemnification under this Agreement, and the Corporation agrees to give the Indemnified Party notice in writing as soon as practicable upon it being served with any statement of claim, writ, notice of motion, indictment, subpoena, investigation order or other document commencing, threatening or continuing any Claim which may result in a claim for indemnification under this Agreement. Such notice shall include a description of the Claim or threatened Claim, a summary of the facts giving rise to the Claim or threatened Claim and, if possible, an estimate of any potential liability arising under the Claim or threatened Claim. Failure by either party to so notify the other of any Claim shall not relieve the Corporation from liability under this Agreement except to the extent that the failure materially prejudices the Corporation.

• (b) If, at the time the Corporation gives the Indemnified Party notice in connection with Section 2.2(a), a Policy is in effect with respect to the Indemnified Party, the Corporation shall give prompt notice of the applicable Claim to its insurers in accordance with the procedures set forth in such Policy. The Corporation shall thereafter take all necessary or desirable action to cause such insurers to pay all amounts payable as a result of such Claim in accordance with the terms of such Policy.

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2.3 Subrogation

Promptly after receiving written notice from the Indemnified Party of any Claim or threatened Claim (other than a Claim by or on behalf of the Corporation to procure a judgment in its favour against the Indemnified Party), the Corporation may by notice in writing to the Indemnified Party, and upon the written request of the Indemnified Party the Corporation shall, in a timely manner assume conduct of the defence thereof and retain counsel on behalf of the Indemnified Party who is reasonably satisfactory to the Indemnified Party, to represent the Indemnified Party in respect of the Claim. On delivery of such notice by the Corporation, other than pursuant to Section 2.4, the Corporation shall not be liable to the Indemnified Party under this Agreement for any fees and disbursements of counsel the Indemnified Party may subsequently incur with respect to the same matter. If the Corporation assumes conduct of the defence on behalf of the Indemnified Party, the Indemnified Party hereby consents to the conduct thereof and of any action taken by the Corporation, in good faith, in connection therewith, and the Indemnified Party shall fully cooperate in such defence including the provision of documents, attending examinations for discovery, making affidavits, meeting with counsel, testifying and divulging to the Corporation all information reasonably required to defend or prosecute the Claim.

2.4 Separate Counsel

In connection with any Claim or other matter for which the Indemnified Party may be entitled to indemnity under this Agreement, the Indemnified Party shall have the right to employ separate counsel and consultants of the Indemnified Party’s choosing and to participate in and approve any settlement by the Corporation of any Claim involving or affecting in any manner whatsoever the Indemnified Party, and provided that: (a) the employment of such counsel and consultants of the Indemnified Party’s choosing have been previously approved by the Corporation, acting reasonably; or (b) the Indemnified Party has reasonably concluded that there may be a conflict of interest between the Corporation and the Indemnified Party in defending such Claim; then all fees, expenses and disbursements of such counsel and consultants shall be at the Corporation’s expense and shall be paid within ten (10) days of invoices being submitted to the Corporation.

2.5 Presumption of Indemnification

• (a) In making a determination with respect to entitlement to indemnification hereunder, the Corporation shall, to the fullest extent not prohibited by law, presume that the Indemnified Party is entitled to indemnification under this Agreement, and the Corporation shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by the Court of any determination contrary to that presumption. Neither the failure of the Corporation to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because the Indemnified Party has met the applicable standard of conduct, nor an actual determination by the Corporation that the Indemnified Party has not met such applicable standard of conduct, shall be a defence to the action or create a presumption that the Indemnified Party has not met the applicable standard of conduct.

• (b) If the Corporation shall not have made a determination with respect to entitlement to indemnification within sixty (60) days after receipt by the Corporation of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and the Indemnified Party

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shall be entitled to such indemnification, absent a prohibition of such indemnification under applicable law.

• (c) The knowledge or actions, or failure to act, of any director, officer, agent or employee of the Entity shall not be imputed to the Indemnified Party for purposes of determining the right to indemnification under this Agreement.

2.6 Presumption of Good Faith

• (a) For the purposes of any determination of good faith under this Agreement, the Indemnified Party shall be deemed to have acted in good faith if the Indemnified Party’s action is based on the records or books of account of the Corporation or an Entity, including applicable financial statements, or on information supplied to the Indemnified Party by officers of the Corporation or an Entity (other than the Indemnified Party) in the course of their duties, or on the advice of legal counsel of the Corporation, an Entity, their respective board of directors, counsel selected by any committee of their respective board of directors or on information or records given or reports made to the Corporation or an Entity by an independent certified public accountant or by an appraiser, investment banker, compensation consultant or other expert selected with reasonable care by the Corporation, an Entity, their respective board of directors or any committee of their respective board of directors or by any other person as to matters the Indemnified Party reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. The provisions of this Section 2.6 shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnified Party may be deemed to have fulfilled the conditions in Section 2.1(b) or met any other applicable standard of conduct.

• (b) Unless the Court or a court of competent jurisdiction otherwise has held or decided that the Indemnified Party is not entitled to be fully or partially indemnified under this Agreement, the termination of any civil, criminal or administrative action or proceedings by judgement, order, settlement, conviction or similar or other result or upon a plea of “no contest” or the equivalent will not, of itself: (i) create a presumption for the purposes of this Agreement that the Indemnified Party did not act honestly and in good faith with a view to the best interests of the Corporation or Entity; (ii) in the case of a criminal or administrative action or proceeding that is enforced by monetary penalty, that the Indemnified Party did not have reasonable grounds for believing that the Indemnified Party’s conduct was lawful; or (iii) that the Indemnified Party is not entitled to indemnity under this Agreement.

2.7 Settlement of a Claim

For greater certainty, no admission of liability and no settlement of any Claim in a manner adverse to the Indemnified Party shall be made without the consent of the Indemnified Party, acting reasonably. No admission of liability shall be made by the Indemnified Party without the consent of the Corporation and the Corporation shall not be liable for any settlement of any Claim made without its consent, acting reasonably.

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2.8 Other Rights and Remedies Unaffected

The indemnification and advance payment provided in this Agreement shall not derogate from or exclude any other rights to which the Indemnified Party may be entitled under any provision of the Act or otherwise at law, the articles or by-laws of the Corporation, any applicable policy of insurance, guarantee or thirdparty indemnity, any vote of shareholders of the Corporation, or otherwise, both as to matters arising out of the Indemnified Party’s capacity as a director or officer of the Corporation or as to matters arising out of any other capacity in which the Indemnified Party may act for or on behalf of the Corporation.

2.9 Exceptions

Any other provision herein to the contrary notwithstanding, the Corporation shall not be obligated pursuant to the terms of this Agreement:

• (a) Claims Initiated by the Indemnified Party – To indemnify or advance expenses to the Indemnified Party with respect to any proceeding or Claim initiated or brought voluntarily by the Indemnified Party and not by way of defence, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any statute, the articles or by-laws of the Corporation or otherwise but such indemnification or advancement of expenses may be provided by the Corporation in specific cases if the Corporation’s board of directors has approved the initiation or bringing of such suit.

• (b) Frivolous Proceedings – To indemnify the Indemnified Party for any expenses incurred by the Indemnified Party with respect to any proceeding instituted by the Indemnified Party to enforce or interpret this Agreement, if the Court or a court of competent jurisdiction determines that each of the material assertions made by the Indemnified Party in such proceedings were frivolous.

• (c) Insured Claims – To make any payment in connection with any Claim made against the Indemnified Party to the extent the Indemnified Party has otherwise received payment (under any insurance policy, the articles or by-laws of the Corporation, contract or otherwise) of the amounts otherwise indemnifiable hereunder. If the Corporation makes any indemnification payment to the Indemnified Party in connection with any particular expense indemnified hereunder and the Indemnified Party has already received or thereafter receives, and is entitled to retain, duplicate payments in reimbursement of the same particular expense, then the Indemnified Party shall reimburse the Corporation in an amount equal to the lesser of: (i) the amount of such duplicate payment; and (ii) the full amount of such indemnification payment made by the Corporation.

• (d) Claims for Unlawful Profits – To indemnify the Indemnified Party for the disgorgement of profits arising from the purchase and sale by the Indemnified Party of securities in violation of Section 16(b) of the Exchange Act (or any successor statute) or any other applicable securities law or Losses incurred by the Indemnified Party for Claims in connection with such payment.

• (e) Other Indemnification – To indemnify the Indemnified Party for expenses for which the Indemnified Party is indemnified by the Corporation otherwise than pursuant to this Agreement.

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• (f) Not Lawful – To indemnify the Indemnified Party if (and to the extent that) a final decision by the Court, a court of competent jurisdiction, or an arbitration body having jurisdiction in the matter shall determine that such indemnification is not lawful.

2.10 Articles and By-Laws

The Corporation agrees that the articles and by-laws of the Corporation in effect on the date hereof shall not be amended to reduce, limit, hinder or delay: (a) the rights of the Indemnified Party granted hereunder; or (b) the ability of the Corporation to indemnify the Indemnified Party as required hereunder. The Corporation further agrees that it shall exercise the powers granted to it under the articles and by- laws of the Corporation and applicable law to indemnify the Indemnified Party to the fullest extent possible as required by this Agreement.

ARTICLE 3 INSURANCE

3.1 The Policy

The Corporation shall purchase and maintain, or cause to be purchased and maintained, while the Indemnified Party remains a director or officer of the Corporation or director, officer or a similar capacity of an Entity at the Corporation’s request, and in accordance with Section 3.6, for a period of six (6) years after the Indemnified Party ceases to be a director or officer of the Corporation, a Policy including Side “A” difference in conditions coverage, for the benefit of the Indemnified Party containing such customary terms and conditions and in such amounts as are available to the Corporation on reasonable commercial terms, having regard to the nature and size of the business and operations of the Corporation and its subsidiaries from time to time. In all such Policies, the Indemnified Party, by reference to the Indemnified Party’s position or otherwise, shall be named as an insured. The Corporation shall thereafter take all necessary or desirable action to cause its insurer to pay, on behalf of the Indemnified Party, all amounts payable as a result of such Claims in accordance with the terms of such policies.

3.2 Variation of Policy

So long as the Indemnified Party is a director or officer of the Corporation or director, officer or similar capacity of an Entity at the Corporation’s request, and, in accordance with Section 3.6, for a period of six (6) years thereafter, the Corporation shall not seek to amend or discontinue the Policy or allow the Policy to lapse.

3.3 Run-Off Coverage

If the Policy is discontinued for any reason, the Corporation shall purchase, maintain and administer, or cause to be purchased, maintained and administered for a period of six (6) years after such discontinuance, insurance for the benefit of the Indemnified Party (the “ Run-Off Coverage ”), on such terms as the Corporation then maintains in existence for its directors and officers, to the extent permitted by law and provided such Run-Off Coverage is available on commercially acceptable terms and premiums (as determined by the Corporation’s board of directors acting reasonably). The Run-Off Coverage shall provide coverage only in respect of events occurring prior to the discontinuance of the Policy.

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3.4 Insurable Events

If an insurable event occurs, the Corporation shall indemnify the Indemnified Party as agreed hereto regardless of whether the Corporation receives the insurance proceeds. The Indemnified Party is entitled to full indemnification as agreed hereto notwithstanding any deductible amounts or policy limits contained in any such insurance policy.

3.5 Exclusion of Indemnity

Notwithstanding any other provision in this Agreement to the contrary, the Corporation shall not be obligated to indemnify the Indemnified Party under this Agreement for any Losses which have been paid to, by or on behalf of, the Indemnified Party under the Policy or any other applicable policy of insurance maintained by the Corporation.

3.6 Post Office Directors and Officers Insurance

Following the Indemnified Party ceasing to be a director or officer of the Corporation or director, officer or similar capacity of an Entity at the Corporation’s request, for any reason whatsoever, the Corporation shall continue to purchase and maintain directors’ and officers’ liability insurance, for the benefit of the Indemnified Party for a minimum of six (6) years, such that the Indemnified Party’s insurance coverage is, during that time, the same as any insurance coverage the Corporation purchases and maintains for the benefit of its then current directors and officers, from time to time. Notwithstanding the foregoing, if: (a) liability insurance coverage for former directors and officers is no longer available; or (b) it is no longer industry practice among responsible companies to procure liability insurance for former directors and officers and the cost to the Corporation to do so would be commercially unreasonable (as determined by the board of directors acting reasonably), the Corporation shall be relieved of its obligation to procure liability insurance coverage for former directors and officers; provided that the Corporation procures such level of insurance coverage, if any, as is available for former directors and officers at a commercially reasonable rate and adopts comparable measures to protect its former directors and officers in the circumstances as are adopted by other responsible companies. The onus is on the Corporation to establish that the circumstances described in the previous sentence exist.

3.7 Deductible under Directors and Officers Insurance

If for any reason whatsoever, any directors’ and officers’ liability insurer asserts that the Indemnified Party is subject to a deductible under any existing or future Policy purchased and maintained by the Corporation for the benefit of the Indemnified Party, the Corporation shall pay the deductible for and on behalf of the Indemnified Party.

3.8 Notice

The Corporation agrees to provide notice of any material changes in the insurance coverage referred to in Article 3 during the period in which the Indemnified Party serves as director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request and for a period of six (6) years thereafter.

3.9 Most Favoured Nation

The Corporation agrees that if the Corporation enters into any indemnity agreement or similar arrangement with any person who is, or becomes, a director or officer of the Corporation or a director, officer or

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similar capacity of an Entity at the Corporation’s request, and such agreement or arrangement contains any provision which is more favourable to the other party to such agreement than the provisions of this Agreement are to the Indemnified Party then, and in each such case, the Corporation shall provide written notice of such provision to the Indemnified Party (which shall include a copy of such provision). Upon such notice, unless the Indemnified Party elects otherwise within five (5) days of receipt of such notice, this Agreement shall be deemed to be amended to conform the provisions of this Agreement to such more favourable provision.

ARTICLE 4 MISCELLANEOUS

4.1 Corporation and Indemnified Party to Cooperate

The Corporation and the Indemnified Party shall, from time to time, provide such information and cooperate with the other, as the other may reasonably request, in respect of all matters under this Agreement.

4.2 Effective Time

This Agreement shall be deemed to have effect as and from the first date that the Indemnified Party became a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request.

4.3 Insolvency

The liability of the Corporation under this Agreement shall not be affected, discharged, impaired, mitigated or released by reason of the discharge or release of the Indemnified Party in any bankruptcy, insolvency, receivership or other similar proceeding of creditors.

4.4 Multiple Proceedings

No action or proceeding brought or instituted under this Agreement and no recovery pursuant thereto shall be a bar or defence to any further action or proceeding which may be brought under this Agreement.

4.5 Termination

• (a) Nothing in this Agreement will prevent the Indemnified Party from resigning as adirector or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request at any time.

• (b) The obligations of the Corporation will not terminate or be released upon the Indemnified Party resigning or ceasing to act as a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request.

4.6 Limitation of Actions and Release of Claims

To the extent permitted by applicable law, no legal action shall be brought and no course of action shall be asserted by or on behalf of the Corporation against the Indemnified Party after the expiration of two years from the date of the Indemnified Party’s ceasing to act as a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request and the Corporation agrees that any claim or cause of action of the Corporation shall be extinguished and the Indemnified Party be

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deemed released therefrom absolutely unless asserted by the commencement of legal action in a court of competent jurisdiction within such two yearperiod.

ARTICLE 5 CONTRIBUTION

5.1. Contribution Payment

• (a) To the fullest extent permitted by law, whether or not the indemnification provided in Article 2 is available, in respect of any threatened, pending or completed Claim in which the Corporation is jointly liable with the Indemnified Party (or would be if joined in such Claim), the Corporation shall pay, in the first instance, the entire amount of any judgment or settlement of such Claim without requiring the Indemnified Party to contribute to such payment, and the Corporation hereby waives and relinquishes any right of contribution it may have against the Indemnified Party. The Corporation shall not enter into any settlement of any Claim in which the Corporation is jointly liable with the Indemnified Party (or would be if joined in such Claim) unless such settlement provides for a full and final release of all claims asserted against the Indemnified Party.

• (b) Without diminishing or impairing the obligations of the Corporation set forth in the preceding paragraph, if, for any reason, the Indemnified Party shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed Claim in which the Corporation is jointly liable with the Indemnified Party (or would be if joined in such Claim), the Corporation shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by the Indemnified Party in proportion to the relative benefits received by the Corporation and all officers, directors or employees of the Corporation, other than the Indemnified Party, who are jointly liable with the Indemnified Party (or would be if joined in such Claim), on the one hand, and the Indemnified Party, on the other hand, from the transaction or events from which such Claim arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Corporation and all officers, directors or employees of the Corporation other than the Indemnified Party who are jointly liable with the Indemnified Party (or would be if joined in such Claim), on the one hand, and the Indemnified Party, on the other hand, in connection with the transaction or events that resulted in such Expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered.

• (c) The Corporation hereby agrees, to the fullest extent permitted by applicable law, to fully indemnify and hold the Indemnified Party harmless from any claims of contribution which may be brought by officers, directors or employees of the Corporation, other than the Indemnified Party, who may be jointly liable with the Indemnified Party.

• (d) To the fullest extent permissible under applicable law and without diminishing or impairing the obligations of the Corporation set forth in the preceding paragraphs of this Section 5.1, if the indemnification provided for in this Agreement is unavailable to the Indemnified Party for any reason whatsoever, the Corporation, in lieu of indemnifying the Indemnified Party, shall contribute to the amount incurred by the Indemnified Party, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in

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settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Claim in order to reflect (i) the relative benefits received by the Corporation and the Indemnified Party as a result of the event(s) and/or transaction(s) giving cause to such Claim; and/or (ii) the relative fault of the Corporation (and its directors, officers, employees and agents) and the Indemnified Party in connection with such event(s) and/or transaction(s).

5.2 Relative Fault

The relative fault of the Indemnified Party, on the one hand, and of the Corporation and any and all other parties (including officers and directors of the Corporation other than the Indemnified Party) who may be at fault with respect to such matter shall be determined (i) by reference to the relative fault of the Indemnified Party as determined by the court or other governmental agency assessing the contribution amounts or (ii) to the extent such court or other governmental agency does not apportion relative fault, by independent counsel agreed to by both the Corporation and the Indemnified Party after giving effect to, among other things, the degree of which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, the degree to which their conduct is active or passive, the degree of the knowledge, access to information, and opportunity to prevent or correct the subject matter of the Claim and other relevant equitable considerations of each party. The Corporation and the Indemnified Party agree that it would not be just and equitable if contribution pursuant to this Section 5.2 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 5.2.

ARTICLE 6 GENERAL

6.1. Term

This Agreement shall continue after the Indemnified Party ceases to serve as a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request and shall survive indefinitely.

6.2. Deeming Provision

The Indemnified Party shall be deemed to have acted or be acting at the specific request of the Corporation upon the Indemnified Party’s being appointed or elected as a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request.

6.3. Assignment

Neither Party may assign this Agreement or any rights or obligations under this Agreement without the prior written consent of the other Party. This Agreement shall enure to the benefit of and be binding upon the Parties and the heirs, executors and administrators and other legal representatives of the Indemnified Party and the successors and permitted assigns of the Corporation (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Corporation).

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6.4. Amendments and Waivers

No supplement, modification, amendment or waiver or termination of this Agreement and, unless otherwise specified, no consent or approval by any Party, shall be binding unless executed in writing by the Party to be bound thereby. For greater certainty, the rights of the Indemnified Party under this Agreement shall not be prejudiced or impaired by permitting or consenting to any assignment in bankruptcy, receivership, insolvency or any other creditor’s proceedings of or against the Corporation or by the winding-up or dissolution of the Corporation.

6.5. Notices

Any notice, consent or approval required or permitted to be given in connection with this Agreement (in this Section referred to as a “ Notice ”) shall be in writing and shall be sufficiently given if delivered (whether in person, by courier service or other personal method of delivery), or if transmitted by facsimile or e-mail:

• (a) in the case of a Notice to the Indemnified Party at: Benjamin Urban

Facsimile: e-mail:

• (b) in the case of a Notice to the Corporation

at: DIRTT Environmental Solutions Ltd.

Attn: General Counsel 7303 30th Street S.E. Calgary, Alberta T2C 1N6 Facsimile: e-mail:

Any Notice delivered or transmitted to a Party as provided above shall be deemed to have been given and received on the day it is delivered or transmitted, provided that it is delivered or transmitted on a business day prior to 5:00 p.m. local time in the place of delivery or receipt. However, if the Notice is delivered or transmitted after 5:00 p.m. local time or if such day is not a business day then the Notice shall be deemed to have been given and received on the next business day.

Any Party may, from time to time, change its address for Notice set out in this Section 6.5 by giving Notice to the other Party in accordance with the provisions of this Section.

6.6. Further Assurances

The Corporation and the Indemnified Party shall, with reasonable diligence, do all such further acts, deeds or things and execute and deliver all such further documents as may be necessary or advisable for the purpose of assuring and conferring on the Indemnified Party the rights hereby created or intended, and of giving effect to and carrying out the intention or facilitating the performance of the terms of this Agreement or to evidence any advance made pursuant to Section 2.1(k).

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6.7. Independent Legal Advice

The Indemnified Party acknowledges that the Indemnified Party has been advised to obtain independent legal advice with respect to entering into this Agreement, that it has obtained such independent legal advice or has expressly determined not to seek such advice, and that the Indemnified Party is entering into this Agreement with full knowledge of the contents hereof, of the Indemnified Party’s own free will and with full capacity and authority to do so.

6.8. Execution and Delivery

This Agreement may be executed by the Parties in counterparts and may be executed and delivered by facsimile or other form of electronic transmission, and all such counterparts and facsimiles or forms of electronic transmission together shall be deemed to be an original and shall constitute one and the same agreement.

[Signature Page Follows]

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IN WITNESS OF WHICH the Parties have duly executed this Agreement.

DIRTT ENVIRONMENTAL SOLUTIONS LTD.

Per: /s/ Charles R Kraus Name: Charles R Kraus Title: General Counsel

SIGNED, SEALED AND DELIVERED In the presence of: /s/ Geoffrey D. Krause /s/ Benjamin Urban Witness Benjamin Urban --------------------------------------------------------------------------------------------------- Schedule I

The Company entered into an Indemnification Agreement with each of Jeffrey Metcalf and Shaun Noll that is identical to the one entered into with Benjamin Urban.

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Exhibit 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13A-14(a) OR RULE 15D-14(a) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Benjamin Urban, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “registrant”) for the quarter ended June 30, 2022;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

5. a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

6. b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

7. c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

8. d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

9. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

10. a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

11. b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: July 27, 2022

By: /s/ Benjamin Urban Benjamin Urban Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13A-14(a) OR RULE 15D-14(a) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Geoffrey D. Krause, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “registrant”) for the quarter ended June 30, 2022;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

5. a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

6. b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

7. c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

8. d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

9. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

10. a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

11. b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: July 27, 2022

By: /s/ Geoffrey D. Krause Geoffrey D. Krause Chief Financial Officer (Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “Company”) for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Benjamin Urban, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 27, 2022

By: /s/ Benjamin Urban Benjamin Urban Chief Executive Officer (Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “Company”) for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Geoffrey D. Krause, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 27, 2022

By: /s/ Geoffrey D. Krause Geoffrey D. Krause Chief Financial Officer (Principal Financial Officer)