DIRTT Environmental Solutions Ltd. — Interim / Quarterly Report 2023

Nov 9, 2023

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 September 30, 2023

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 N/A (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 7303 30th Street S.E. T2C 1N6 Calgary, Alberta, Canada (Zip code) (Address of principal executive offices)

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

Securities registered pursuant to Section 12(b) of the Exchange Act: None

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 104,789,358 common shares outstanding as of October 31, 2023.

DIRTT ENVIRONMENTAL SOLUTIONS LTD. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023

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.........................................................................................................................................

Page

ii 4 4 4 5 7 8 9 22 36 37 38 38 39 39 39 39 39 40

i

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (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,” “continue,” 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 contained in, or expressed or implied by 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 a material adverse effect on our business, financial condition, results of operations and growth prospects can be found in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission (the “SEC”) and applicable securities commissions or similar regulatory authorities in Canada on February 22, 2023 (the “Annual Report on Form 10-K”), and in our subsequently filed Quarterly Reports on Form 10-Q and in this Quarterly Report under “Part II, Item 1A. Risk Factors.” These factors include, but are not limited to, the following:

• general economic and business conditions in the jurisdictions in which we operate, including inflation;

• • our ability to implement our strategic plan, including realization of benefits from certain cost-optimization initiatives undertaken in 2022 and initiatives being taken in 2023 and the ability of our board of directors ("Board of Directors") to successfully implement its transformation plan;

• 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;

• • volatility of our share price;

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

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

• our history of negative cash flow from operating activities;

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

• 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 in the construction industry;

• • our ability to achieve and manage growth effectively;

• competition in the interior construction industry;

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

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

• our reliance on our network of construction partners ("Construction 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;

• 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;

• • global economic, political and social conditions affecting financial markets, such as the war in Ukraine and the Israel-Hamas war;

ii

• our exposure to currency exchange rates, tax rates, interest 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;

• the impact of increasing attention to environmental, social and governance (ESG) matters on our business;

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

• 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 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 expressed 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.

iii

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	As at December 31,
	September 30,
	2023	2022
ASSETS
Current Assets
Cash and cash equivalents	19,460	10,821
Restricted cash	2,977	3,418
Trade and accrued receivables, net of expected credit losses of	20,516	13,930
$0.1 million at September 30, 2023 and at December 31, 2022
Other receivables	852	7,880
Inventory	17,368	22,251
Prepaids and other current assets	4,015	3,825
Assets held for sale	2,317	-
Total Current Assets	67,505	62,125
Property, plant and equipment, net	26,324	41,522
Capitalized software, net	2,168	4,406
Operating lease right-of-use assets, net	30,561	30,490
Other assets	3,776	5,110
Total Assets	130,334	143,653
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities	18,761	19,881
Other liabilities	2,021	2,056
Customer deposits and deferred revenue	6,743	4,866
Current portion of long-term debt and accrued interest	8,961	3,306
Current portion of lease liabilities	5,284	5,889
Total Current Liabilities	41,770	35,998
Long-term debt	53,901	62,129
Long-term lease liabilities	28,751	27,534
Total Liabilities	124,422	125,661
SHAREHOLDERS’ EQUITY
Common shares, unlimited authorized without par value, 104,789,358 issued	195,747	191,347
and outstanding at September 30, 2023 and 97,882,844 at December 31, 2022
Additional paid-in capital	7,933	9,023
Accumulated other comprehensive loss	(15,957 )	(16,106 )
Accumulated deficit	(181,811 )	(166,272 )
Total Shareholders’ Equity	5,912	17,992
Total Liabilities and Shareholders’ Equity	130,334	143,653

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 September 30, For the Nine Months Ended September 30,
	2023 2022 2023 2022
Product revenue	48,095 44,307 127,105 124,849
Service revenue	1,442 2,440 3,893 4,885
Total revenue	49,537 46,747 130,998 129,734
Product cost of sales	31,622 37,965 88,529 109,757
Service cost of sales	850 1,774 2,165 3,406
Total cost of sales	32,472 39,739 90,694 113,163
Gross profit	17,065 7,008 40,304 16,571
Expenses
Sales and marketing	6,161 6,089 18,302 21,094
General and administrative	4,669 6,542 16,003 21,412
Operations support	1,752 2,321 5,564 7,347
Technology and development	1,239 1,695 4,055 5,714
Stock-based compensation	1,069 918 2,543 3,546
Reorganization	321 3,426 2,857 12,281
Impairment charge on Rock Hill Facility	7,952 - 7,952 -
Related party expense	- - 1,524 -
Total operating expenses	23,163 20,991 58,800 71,394
Operating loss	(6,098 ) (13,983 ) (18,496 ) (54,823 )
Government subsidies	- 7,141 236 7,765
Gain on sale of software and patents	- - 6,145 -
Foreign exchange (loss) gain	822 1,356 (59 ) 1,870
Interest income	161 19 271 50
Interest expense	(1,196 ) (1,276 ) (3,636 ) (3,935 )
	(213 ) 7,240 2,957 5,750
Net loss before tax	(6,311 ) (6,743 ) (15,539 ) (49,073 )
Income taxes
Current and deferred income tax recovery	- (16 ) - (16 )
	- (16 ) - (16 )
Net loss	(6,311 ) (6,727 ) (15,539 ) (49,057 )
Net loss per share
Net loss per share - basic and diluted	(0.06 ) (0.08 ) (0.15 ) (0.57 )
Weighted average number of shares outstanding(in thousands)
Basic and diluted 104,449 87,446 101,036 86,229

Interim Condensed Consolidated Statement of Comprehensive Loss

	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months	For the Nine Months
			Ended September 30,
	2023	2022	2023	2022
Loss for the period	(6,311 )	(6,727 )	(15,539 )	(49,057 )
Exchange differences on translation of foreign operations	(45 )	(66 )	149	(227 )
Comprehensive loss for the period	(6,356 )	(6,793 )	(15,390 )	(49,284 )

Total revenue for the nine months ended September 30, 2023 includes $0.3 million earned from related parties. All related party income was earned in the first quarter of 2023.

5

Interest expense for the three and nine month ended September 30, 2023 includes $0.4 million owing to a related party (refer to Note 16).

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

6

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)

	Accumulated
Number of	Additional other Total
Common Common	paid-in comprehensive Accumulated shareholders’
shares shares	capital loss deficit equity
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 ) - - -
RSUs and Share Awards withheld to settle employee tax obligations -
	- (189 ) - (9 ) (198 )
Foreign currency translation adjustment -	- - 433 - 433
Netlossforthe 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 ) - - -
RSUs and Share Awards withheld to settle employee tax obligations -
	- (536 ) - - (536 )
Foreign currency translation adjustment -	- - (594 ) - (594 )
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
Stock-based compensation - - 846 - - 846
Issued on vesting of RSUs and Share Awards 874,266 1,587 (1,587 ) - - -
Issued for employee share purchase plan 403,821 9	0 - - - 90
RSUs and Share Awards withheld to settle employee tax obligations -	- (296 ) - - (296 )
Foreign currency translation adjustment -	- - (66 ) - (66 )
Netlossforthe period -	- - - (6,727 ) (6,727 )
As at September 30, 2022 88,266,915 187,93	0 9,592 (16,143 ) (160,366 ) 21,013
As at December 31, 2022 97,882,844 191,347 9,023 (16,106 ) (166,272 ) 17,992
Stock-based compensation - - 452 - - 452
Issued on vesting of RSUs and Share Awards 659,473 1,256 (1,256 ) - - -
RSUs withheld to settle employee tax obligations - - (26 ) - - (26 )
Issued for employee share purchase plan 322,408 128 - - - 128
Foreign currency translation adjustment - - - 273 - 273
Net loss for the period - - - - (11,434 ) (11,434 )
As at March 31, 2023 98,864,725 192,731 8,193 (15,833 ) (177,706 ) 7,385
Stock-based compensation - - 625 - - 625
Issued on vesting of RSUs and Share Awards 1,108,213 1,243 (1,243 ) - - -
Issued for employee share purchase plan 572,253 122 - - - 122
Issued to settle related party debt 3,899,745 1,524 - - - 1,524
Foreign currency translation adjustment - - - (79 ) - (79 )
Net income for the period - - - - 2,206 2,206
As at June 30, 2023 104,444,936 195,620 7,575 (15,912 ) (175,500 ) 11,783
Stock-based compensation - - 360 - - 360
Issued on vesting of RSUs and Share Awards 1,011 2 (2 ) - - -
Issued for employee share purchase plan 343,411 125 - - - 125
Foreign currency translation adjustment - - - (45 ) - (45 )
Net loss for the period - - - - (6,311 ) (6,311 )
As at September 30, 2023 104,789,358 195,747 7,933 (15,957 ) (181,811 ) 5,912

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

7

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

	For the Three Months Ended	For the Three Months Ended	For the Nine	Months Ended
	September 30,		September 30,
	2023	2022	2023	2022
Cash flows from operating activities:
Net loss for the period	(6,311 )	(6,727 )	(15,539 )	(49,057 )
Adjustments:
Depreciation and amortization	2,017	4,236	7,216	12,202
Impairment charge on Rock Hill Facility	7,952	-	7,952	-
Stock-based compensation, net of settlements	1,069	888	2,543	2,596
Foreign exchange loss (gain)	(577 )	(1,365 )	563	(2,147 )
Gain on sale of software and patents	-	-	(6,145 )	-
Loss (gain) on disposal of equipment	97	44	97	(121 )
Accretion of convertible debentures	172	163	515	505
Changes in operating assets and liabilities:
Trade and accrued receivables	(5,130 )	(819 )	(6,639 )	(5,814 )
Other receivables	(163 )	(7,419 )	7,029	(4,566 )
Inventory	1,749	1,052	4,902	(6,052 )
Prepaid and other assets, current and long term	477	(254 )	(41 )	(1,421 )
Accounts payable and accrued liabilities	(77 )	2,748	475	5,921
Other liabilities	(212 )	(70 )	(421 )	(109 )
Customer deposits and deferred revenue	737	(3,078 )	1,702	641
Current portion of long-term debt and accrued interest	(49 )	(44 )	(64 )	(186 )
Lease liabilities	168	(22 )	542	99
Net cash flows provided by (used in) operating activities	1,919	(10,667 )	4,687	(47,509 )
Cash flows from investing activities:
Purchase of property, plant and equipment, net of accounts payable changes	(255 )	(360 )	(1,304 )	(2,247 )
Capitalized software development expenditures	(425 )	(385 )	(1,530 )	(1,286 )
Other asset expenditures	(41 )	(86 )	(186 )	(367 )
Recovery of software development expenditures	49	46	131	91
Proceeds on sale of software and patents	-	-	9,964	-
Proceeds on sale of equipment	14	141	14	214
Net cash flows provided by (used in) investing activities	(658 )	(644 )	7,089	(3,595 )
Cash flows from financing activities:
Proceeds received on long-term debt	-	-	-	647
Repayment of long-term debt	(551 )	(616 )	(3,386 )	(1,852 )
Employee tax payments on vesting of RSUs	-	(296 )	(26 )	(597 )
Net cash flows used in financing activities	(551 )	(912 )	(3,412 )	(1,802 )
Effect of foreign exchange on cash, cash equivalents and restricted cash	(117 )	(293 )	(166 )	(73 )
Net increase (decrease) in cash, cash equivalents and restricted cash	593	(12,516 )	8,198	(52,979 )
Cash, cash equivalents and restricted cash, beginning of period	21,844	22,945	14,239	63,408
Cash, cash equivalents and restricted cash, end of period	22,437	10,429	22,437	10,429
Supplemental disclosure of cash flow information:
Interest paid	(1,038 )	(1,108 )	(3,077 )	(3,439 )
Income taxes (paid) received	-	-	(10 )	3,207

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

	As at September 30,	As at September 30,
	2023	2022
Cash and cash equivalents	19,460	6,818
Restricted cash	2,977	3,611
Total cash, cash equivalents and restricted cash	22,437	10,429

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

8

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 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. As of May 9, 2023, Armstrong World Industries, Inc. ("AWI") owns a 50% interest in the rights, title and interests in all the intellectual property rights in a portion of the ICE Software that is used by AWI.

DIRTT is incorporated under the laws of the province of Alberta, Canada. Its headquarters is located at 7303 – 30th Street S.E., Calgary, AB, Canada T2C 1N6 and its registered office is located at 4500, 855 – 2nd Street S.W., Calgary, AB, Canada T2P 4K7. DIRTT’s common shares trade on the Toronto Stock Exchange under the symbol “DRT”. Effective October 12, 2023, DIRTT’s common shares ceased to trade on the Nasdaq Capital Market. DIRTT’s common shares are quoted on the OTC Markets on the “OTC Pink Tier” under the symbol “DRTTF.”

2. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the Financial Statements contain all adjustments necessary, consisting of only normal recurring adjustments, for a fair statement of its financial position as of September 30, 2023, and its results of operations and cash flows for the three and nine months ended September 30, 2023 and 2022. The condensed balance sheet at December 31, 2022, 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, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 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 3, no new accounting standards were adopted by the Company during the quarter.

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

Principles of consolidation

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

Basis of measurement

These Financial Statements have been prepared on the historical cost convention except for certain financial instruments, assets held for sale and certain components of stock-based compensation that are measured at fair value.

9

Historical cost is generally based on the fair value of the consideration given in exchange for assets. The Company’s quarterly tax provision is based upon an estimated annual effective tax rate.

Seasonality

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

3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Company has not adopted any new accounting standards effective January 1, 2023. Accounting guidance for assets held for sale was applicable to the Company this quarter and the policy applied has been disclosed below. Although there are several 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.

Assets held for sale

The Company classifies an asset group (“asset”) as held for sale in the period that (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable and transfer of the asset is expected to qualify for recognition as a completed sale within one year (subject to certain events or circumstances), (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially and subsequently measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the consolidated statement of operations in the period in which the held for sale criteria are met. Conversely, gains are generally not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for sale, the Company stops recording depreciation or amortization expense on the asset. The Company assesses the fair value of assets held for sale less any costs to sell at each reporting period until the asset is no longer classified as held for sale. Adjustments made to the fair value are recorded in the consolidated statement of operations in the period it is measured. Refer to Note 6.

4. LIQUIDITY

As at September 30, 2023, the Company had $19.5 million of cash on hand and C$14.6 million ($10.8 million) of available borrowings (December 31, 2022 – $10.8 million and C$7.2 million ($5.3 million) of available borrowings). Through the first nine months of fiscal year 2023, the Company generated $4.7 million in cash flows from operations, compared to a cash usage of $47.5 million over the first nine months of fiscal year 2022. The Company benefited from the receipt of $7.3 million of government subsidies during the first nine months of 2023 compared to $nil in the nine months ended September 30, 2022 (refer to Note 5).

We have implemented multiple price increases during the past two years to mitigate the impact of inflation on raw materials. These actions have resulted in a meaningful improvement in our gross profit margins and higher net profit and have served to reduce our cash usage to operate the business. Gross profit for the nine months ended September 30, 2023 was $40.3 million, or 30.8%, compared to the same period of 2022, which generated gross profit of $16.6 million, or 12.8%.

Over the past four quarters, we have also executed upon several cash initiatives. First, in May 2023, we entered into an agreement with AWI (refer to Note 7) resulting in the receipt of $10.9 million of cash. Second, during March 2023, we entered into an agreement to sublease our Dallas DIRTT Experience Center (“DXC”) to one of our Construction Partners in that region. Under the sublease agreement, the subtenant has assumed responsibility for the monthly rent, utilities, maintenance, taxes and other costs as of April 1, 2023, through December 31, 2024, which will provide us annualized savings of approximately $1 million. We are continuing to evaluate other properties for sale and leaseback or sublease opportunities and expect these strategic initiatives to result in positive cash inflows in 2023

10

and 2024. Third, we completed a Private Placement (as defined herein) of common shares in November 2022, with certain significant shareholders and directors and officers of the Company, to bridge cash requirements before the completion and closing of the noted strategic transactions.

While we are encouraged by our improved profitability and cash flow, we have continued to evaluate our fixed cost structure and overhead in light of macroeconomic uncertainty. We have implemented multiple restructuring initiatives (refer to Note 6) designed to align our cost structure with current expected levels of demand. In addition, the Company has reduced headcount by 154 employees, or approximately 16% from January 2022 through September 2023.

We have assessed the Company’s liquidity position as at September 30, 2023 taking into account our sales outlook for the next year, our existing cash balances and available credit facilities and expected early settlements related to our Rock Hill Facility equipment lease (refer to Note 10). Based on this analysis, we believe the Company has sufficient liquidity to support ongoing operations for the next twelve months.

5. GOVERNMENT SUBSIDIES

In the United States, the Employee Retention Credit (“ERC”) was established by Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act to provide an incentive for employers to keep their employees on their payroll during COVID-19 closures. The ERC is a refundable payroll tax credit based on qualified wages paid by an eligible employer between March 12, 2020, and October 1, 2021 for companies experiencing a significant decline in gross receipts during a calendar quarter or having operations fully or partially suspended during the quarter due to COVID-19. During the third quarter of 2022, the Company determined it was eligible for the ERC for the first three quarters of 2021 and filed a claim for $7.3 million in payroll tax credits ($7.1 million net of expenses). As of September 30, 2023, the $7.3 million claim (plus an additional $0.2 million of interest) has been received in full.

6. REORGANIZATION AND ASSETS HELD FOR SALE

During the year ended December 31, 2022, and continuing into 2023, the Company undertook a number of reorganization initiatives:

Closure of Phoenix Aluminum Manufacturing Facility (the “Phoenix Facility”)

On February 22, 2022, we commenced the process of closing our Phoenix Facility, shifting related manufacturing to both our Savannah and Calgary manufacturing facilities. During the first quarter of 2022, the Company incurred $1.0 million of accelerated depreciation, recorded in cost of sales, associated with the closure of the Phoenix Facility. The closure of the Phoenix Facility was substantially completed in the second quarter of 2022. The Company entered into a sublease arrangement for part of the Phoenix Facility during the second quarter of 2022, commencing July 1, 2022, which exceeds the contractual lease commitments under the Right of Use assets.

Workforce Reductions, Board and Management Changes

In February and July of 2022, we announced our intention to eliminate a portion of our salaried workforce, including manufacturing and office positions, along with other cost reduction initiatives. The Company’s Board of Directors was reconstituted following a proxy contest in April 2022, which was deemed a change of control under the Company’s insurance policy resulting in additional insurance expenditures. Further, the Company made changes to several executive officer roles during the year ended December 31, 2022. During the nine months ended September 30, 2023, we continued to review costs resulting in the elimination of additional salaried positions in the second and third quarters of 2023. These actions resulted in the Company incurring certain one-time termination costs.

Temporary Suspension of Operations and Subsequent Closure at Rock Hill, South Carolina (the “Rock Hill Facility”)

On August 23, 2022, we announced the temporary suspension of operations at our Rock Hill Facility, shifting related manufacturing to our Calgary manufacturing facility. Costs associated with this idle facility, included in cost of sales, were $0.4 million and $1.4 million for the three month and nine month period ended September 30, 2023, respectively.

11

On September 27, 2023, we decided to permanently close the Rock Hill Facility. As a result of this decision, we incurred $8.0 million of impairment charges associated with the manufacturing equipment located at the Rock Hill Facility. We expect to incur $0.5 million of costs in dismantling and decommissioning the Rock Hill Facility assets. The Company will continue to maintain the building lease and is pursuing a sublease arrangement.

For the three and nine months ended September 30, 2023, reorganization costs incurred relate to the above mentioned initiatives:

	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023		2022		2023	2022
Termination benefits	168		2,843		2,138	6,870
Insurance costs on change of control	-		-		-	3,676
Phoenix Facility closure	24		-		96	853
Rock Hill Facility temporary suspension and closure
	129		144		129	144
of operations
Other costs	-		439		494	738
Total reorganization costs	321		3,426		2,857	12,281
Reorganization costs in accounts payable and accrued liabilities at January 1, 2022						-
Reorganization expense						13,461
Reorganization costs paid						(11,184 )
Reorganization costs in accounts payable and accrued liabilities at December 31, 2022						2,277
Reorganization expense						2,857
Reorganization costs paid						(3,977 )
Reorganization costs in accounts payable and accrued liabilities at September 30, 2023						1,157

The $1.1 million payable relates to termination benefits (December 2022 – $2.1 million).

Assets classified as held for sale as at September 30, 2023 of $2.3 million consist of manufacturing equipment previously used in the Rock Hill Facility. Prior to the decision to permanently close the Rock Hill Facility, the assets were classified as property, plant and equipment.

7. GAIN ON SALE OF SOFTWARE AND PATENTS

On May 9, 2023, we entered into a Co-Ownership Agreement (the “Co-Ownership Agreement”) and Partial Patent Assignment Agreement with AWI. The agreements provided for a cash payment from AWI to the Company of $10.0 million, subject to certain routine closing conditions, in exchange for the partial assignment to AWI and resulting co-ownership of a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE software that is used by AWI (the “Applicable ICE Code”), including a 50% interest in the patent rights that relate to the Applicable ICE Code. Under the Co-Ownership Agreement, we also agreed to provide AWI a transfer of knowledge concerning the source code of the Applicable ICE Code. In exchange for completing the knowledge transfer, we will receive an additional cash payment of $1.0 million, which is expected to be received by early 2024. The Co-Ownership Agreement provides that we and AWI have separate exclusive fields of use and restrictive covenants with respect to the Applicable ICE Code and related intellectual property, which survive until either party elects to separate from its relationship with the other and for five years thereafter. We concurrently entered into an Amended and Restated Master Services Agreement (the “ARMSA”) with AWI, under which AWI has also prepaid certain development services to be provided by DIRTT. The ARMSA will automatically terminate if the CoOwnership Agreement is terminated or expires, and may also be terminated if either party breaches the exclusive fields of use or restrictive covenants in the Co-Ownership Agreement.

The $10.0 million of proceeds on the sale of the 50% interest in the Applicable ICE code, pursuant to the CoOwnership Agreement, was received during the second quarter of 2023. In accordance with US GAAP, the proceeds were first applied to the net book value of the related cost of software of $2.9 million and patents (other assets) of $0.9 million and the residual amount of $6.1 million was recognized as a gain in the consolidated statement of operations. Further, $0.9 million was received during the second quarter as a prepayment under the ARMSA, which was recognized into revenue as the performance obligation is met. Part of the proceeds of this transaction were used to

12

settle one of our equipment leases of $1.6 million and resulted in the release of $0.4 million of restricted cash (refer to Note 10). A final prepayment of $0.9 million under the ARMSA was received in October 2023.

8. TRADE AND ACCRUED RECEIVABLES

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

In order to manage and assess our risk, management maintains credit policies that include regular review of credit limits of individual receivables and systematic monitoring of aging of trade receivables and the financial wellbeing of our customers. In addition, we acquired trade credit insurance effective April 1, 2020. At September 30, 2023, approximately 80% 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.

Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the three and nine months ended September 30, 2023, one Construction Partner accounted for greater than 10% of revenue (one Construction Partner for the nine months ended September 30, 2022). 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 :

	As at,	As at,
	September 30,	December 31,
	2023	2022
Current	16,974	12,381
Overdue	3,642	1,675
	20,616	14,056
Less: expected credit losses	(100 )	(126 )
	20,516	13,930

No adjustment to our expected credit losses of $0.1 million was required for the three or nine months ended September 30, 2023. 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.

9. OTHER LIABILITIES

	As at,	As at,
	September 30, 2023	December 31, 2022
Warranty provisions(1)	867	1,278
DSU liability	971	594
Sublease deposits	183	139
Other provisions	-	45
Other liabilities	2,021	2,056

(1) The following table presents a reconciliation of the warranty balance:

	As at,	As at,
	September 30, 2023	December 31, 2022
As at January 1	1,278	1,451
Additions to warranty provision	845	1,134
Payments related to warranties	(1,056 )	(1,307 )
Adjustments to warranty provision	(200 )	-
	867	1,278

13

10. LONG-TERM DEBT

	Revolving Credit Facility	Leasing	Convertible
		Facilities	Debentures	Total Debt
Balance on January 1, 2022	-	13,909	56,733	70,642
Issuances	-	647	-	647
Accretion of issue costs	-	-	676	676
Accrued interest	-	735	3,539	4,274
Interest payments	-	(735 )	(3,688 )	(4,423 )
Principal repayments	-	(2,470 )	-	(2,470 )
Exchange differences	-	(274 )	(3,637 )	(3,911 )
Balance at December 31, 2022	-	11,812	53,623	65,435
Current portion of long-term debt and accrued interest	-	2,561	745	3,306
Long-term debt	-	9,251	52,878	62,129
Balance on December 31, 2022	-	11,812	53,623	65,435
Accretion of issue costs	-	-	515	515
Accrued interest	-	447	2,566	3,013
Interest payments	-	(447 )	(2,630 )	(3,077 )
Principal repayments	-	(3,386 )	-	(3,386 )
Exchange differences	-	241	121	362
Balance at September 30, 2023	-	8,667	54,195	62,862
Current portion of long-term debt and accrued interest	-	8,250	711	8,961
Long-term debt	-	417	53,484	53,901

Revolving Credit Facility

On February 12, 2021, the Company entered into a loan agreement governing a C$25.0 million senior secured revolving credit facility with the Royal Bank of Canada (“RBC”), as lender (the “RBC Facility”). Under the RBC Facility, the Company is able to borrow up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of (i) 75% of the book value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims (the “Borrowing Base”). Interest 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). 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 offset any borrowings and any remaining amounts made available to the Company.

On February 9, 2023, the Company extended the RBC Facility (the “Extended RBC Facility”). The Extended RBC Facility has a borrowing base of C$15 million and a one year term. Interest is calculated as at the Canadian or U.S. prime rate plus 75 basis points or the Canadian Dollar Offered Rate or Term Secured Overnight Financing Rate ("SOFR") plus 200 basis points plus the Term SOFR Adjustment (as defined in the amended loan agreement governing the Extended RBC Facility). Under the Extended RBC Facility, if the trailing twelve month FCCR is not above 1.25 for three consecutive months, a cash balance equivalent to one-year's worth of Leasing Facilities payments must be maintained. At September 30, 2023, available borrowings are C$14.6 million ($10.8 million) (December 31, 2022 – $10.8 million and C$7.2 million ($5.3 million) of available borrowings), calculated in the same manner as the RBC facility described above, of which no amounts have been drawn. The Company did not meet the three-month FCCR requirement during the third quarter of 2023, which resulted in requiring the restriction of $3.0 million of cash ($3.4 million as at December 31, 2022).

Leasing Facilities

The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) of which C$4.4 million ($3.3 million) has been drawn and C$3.8 million ($2.8 million) has been repaid, and a $14.0 million equipment leasing facility in the United States (the “U.S. Leasing Facility” and, together with the Canada

14

Leasing Facility, the “Leasing Facilities”) of which $13.3 million has been drawn and $5.2 million has been repaid, each with RBC, and one of its affiliates, which are available for equipment expenditures and certain equipment expenditures already incurred. The Canadian Leasing Facility and the U.S. Leasing Facility, respectively, have seven and five-year terms and bear interest at 4.25% and 5.59%. Refer to Note 6 on the decision to permanently close the Rock Hill Facility. As part of this decision the Company intends to early settle the U.S. Leasing Facility in the next twelve months. The $8.2 million balance of the U.S. Leasing Facility has therefore been classified under current liabilities as at September 30, 2023. On October 31, 2023, the Company paid off $1.0 million of the U.S. Leasing Facility.

The Company did not make any draws on the Leasing Facilities during the three and nine months ended September 30, 2023. During the three and nine months ended September 30, 2022, the Company received C$0.9 million ($0.7 million) under the Canada Leasing Facility. The associated financial liabilities are shown on the consolidated balance sheet in the current portion of long-term debt and accrued interest and long-term debt.

As part of RBC's consent to the AWI transaction (refer to Note 7), one of the Canadian lease agreements of $1.6 million was fully settled using AWI proceeds. This resulted in the release of $0.4 million of restricted cash associated with the one year of payments on this lease, as described above.

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. As at September 30, 2023, C$18.9 million of the January Debentures are held by a related party (refer to Note 16).

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 September 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. As at September 30, 2023, C$13.6 million of the December Debentures are held by a related party (refer to Note 16).

11. STOCK-BASED COMPENSATION

In May 2020, shareholders approved the DIRTT Environmental Solutions Long Term Incentive Plan (the “2020 LTIP”). The 2020 LTIP replaced the predecessor incentive plans, being the Performance Share Unit Plan (“PSU Plan”) and the Amended and Restated Stock Option Plan (“Stock Option Plan”). 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.

In May 2023, shareholders approved the DIRTT Environmental Solutions Ltd. Amended and Restated LongTerm Incentive Plan (the “2023 LTIP”) at the annual and special meeting of shareholders. The 2023 LTIP gives the

15

Company the ability to award options, share appreciation rights, restricted share units, deferred share units, restricted shares, dividend equivalent rights, and other share-based awards and cash awards to eligible employees, officers, consultants and directors of the Company and its affiliates. In accordance with the 2023 LTIP, the sum of (i) 12,350,000 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 30, 2023, expire or are cancelled or terminated without having been exercised in full, have been reserved for issuance under the 2023 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.

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

Stock-based compensation expense

	For The Three Months Ended September 30,	For The Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023	2022	2023	2022
Equity-settled awards	594	846	2,106	3,471
Cash-settled awards	475	72	437	75
	1,069	918	2,543	3,546

The following summarizes RSUs, Share Awards, PSUs, and DSUs activity during the periods:

	RSU Time-	RSU Performance-	Share
	Based	Based	Awards	PSU	DSU
	Number of	Number of	Number of	Number of	Number of
	units	units	units	units	units
Outstanding at December 31, 2021	3,216,536	1,021,739	-	157,200	361,577
Granted	2,303,287	863,279	162,682	-	890,832
Vested or settled	(2,019,550 )	(566,352 )	(94,528 )	-	(501,916 )
Withheld to settle employee tax obligations	(526,259 )	(242,460 )	(68,154 )	-	-
Forfeited	(734,855 )	(502,628 )	-	(157,200 )	-
Outstanding at September 30, 2022	2,239,159	573,578	-	-	750,493
Outstanding at December 31, 2022	1,885,337	343,919	-	-	1,165,319
Granted	3,549,500	-	522,883	2,584,161	1,646,420
Vested or settled	(987,054 )	(258,760 )	(522,883 )	-	(220,590 )
Withheld to settle employee tax obligations	(64,230 )	-	-	-	-
Forfeited orexpired	(600,345 )	-	-	(738,553 )	-
Outstanding at September 30, 2023	3,783,208	85,159	-	1,845,608	2,591,149

Restricted share units (time-based vesting)

Restricted share units 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 (“RSUs”). 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 in 2022 and 2023 was C$2.37 and C$0.46, respectively, which was determined using the closing price of the Company’s common shares on their respective grant dates.

16

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.

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

In the first quarter of 2023, 36,254 Share Awards were issued to a consultant as compensation for services rendered. During the second quarter of 2023, certain executives were issued Share Awards in lieu of cash paid variable incentive compensation. These Share Awards vested upon grant. The fair value of the Share Awards granted was C$0.49 ($0.34), which was determined using the closing price of the Company’s common shares on the grant date.

Performance share units

During the second quarter of 2023, certain executives were issued a strategic equity grant through Performance share units (“PSUs”). The performance period of the PSUs is from January 1, 2023 to December 31, 2026 with a cliff vesting term for December 31, 2026. 2,584,161 PSUs were granted and depending on the level of performance, the PSUs will vest 100%, 160% or 190% up to a maximum of 4,909,907 PSUs. Settlement will be made in the form of shares issued from treasury. The performance measures are a combination of Revenue and Earnings Before Interest, Taxes, Depreciation and Amortization and both targets have to be achieved. As of September 30, 2023, the fair value of these PSUs have been deemed to be nil based on the likelihood of achieving the targets compared to current results. During the third quarter of 2023, 738,553 PSUs with a $nil value were forfeited as a result of an executive departure and 1,845,608 PSUs with a $nil value are outstanding at September 30, 2023.

Deferred share units

Granted under the DSU Plan

The fair value of the DSU liability and the corresponding expense is charged to profit or loss at the grant date. Subsequently, at each reporting date between the grant date and settlement date, the fair value of the liability is remeasured with any changes in fair value recognized in profit or loss for the period. DSUs outstanding at September 30, 2023 had a fair value of $0.6 million which is included in other liabilities on the balance sheet (December 31, 2022 – $0.6 million).

Granted under the 2023 LITP

DSUs granted after May 30, 2023 (the "New DSUs") will be settled by way of the provision of cash or shares (or a combination thereof) to the Directors, at the discretion of the Company. The Company intends to settle these DSUs through issuances of common shares. The weighted average fair value of the DSUs granted in 2023 was C$0.44 ($0.33), which was determined using the closing price of the Company’s common shares on the grant date. New DSUs outstanding at September 30, 2023 had a fair value of $0.4 million which is included in other liabilities on the balance sheet (December 31, 2022 – $nil).

17

Options

The following summarizes options forfeited and expired during the periods:

	Number of	Weighted average
	options	exercise price C$
Outstanding at December 31, 2021	4,064,489	6.64
Forfeited	(2,530,120 )	6.40
Outstanding at September 30, 2022	1,534,369	7.03
Outstanding at December 31, 2022	1,480,069	7.03
Forfeited	(989,066 )	6.97
Expired	(263,725 )	6.46
Outstanding and Exercisable at September 30, 2023	227,278	7.95

No options were granted during the three months and nine months ended September 30, 2023.

Range of exercise prices outstanding and exercisable at September 30, 2023:

	Options outstanding	Options exercisable
	Weighted Weighted	Weighted Weighted
	Number of average average	average average
	options remaining exercise	Number remaining exercise
Range of exercise prices	life price C$	exercisable life price C$
C$6.01 – C$7.00	16,350 0.97 $ 6.12	16,350 0.97 $ 6.12
C$7.01–C$7.84	210,928 0.63 $ 7.84	210,928 0.63 $ 7.84
Total	227,278	227,278

Dilutive Instruments

For the three and nine months ended September 30, 2023, 0.2 million options (2022 – 1.5 million) 3.9 million RSUs and PRSUs (2022 – 2.8 million), 1.2 million New DSUs (2022 – nil), 2.6 million PSUs (2022 – nil), 1.1 million shares relating to equity-settled Variable Pay Plan (“VPP”) (2022 – nil), and 134.4 million (2022 – 127.5 million) shares would be issued if the principal amount of the Debentures were settled in our common shares at the quarter end price and were included in the diluted EPS calculation.

12. 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 13 for the disaggregation of revenue by geographic region.

	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended	For the Nine Months Ended
			September 30,
	2023	2022	2023	2022
Product	43,132	39,092	113,323	110,383
Transportation	4,767	5,022	13,169	13,878
License fees from Construction Partners	196	193	613	588
Total product revenue	48,095	44,307	127,105	124,849
Installation and other services	1,442	2,440	3,893	4,885
	49,537	46,747	130,998	129,734

18

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

	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended	For the Nine Months Ended
			September 30,
	2023	2022	2023	2022
At a point in time	47,899	44,114	126,492	124,261
Over time	1,638	2,633	4,506	5,473
	49,537	46,747	130,998	129,734

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

Contract Liabilities

		As at
	September 30, 2023	December 31, 2022	December 31, 2021
Customer deposits	6,396	4,458	1,959
Deferred revenue	347	408	461
Contract liabilities	6,743	4,866	2,420

Contract liabilities primarily relate to deposits received from customers and maintenance revenue from license subscriptions. The balance of contract liabilities was higher as at September 30, 2023 compared to December 31, 2022 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2022 and 2021, respectively, totaling $4.8 million and $2.4 million were recognized as revenue during the nine months ended September 30, 2023 and 2022, 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 September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023	2022	2023	2022
Commercial	31,272	31,796	82,154	85,458
Healthcare	8,483	3,638	25,111	15,693
Government	4,606	3,358	10,581	11,680
Education	3,538	5,322	8,646	11,430
License fees from Construction Partners	196	193	613	588
Total product and transportation revenue	48,095	44,307	127,105	124,849
Installation and other services	1,442	2,440	3,893	4,885
	49,537	46,747	130,998	129,734

13. 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. The Company’s revenue from operations from external customers, based on location of operations, and information about its non-current assets, is detailed below.

19

Revenue from external customers

Revenue from external customers
	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2023		2022	2023	2022
Canada	5,665		7,191	14,577	19,859
U.S.	43,872		39,556	116,421	109,875
	49,537		46,747	130,998	129,734

Non-current assets

Non-current assets
	As at
	September 30, 2023	December 31, 2022
Canada	30,396	28,251
U.S.	32,433	53,277
	62,829	81,528

14. INCOME TAXES

As at September 30, 2023, the Company had a valuation allowance of $33.4 million against deferred tax assets as the Company has experienced cumulative losses in recent years (December 31, 2022 – $29.8 million).

15. COMMITMENTS

As at September 30, 2023, the Company had outstanding purchase obligations of approximately $4.2 million related to inventory and property, plant and equipment purchases (December 31, 2022 – $2.2 million). As at September 30, 2023, the Company had undiscounted operating lease liabilities of $46.0 million (December 31, 2022 – $48.7 million). The decrease in undiscounted operating lease liabilities from June 30, 2023 ($61.2 million) was related to a modification on the Rock Hill Facility lease liability, as DIRTT no longer assumes the two 5-year extension options will be exercised (refer to Note 6).

16. RELATED PARTY TRANSACTIONS

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

Pursuant to the Debt Settlement Agreement, the Company agreed to repay the Debt by either, or a combination of (i) a payment in cash by the Company to the 22NW Group, and/or (ii) the issuance of equity securities of the Company to the 22NW Group.

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

At the annual general and special meeting of shareholders held on May 30, 2023, shareholders voted to approve the issuance of common shares to 22NW Group, and on June 2, 2023, the Company issued 3,899,745 common shares to 22NW Group as repayment for the Debt. Upon settlement, the debt was revalued at the higher of the deemed price of $0.40 per common share and the May 30, 2023 market price of $0.38 per common share resulting in a recovery from the balance recorded at March 31, 2023 which had been valued at a price of $0.53 per common share.

20

Other related party transactions for the three and nine months ended September 30, 2023, relate to the sale of DIRTT products and services to the 22NW Group for $nil and $0.3 million, respectively (2022 – $nil). The sale to 22NW Group was based on price lists in force and terms that are available to all employees.

As at September 30, 2023, C$18.9 million and C$13.6 million of the January Debentures and December Debentures, respectively, are held by 22NW Group. Interest accrued on the debentures for the three months ended September 30, 2023 is $0.4 million (2022 – $nil). Interest is earned on terms applicable to all Debenture holders.

21

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

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, including AWI which owns a 50% interest in the rights, title and interests in all the intellectual property rights in a portion of the ICE Software that is used by AWI.

Key Third Quarter Highlights

• Revenue for the quarter ended September 30, 2023 was $49.5 million, an increase of $2.8 million or 6% from $46.7 million for the same period in 2022, and a $4.8 million or 11% increase from the second quarter of 2023. Compared to the same period in 2022, the increase in revenue was primarily driven by an increase in pricing, as well as volume growth in Healthcare and Government sectors. Compared to the first and second quarter of 2023, third quarter activity was higher, in line with seasonal demand patterns and timing of project schedules.

• Gross profit and gross profit margin for the quarter ended September 30, 2023 was $17.1 million or 34.4% of revenue, an increase of $10.1 million or 144% from $7.0 million or 15.0% of revenue for the quarter ended September 30, 2022. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended September 30, 2023 was $18.3 million. This represents an $8.2 million or 80% increase over the comparative period in 2022 and a $2.1 million or 13% increase from the second quarter of 2023. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) for the third quarter of 2023 was 36.9%, a 1,520 bps improvement over the comparative period and a 70 bps improvement from the second quarter of 2023. The increase in Adjusted Gross Profit and Adjusted Gross Profit Margin compared to the previous and comparative quarters is due to having better leverage over fixed costs through price increases and reduced fixed costs.

• Net loss for the third quarter of 2023 was $6.3 million compared to a $6.7 million net loss for the same period of 2022. The lower net loss is primarily the result of the higher gross profit margin of $10.1 million (as explained above), a $2.2 million increase in operating expenses including the $8.0 impairment charge on the Rock Hill Facility, offset by a $3.1 million reduction in reorganization costs, a $0.1 million increase in interest income and $0.1 million decrease in interest expense, offset by a $0.5 million decrease in foreign exchange gain and a $7.1 million government subsidy in 2022 that did not recur.

• During the third quarter of 2023, we announced the permanent closure of the Rock Hill Facility. This facility had been temporarily suspended since August 2022. With annual production capacity at DIRTT facilities in Savannah, Georgia and Calgary, Alberta, of approximately $400 million in annual revenue, the closure is part of DIRTT’s ongoing focus on realigning the organization, increasing efficiency, and improving profitability. Non-cash impairment charges related to Rock Hill Facility equipment of $8.0 million has been recorded in the three months ended September 30, 2023.

• Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the third quarter of 2023 was $5.3 million or 10.6%, an improvement of $10.7 million from a $5.4 million loss or (11.6)% for the third quarter of

22

1. This improvement was driven by the price increases and improved product mix, as well as the cost reduction measures taken by the Company over the past twenty four months.

2. Approximately $1.9 million of cash was generated by operating activities in the third quarter of 2023 compared to $10.7 million of cash used in the third quarter of 2022, with cash increasing $0.6 million overall in the third quarter of 2023. Our cash flow has improved compared to earlier quarters due to improved gross margin, our cost reduction initiatives, strategic actions and careful working capital management.

In the first quarter of 2023, we changed our methodology for calculating and disclosing our forward twelve month pipeline. We are now disclosing qualified leads, defined as quantity of projects being pursued, and our pipeline, defined as working with an engaged client on assessment of DIRTT as a prefabricated interior solution provider. We have begun using these new measures as they better measure expected near term performance given our operating environment has been prone to change due to macroeconomic factors such as worksite labor availability, interest rate changes, and potential recessionary impacts on construction projects.

As of October 1, 2023, our twelve month forward pipeline is projecting a 9% growth year on year and a 15% growth from January 1, 2023, illustrated in the table below.

As at
October 1, 2023 January 1, 2023 % Change	October 1, 2022 % Change
Twelve Month Forward Pipeline ($ 000s)
Commercial 192,773 141,293 36 %	146,306 32 %
Healthcare 39,230 55,719 (30 %)	67,008 (41 %)
Government 34,866 32,313 8 %	28,526 22 %
Education 16,235 17,201 (6 %)	17,524 (7 %)
283,104 246,526 15 %	259,364 9 %
Leads (#) 999 721 39 %	678 47 %

Our Commercial segment has benefited from our positioning in Texas and Alberta and exposure to the energy sector. Our healthcare segment pipeline has returned to growth from the previous quarter after delivering several large healthcare projects. Due to the extended sales cycle of healthcare projects our twelve month pipeline experiences higher volatility than our other segments. Our full pipeline for healthcare projects continues to experience growth.

We are cautious on the timing of our Government and Education pipeline in the forward twelve months due to the uncertainty and risk of a potential U.S. federal government shutdown. We continue to increase our penetration in K-12 education and grow a higher education presence in our Central and Southern regions.

We are constantly scrutinizing our pipeline and believe that our commercial initiatives are reflected in the increased pipeline size and lead activity.

23

Outlook

Through the first six months of 2023, we experienced continued volatility in economic conditions, especially in regions with concentrated sales to the technology and banking sectors. These conditions included layoffs in the technology sector, reduction in short-term needs for office space, and increasing interest rates impacting borrowings, resulting in certain projects that were planned earlier in the year being deferred or canceled. We note that we are exiting our seasonally strongest quarter and are entering our typically weaker winter period.

In response and as discussed in our previous quarterly reports on Form 10-Q, we identified and took action to reduce annualized overhead costs by $5.0 million during the first quarter of 2023. Further, on May 8, 2023, the Company reduced its salaried workforce, resulting in annualized savings of $2.6 million. One-time costs associated with these reductions, incurred in the second quarter of 2023, were approximately $0.7 million.

The trend of economic uncertainty has continued into the third quarter of 2023. The conversation on “return to work” continues as some companies are mandating a hybrid “return to work” policy. Various inflation metrics have improved over the three months ended September 30, 2023, although there is no guarantee they will continue to do so.

We believe that wider macroeconomic conditions indicate we are in an uncertain late cycle environment with the near-term potential for deteriorating macroeconomic conditions. The increase in long term interest rates can potentially reduce demand for capital intensive projects in our Commercial, Healthcare, and Education segments. The AIA/Deltek Architecture Billings Index fell into contraction across all geographies in September. Regardless, we continue to focus on what is within our control: supporting our current partners, increasing penetration in targeted geographies, onboarding new Construction Partners, and new strategic partnerships. While we are benefiting from price stability in our input costs as well as a strengthening U.S. dollar, recent unrest in the Middle East may adversely impact our gross margins, and could further impact our pipeline, should energy prices return to 2022 levels.

We have made hard choices and meaningfully reduced our cost footprint and made great progress lowering our estimated revenue breakeven point. We will continue to evaluate our cost structure and respond to the inflationary impacts to labor, materials and services in an efficient manner consistent with our goal to maintain future healthy gross profit and Adjusted EBITDA margins while improving our future liquidity.

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, onetime non-recurring charges or gains (such as gain on sale of software and patents), 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 charges 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

24

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
Adjusted EBITDA	EBITDA adjusted to remove foreign exchange gains or losses;
	impairment charges; reorganization expenses; stock-based
	compensation expense; government subsidies; one-time, non-
	recurring charges and gains; and any other non-core gains or
	losses
Adjusted EBITDA Margin	Adjusted EBITDA divided by revenue

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.

25

Results of Operations

Three and Nine Months Ended September 30, 2023, Compared to the Three and Nine Months Ended September 30, 2022

	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023 2022		% Change	2023 2022		% Change
	($ in thousands)			($ in thousands)
Revenue	49,537	46,747	6	130,998	129,734	1
Gross Profit(1)	17,065	7,008	144	40,304	16,571	143
Gross Profit Margin	34.4 %	15.0 %		30.8 %	12.8 %
Operating Expenses
Sales and Marketing	6,161	6,089	1	18,302	21,094	(13 )
General and Administrative	4,669	6,542	(29 )	16,003	21,412	(25 )
Operations Support	1,752	2,321	(25 )	5,564	7,347	(24 )
Technology and Development	1,239	1,695	(27 )	4,055	5,714	(29 )
Stock-Based Compensation	1,069	918	16	2,543	3,546	(28 )
Reorganization	321	3,426	(91 )	2,857	12,281	(77 )
Impairment charge on Rock Hill	7,952	-	100	7,952	-	100
Facility
Related Party Expense	-	-	NA	1,524	-	100
Total Operating Expenses	23,163	**20,991 **	10	58,800	**71,394 **	(18 )
Operating Loss	(6,098 )	(13,983 )	(56 )	(18,496 )	(54,823 )	(66 )
Operating Margin	(12.3 )%	(29.9 )%		(14.1 )%	(42.3 )%
Government subsidies	-	7,141	(100 )	236	7,765	(97 )
Gain on sale of software and	-	-	NA	6,145	-	100
patents
Foreign exchange (loss) gain	822	1,356	(39 )	(59 )	1,870	(103 )
Interest income	161	19	747	271	50	442
Interest expense	(1,196 )	(1,276 )	(6 )	(3,636 )	(3,935 )	(8 )
	(213 )	7,240	103	2,957	5,750	(49 )
Net loss before tax	(6,311 )	(6,743 )	6	(15,539 )	(49,073 )	68
Current and deferred income tax	-	(16 )	100	-	(16 )	100
recovery
	-	(16 )	100	-	(16 )	100
Net loss	(6,311 )	(6,727 )	6	(15,539 )	(49,057 )	68
(1) For the three and nine months ended September 30, 2022, $1.0 million primarily related to the write off of inventory of discounted product lines, and $1.0 million and $2.1 million, respectively of accelerated depreciation and amortization on software associated with discontinued product lines and the closure of the Phoenix Facility.

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 September 30,	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023 2022		% Change	2023 2022		% Change
	($ in thousands)			($ in thousands)
Product	43,132	39,092	10	113,323	110,383	3
Transportation	4,767	5,022	(5 )	13,169	13,878	(5 )
License fees from	196
		193	2	613	588	4
Construction Partners
Total product revenue	48,095	44,307	9	127,105	124,849	2
Installation and other services	1,442	2,440	(41 )	3,893	4,885	(20 )
	49,537	46,747	6	130,998	129,734	1

Beginning in 2020, we experienced significant increases in nearly all of our material input costs, including raw materials, shipping materials, labor, and freight. This led to significant gross margin compression in 2021 and 2022. Effective November 16, 2021, DIRTT increased product and transportation prices on new projects by approximately

26

6.5%. On February 17, 2022, we implemented a further price increase of 5% that came into effect June 1, 2022. On June 21, 2022 an additional price increase of 10% was announced effective July 21, 2022. These increases have improved revenue and profitability through better recovery of the material input costs previously discussed.

Revenue for the nine months ended September 30, 2023, was $131.0 million, an increase of $1.3 million compared to $129.7 million in the comparative period of 2022. The first nine months of 2023 were impacted by macroeconomic conditions, including layoffs in the tech sector and rising interest rates, both of which have had an impact on our pipeline. For example, one large project with a customer in the technology sector that was originally scheduled for the first quarter of 2023 was deferred indefinitely. During the quarter ended September 30, 2023, revenue was $49.5 million, an increase of $2.8 million compared to the comparative period of 2022 of $46.7 million.

Installation and other services revenue was $1.4 million for the quarter ended September 30, 2023 compared to $2.4 million in the quarter ended September 30, 2022, and $3.9 million in the nine months ended September 30, 2023 compared to $4.9 million in the same period of 2022. This revenue primarily reflects services performed by our ICE and design teams for third parties. 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 September 30, 2023, we had 71 (September 30, 2022: 69; December 31, 2022: 67) Construction Partners servicing multiple locations. During the nine months ended September 30, 2023, we announced the expansion of seven of our DIRTT Construction Partners into new markets as we expand the reach of DIRTT products in North America.

We periodically analyze our revenue growth by vertical markets in the defined markets of commercial, healthcare, government and education. While the commercial sector has been challenged by the macroeconomic factors discussed previously, we are seeing increased growth in our healthcare sector, as an increase in new construction starts and the heightened need for adaptability and flexibility in the years after COVID-19 have increased the demand for our products. We continue to see growth opportunities in the government and education sectors and have restructured our sales leadership function, prioritizing oversight of these verticals.

The following table presents our product and transportation revenue by vertical market:

	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023 2022		% Change	2023 2022		% Change
	($ in thousands)			($ in thousands)
Commercial	31,272	31,796	(2 )	82,154	85,458	(4 )
Healthcare	8,483	3,638	133	25,111	15,693	60
Government	4,606	3,358	37	10,581	11,680	(9 )
Education	3,538	5,322	(34 )	8,646	11,430	(24 )
License fees from	196	193	2	613	588	4
Construction Partners
Total product revenue	48,095	44,307	9	127,105	124,849	2
Service revenue	1,442	2,440	(41 )	3,893	4,885	(20 )
	49,537	46,747	6	130,998	129,734	1

	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023 2022		2023	2022
	(in %)		(in	%)
Commercial	65	72	65	69
Healthcare	18	8	20	13
Government	10	8	8	9
Education	7	12	7	9
Total Product Revenue(1)	100	100	100	100

(1) Excludes license fees from Construction Partners.

27

Commercial revenues decreased by 2% from the prior year period. Healthcare revenues increased by 133% in the third quarter of 2023 from the same period of 2022. The quarter ended September 30, 2023 includes $2.1 million of revenue from a large healthcare customer. 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. Government revenues in the third quarter of 2023 increased by 37% from the prior year period. Similar to healthcare, government revenues tend to be larger individual projects. Education sales in the third quarter of 2023 decreased 34% from the same period of 2022. The education sector included a higher magnitude of smaller projects in the third quarter of 2023 than in the third quarter of 2022.

For the nine months ended September 30, 2023 commercial revenues decreased by 4% from the prior year period. Healthcare revenues increased by 60% in the first nine months of 2023 from the same period of 2022. Government revenues decreased by 9% from the prior year period. Education sales for the nine months ended September 30, 2023 were down 24% from 2022. Both the healthcare and education sectors included a higher magnitude of smaller projects in 2023 than 2022.

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 September 30,	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023 2022		% Change	2023 2022		% Change
	($ in thousands)			($ in thousands)
Canada	5,665	7,191	(21 )	14,577	19,859	(27 )
U.S.	43,872	39,556	11	116,421	109,875	6
	49,537	46,747	6	130,998	129,734	1

Historically, approximately 15-25% and 75-85% of revenues are derived from sales to Canada and the United States, respectively. The third quarter of 2023 included a higher volume of sales to customers in the United States compared to Canada resulting in 11% of sales to Canada with the rest in the United States.

Sales and Marketing Expenses

Sales and marketing expenses increased by $0.1 million to $6.2 million for the three months ended September 30, 2023, from $6.1 million for the three months ended September 30, 2022. The increase was driven by higher commissions costs offset by lower travel and entertainment costs, marketing costs, and building expenses.

Sales and marketing expenses decreased by $2.8 million to $18.3 million for the nine months ended September 30, 2023 from $21.1 million from the same period of 2022. The decreases were largely related to a realignment of back office support and territory coverage and cost structure with current demand levels.

General and Administrative Expenses

General and administrative expenses decreased by $1.9 million to $4.7 million for the three months ended September 30, 2023 from $6.5 million for the three months ended September 30, 2022. The decrease was primarily related to a decrease in professional services costs of $1.0 million, a $0.2 million decrease in office costs, a $0.2 million decrease in communications costs and a $0.5 million decrease in salaries and benefits costs associated with the planned headcount reductions as part of our cost reduction initiatives.

For the nine months ended September 30, 2023, general and administrative expenses decreased by $5.4 million to $16.0 million from $21.4 million driven by a $4.1 million reduction in professional services costs, which included $1.8 million related to the costs of the contested director elections, a $0.6 million reduction in office and communication costs and a $0.7 million reduction in depreciation.

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 decreased by $0.6 million from $2.3 million for the three months ended September 30, 2022 to $1.8 million for the three months ended September 30, 2023. The decrease was primarily due to a $0.4 million decrease in salaries and benefits costs associated with the planned headcount reductions as part of our cost reduction initiatives. Operations support expenses decreased $1.8 million for the nine months ended September 30, 2023 to $5.6 million from $7.3 million in the same period of 2022 mostly related to a $1.6 million decrease in salaries and benefits costs.

28

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 decreased by $0.5 million to $1.2 million for the three months ended September 30, 2023, compared to $1.7 million for the three months ended September 30, 2022, primarily related to decreased salaries and benefits costs associated with the planned headcount reductions as part of our cost reduction initiatives. For the nine months ended September 30, 2023, technology and development costs decreased by $1.7 million to $4.1 million from $5.7 million in the same period of 2022 related to a decrease in salaries and benefits costs and an increase in capitalized software development costs.

Stock-Based Compensation

Stock-based compensation expense for the three and nine months ended September 30, 2023 was $1.1 million and $2.5 million, respectively, compared to $0.9 million and $3.5 million in the same periods of 2022. The movement in this expense was largely due to grants of RSUs and share awards which occurred in the first quarter of 2022 but in 2023 were granted in the second quarter. Grants for RSUs in lieu of cash compensation to the Company’s interim Chief Executive Officer in 2022 were not repeated in 2023. DSUs were granted to the Board of Directors, but was offset by the impact of fair value adjustments on cash settled awards as a result of our share price decreasing during the nine months ended September 30, 2023.

Reorganization

Reorganization expenses for the quarter of $0.3 million decreased from $3.4 million in the prior period. Current quarter costs relate primarily to movement of inventory from the Rock Hill Facility and termination costs associated with actions taken to streamline our back office and operational support functions, as discussed herein and in our quarterly reports on Form 10-Q for the periods ended March 31, 2023 and June 30, 2023, which are expected to contribute $2.6 million in annualized savings. Second quarter of 2022 reorganization costs were driven by the closure of Phoenix Facility and the one-time costs associated with a reduction of salaried workforce and two executives.

Reorganization costs decreased to $2.9 million for the nine months ended September 30, 2023 from $12.3 million for the same period of 2022. Nine month costs in 2023 relate primarily to termination costs and costs to move materials from Rock Hill to Calgary, while the costs in 2022 relate to expenditures in closing the Phoenix Facility and costs associated with workforce reductions and changes in management.

Impairment charge on Rock Hill Facility

On September 27, 2023, the Company decided to permanently close the Rock Hill Facility in South Carolina. The Company reassessed the useful lives of the manufacturing equipment resulting in an $8.0 million impairment charge in the three and nine months ended September 30, 2023 ($nil for the three and nine months ended September 30, 2022) to reduce the assets to their fair value less costs to sell certain assets being held for sale.

Related Party Expense

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

Pursuant to the Debt Settlement Agreement, the Company agreed to repay the Debt by either, or a combination of (i) a payment in cash by the Company to the 22NW Group, and/or (ii) the issuance of equity securities of the Company to the 22NW Group.

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

29

At the annual general and special meeting of shareholders held on May 30, 2023 shareholders voted to approve the issuance of common shares, and on June 2, 2023, the Company issued 3,899,745 common shares to 22NW Group as repayment for the Debt. Upon settlement, the debt was revalued at the higher of the deemed price of $0.40 per common share and the May 30, 2023 market price of $0.38 per common share resulting in a recovery from the balance recorded at March 31, 2023 which had been valued at a price of $0.53 per common share.

Government Subsidies

The Company was not eligible and did not receive any new government subsidies in the quarter ended September 30, 2023. The Company received $0.2 million of interest with the collection of the ERC during the nine months ended September 30, 2023.

Pursuant to amendments enacted as part of the 2021 Canadian federal budget, the Company was required to repay a portion of the Canadian Emergency Wage Subsidy ("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 expected to be returned to the Canadian authorities in the second quarter of 2022. The amount was fully provided for in the third quarter of 2021 and in the first quarter of 2022 and the Company reversed a $0.6 million incremental provision related to this that was no longer necessary.

Gain on sale of software and patents

On May 9, 2023, we entered into the Co-Ownership Agreement and Partial Patent Assignment Agreement with AWI. The agreements provide for a cash payment from AWI to the Company of $10.0 million, subject to certain routine closing conditions, in exchange for the partial assignment to AWI and resulting co-ownership of a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE software that is used by AWI (the “Applicable ICE Code”), including a 50% interest in the patent rights that relate to the Applicable ICE Code. We also agreed under the Co-Ownership Agreement to provide AWI a transfer of knowledge concerning the source code of the Applicable ICE Code. In exchange for completing the knowledge transfer, we will receive an additional cash payment of $1.0 million, which is expected to be received by early 2024. The Co-Ownership Agreement provides that we and AWI have separate exclusive fields of use and restrictive covenants with respect to the Applicable ICE Code and related intellectual property which survive until either party elects to separate from its relationship with the other and for five years thereafter. We concurrently entered into the ARMSA with AWI, under which AWI has also prepaid for certain development services to be provided by DIRTT. The ARMSA will automatically terminate if the Co-Ownership Agreement is terminated or expires, and may also be terminated if either party breaches the exclusive fields of use or restrictive covenants in the Co-Ownership Agreement.

The $10.0 million of proceeds from the Co-Ownership Agreement was received during the second quarter of 2023. In accordance with US GAAP, the proceeds were first applied to the net book value of the related cost of software and patents (other assets) and the residual amount of $6.1 million was recognized as a gain in the consolidated statement of operations. Further, $0.9 million was received during the quarter ended June 30, 2023 as prepayment under the ARMSA. Part of the proceeds of this transaction were used to settle one of our equipment leases of $1.6 million and resulted in the release of $0.4 million of restricted cash.

Interest Expense

Interest expense decreased by $0.1 million from $1.3 million in the quarter ended September 30, 2022 to $1.2 million in the quarter ended September 30, 2023 and by $0.3 million for the nine months ended September 30, 2023 to $3.6 million due to foreign exchange impacts and the decrease in equipment lease balances due to principal repayments.

Income Tax

The provision for income taxes comprises U.S. and Canadian federal, state and provincial taxes based on pretax income. As at September 30, 2023 the Company had a valuation allowance of $33.4 million (December 31, 2022: $29.8 million) against deferred tax assets due to ongoing near term uncertainties on the business caused by the COVID19 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 September 30, 2023, we had C$110.9

30

million of non-capital loss carry-forwards in Canada and $55.7 million in the United States. These loss carry-forwards will begin to expire in 2032.

Net Loss

Net loss decreased to a $6.3 million loss or $0.06 net loss per share in the three months ended September 30, 2023 from a net loss of $6.7 million or a $0.08 net loss per share for the three months ended September 30, 2022. The lower net loss is primarily the result of the higher gross profit margin of $10.1 million, a $2.2 million increase in operating expenses (including an $8.0 million impairment charge on the closure of the Rock Hill Facility, offset by a $3.1 million reduction in reorganization costs), a $0.1 million increase in interest income and $0.1 million decrease in interest expense, offset by a $0.5 million decrease in foreign exchange gain and a $7.1 million government subsidy in 2022 that did not recur.

Net loss decreased to $15.5 million or $0.15 net loss per share in the nine months ended September 30, 2023 from a net loss of $49.1 million or $0.57 net loss per share for the nine months ended September 30, 2022. The decreased loss is primarily the result of a $23.7 million increase in gross profit, a $12.6 million decrease in operating expenses (including a $9.4 million decrease in reorganization expenses, and a decrease of $1.8 million of incremental professional fees offset by an $8.0 million impairment charge on the Rock Hill Facility, as described previously), a one-time gain of $6.1 million on the sale of software and patents, a $0.3 million decrease in interest expense, a $0.2 million increase in interest income, offset by a $1.9 million increase in foreign exchange loss and a $7.5 million decrease in government subsidies.

EBITDA and Adjusted EBITDA for the Three and Nine Months Ended September 30, 2023 and 2022

The following table presents a reconciliation for the results of the three and nine months ended September 30, 2023 and 2022 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 September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023	2022	2023	2022
	($ in thousands)		($ in thousands)
Net loss for the period	(6,311 )	(6,727 )	(15,539 )	(49,057 )
Add back (deduct):
Interest expense	1,196	1,276	3,636	3,935
Interest income	(161 )	(19 )	(271 )	(50 )
Income tax recovery	-	(16 )	-	(16 )
Depreciation and amortization	2,017	4,236	7,216	12,202
EBITDA	(3,259 )	(1,250 )	(4,958 )	(32,986 )
Foreign exchange (gain) loss	(822 )	(1,356 )	59	(1,870 )
Stock-based compensation	1,069	918	2,543	3,546
Government subsidies	-	(7,141 )	(236 )	(7,765 )
Related party expense(2)	-	-	1,524	-
Reorganization expense	321	3,426	2,857	12,281
Gain on sale of software and patents(3)	-	-	(6,145 )	-
Impairment charge on Rock Hill	7,952	-	7,952	-
Facility(3)
Adjusted EBITDA	5,261	(5,403 )	3,596	(26,794 )
Net Loss Margin(1)	(12.7 )%	(14.4 )%	(11.9 )%	(37.8 )%
Adjusted EBITDA Margin	10.6 %	(11.6 )%	2.7 %	(20.7 **)% **

(1) Net loss divided by revenue.

(2) The related party transaction is a non-recurring transaction that is not core to our business and is excluded from the Adjusted EBITDA calculation (Refer to Note 16 of the consolidated interim financial statements).

(3) The gain on sale of software and patents is a non-recurring transaction and the impairment charge on Rock Hill Facility are not core to our business and are excluded from the Adjusted EBITDA calculation (Refer to Note 7 and Note 6, respectively, of the consolidated interim financial statements).

31

For the three months ended September 30, 2023, Adjusted EBITDA and Adjusted EBITDA Margin increased by $10.7 million to $5.3 million or 10.6% from a $5.4 million loss or (11.6)% in the same period of 2022. This primarily reflects an $8.2 million increase in Adjusted Gross Profit, a decrease of $1.0 million of professional fees, a $1.1 million decrease in salaries and benefits costs, a $0.6 million decrease in office, building and communication costs, and a $0.3 million decrease in travel and entertainment costs in the quarter, offset by a $0.5 million increase in commissions.

For the nine months ended September 30, 2023, Adjusted EBITDA and Adjusted EBITDA Margin increased by $30.4 million to $3.6 million or 2.7% from a $26.8 million loss or (20.7)% in the same period of 2022. This primarily reflects a $19.6 million increase in Adjusted Gross Profit, a decrease of $4.1 million of professional fees, a $5.1 million decrease in salaries and benefits costs, a $0.8 million decrease in travel and entertainment costs, a $0.6 million decrease in marketing costs and a $1.2 million decrease in building, office and communications costs.

Adjusted Gross Profit and Adjusted Gross Profit Margin for the Three and Nine Months Ended September 30, 2023 and 2022

The following table presents a reconciliation for the three and nine months ended September 30, 2023 and 2022 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 September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023 2022		2023 2022
	($ in thousands)		($ in thousands)
Gross profit	17,065	7,008	40,304	16,571
Gross profit margin	34.4 %	15.0 %	30.8 %	12.8 %
Add: Depreciation and amortization expense	1,231	3,132	4,656	8,792
Adjusted Gross Profit	18,296	10,140	44,960	25,363
Adjusted Gross Profit Margin	36.9 %	21.7 %	34.3 %	19.6 %

For the quarter ended September 30, 2023, gross profit and gross profit margin increased to $17.1 million or 34.4% from $7.0 million or 15.0% for the prior period. Adjusted Gross Profit and Adjusted Gross Profit Margin increased 80% to $18.3 million or 36.9% for the three months ended September 30, 2023, from $10.1 million or 21.7% for the three months ended September 30, 2022.

For the nine months ended September 30, 2023, gross profit and gross profit margin increased to $40.3 million or 30.8% from $16.6 million or 12.8% for the prior period. Adjusted Gross Profit and Adjusted Gross Profit Margin increased 77% to $45.0 million or 34.3% for the nine months ended September 30, 2023, from $25.4 million or 19.6% for the nine months ended September 30, 2022. Gross profit for the nine months ended September 30, 2022 included $1.1 million of accelerated depreciation and amortization arising from the change in useful lives of the Phoenix Facility's equipment.

The improvement in Adjusted Gross Profit was a result of improved product mix, a reduction in fixed costs, management of labor hours throughout the period and the impact of the price increases to offset the inflationary impacts on material costs. Labor decreased $0.7 million and $4.0 million and fixed costs decreased $1.1 million and $2.9 million, respectively, for the quarter and nine months ended September 30, 2023 as we closed our Phoenix Facility during the second quarter of 2022 and temporarily suspended operations in our Rock Hill Facility in the third quarter of 2022, as well as cost reduction initiatives taken impacting our overheads. Idle facility costs incurred to the suspension of operations at the Rock Hill Facility of $0.4 million and $1.4 million for the three and nine months ended September 30, 2023, respectively, and are included in cost of sales.

Liquidity and Capital Resources

As at September 30, 2023, the Company had $19.5 million of cash on hand and C$14.6 million ($10.8 million) of available borrowings, compared to $10.8 million of cash on hand and C$7.2 million ($5.3 million) of available borrowings as at December 31, 2022. Through the first nine months of fiscal 2023, the Company generated $4.7

32

million in cash flow from operations, compared to a cash usage of $47.5 million over the first nine months of fiscal 2022. The Company benefited from the receipt of $7.3 million of government subsidies during the first half of 2023.

We have implemented multiple price increases to mitigate the impact of inflation on raw materials and improve liquidity during the past two years. These actions have resulted in a meaningful improvement in our gross profit margins and higher net profit and have served to stabilize our cash usage to operate the business. Gross profit for the nine months ended September 30, 2023 was $40.3 million, or 30.8% compared to the same period of 2022, which generated gross profit of $16.6 million, or 12.8%.

Over the past twelve months, we have executed upon several initiatives to improve liquidity. First, in May 2023, we entered into an agreement with AWI resulting in the receipt of $10.9 million of cash. Second, during March 2023, we entered into an agreement to sublease our Dallas “DXC” to one of our Construction Partners in that region. Under the sublease agreement, the subtenant has assumed responsibility for the monthly rent, utilities, maintenance, taxes and other costs as of April 1, 2023, through December 31, 2024, providing us annualized savings of approximately $1 million. We are continuing to evaluate other properties for sale and leaseback or sublease opportunities, including our Rock Hill Facility and expect these strategic initiatives to result in positive cash inflows in 2023 and 2024. Third, we completed a Private Placement (as defined herein) of common shares in November 2022, with certain significant shareholders and directors and officers of the Company to bridge cash requirements before the completion and closing of the noted strategic transactions. The Company entered into irrevocable subscription agreements with its two largest shareholders, 22NW and 726 and all the directors and officers of the Company on November 14, 2022 to issue 8.7 million shares for gross consideration of $2.8 million (the "Private Placement"). The Private Placement closed on November 30, 2022. In addition, in connection with the Private Placement, 22NW and 726, or their principals, have irrevocably committed to backstopping any rights offering occurring by the Company within twelve months of closing the Private Placement in the aggregate amount of $2.0 million.

While we are encouraged by the improved profitability and cash flow, we have continued to evaluate our fixed cost structure and overhead in light of recent macroeconomic uncertainty. We have implemented multiple restructuring initiatives designed to align our cost structure with current expected levels of demand. In addition, the Company has reduced headcount by 154 employees, or approximately 16% from January 2022 through September 2023. The reduced overhead has served to offset the impact from the macroeconomic headwinds experienced over the past year.

Furthermore, the Company is evaluating a rights offering to raise additional capital, as described in the registration statement on Form S-1, filed on October 26, 2023 (File No. 333-275172) (the “S-1”) with the SEC (the “Rights Offering”), the proceeds of which, if pursued, are expected to be used for general corporate purposes, which may include investments in our business, funding potential future cash needs or operating losses, funding working capital and capital expenditure needs, or reductions to our outstanding indebtedness.

We have assessed the Company’s liquidity as at September 30, 2023 taking into account our sales outlook for the next twelve months, our existing cash balances and available credit facilities and expected early settlements related to our Rock Hill Facility equipment lease. Based upon this analysis, we believe the Company has sufficient liquidity to remain a going concern for at least the next twelve months. However, a number of factors, including the macroeconomic factors discussed above could adversely impact our liquidity over such period.

To the extent that existing cash and cash equivalents and available 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. While we believe we can access capital markets when needed or under acceptable terms, there can be no assurance we will be able to do so.

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. As at September 30, 2023, C$18.9 million of the January Debentures are held by a related party,

33

22NW. 22NW holds approximately 22.1% of our issued and outstanding common stock as of October 25, 2023. Aron English, manager of 22NW Fund GP, LLC, the general partner of 22NW, is a director 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. On February 9, 2023, the Company extended the RBC Facility. The Extended RBC Facility has a borrowing base of C$15 million and a one year term. Available borrowings under the Extended RBC Facility at September 30, 2023 were C$14.6 million ($10.8 million).

On December 1, 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 be repayable on the December Debenture Maturity Date. Interest and principal are payable in cash or shares at the option of the Company. As at September 30, 2023, C$13.6 million of the December Debentures are held by a related party, 22NW.

The Company has a C$5.0 million Canada Leasing Facility of which C$4.4 million ($3.3 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. In connection with the Company’s decision to close the Rock Hill Facility, we intend to settle the liability related to the U.S. Leasing Facility of $8.2 million in the next twelve months. With the settlement of this liability, we expect approximately $2.6 million to be released from restricted cash. On October 31, 2023, the Company paid off $1.0 million of the U.S. Leasing Facility.

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

	For the Three Months Ended September 30,	For the Three Months Ended September 30,	For the Nine Months Ended September 30,	For the Nine Months Ended September 30,
	2023 2022		2023 2022
	($ in thousands)		($ in thousands)
Net cash flows provided by (used in) operating
	1,919	(10,667 )	4,687	(47,509 )
activities
Net cash flows provided by (used in) investing
	(658 )	(644 )	7,089	(3,595 )
activities
Net cash flows used in financing activities	(551 )	(912 )	(3,412 )	(1,802 )
Effect of foreign exchange on cash, cash
	(117 )	(293 )	(166 )	(73 )
equivalents andrestricted cash
Net increase (decrease) in cash, cash
	593	(12,516 )	8,198	(52,979 )
equivalents and restricted cash
Cash, cash equivalents and restricted cash,
	21,844	22,945	14,239	63,408
beginning of period
Cash, cash equivalents and restricted cash, end
	22,437	10,429	22,437	10,429
of period

Operating Activities

Net cash flows provided by operating activities were $1.9 million for the three months ended September 30, 2023 compared to $10.7 million used in the same period of 2022. The improvement in cash flows used in operations is largely due to the $10.7 million increase in Adjusted EBITDA and a $3.1 million decrease in reorganization expenses offset by a $1.7 million increase in working capital excluding the $7.1 million receivable for government subsidies impacting the third quarter of 2022.

Net cash flows provided by operating activities were $4.7 million for the nine months ended September 30, 2023 compared to $47.5 million used in the same period of 2022. The improved cash flows from operations was driven by the $30.4 million increase in Adjusted EBITDA, a $9.4 million decrease in reorganization expenses, and a $19.0 million net decrease in working capital comprising $11.7 million decrease in routine working capital and a $7.3 million decrease in other receivables relating to the ERC claim. Through September 30, 2023, we have continued to draw down on our inventory supply built up in the first half of 2022.

34

Investing Activities

Cash flows provided by investing activities during the nine months ended September 30, 2023 benefited from $10.0 million of proceeds from the AWI transaction during the second quarter of 2023.

We invested $0.3 million and $1.3 million in property, plant and equipment during the three and nine months ended September 30, 2023, respectively compared to $0.4 million and $2.2 million, respectively, during the three and nine months ended September 30, 2022. This expenditure consisted of $0.3 million of information technology, $0.4 million of DXC refreshes and $0.6 million of manufacturing upgrades for the nine months ended September 30, 2023. We invested $0.4 million and $1.5 million on capitalized software during the three and nine months ended September 30, 2023, respectively, compared to $0.4 million and $1.3 million for the three and nine months ended September 30, 2022.

Financing Activities

For the three and nine months ended September 30, 2023, $0.6 million and $3.4 million of cash, respectively, was used in financing activities compared to $0.9 million and $1.8 million in the same periods of 2022. The cash used comprised mainly of $0.6 million of scheduled payments under the Leasing Facilities for both periods. During the second quarter of 2023, an additional $1.6 million principal repayment was made against the Canadian Leasing Facility. This payment was required by RBC as part of their consent for the AWI transaction and resulted in the full settlement of one of the Canadian leasing agreements. In the three and nine months ended September 30, 2022, we incurred $0.3 million and $0.6 million of spend on employee tax payments on vesting of RSUs compared to $nil and $0.03 million in the same period of 2023.

We currently expect to fund anticipated future investments with available cash and drawings on the Extended RBC Facility. To date, our strategic actions have generated cash through proceeds from the Private Placement in November 2022, the receipt of $7.3 million of government subsidy through the ERC application during the nine months ended September 30, 2023 and proceeds of $10.9 million received in the second quarter of 2023 through the AWI transaction. We continue to evaluate properties we own for sale and lease back and opportunities to sub lease available spaces. 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. No assurance can be given that any of these actions will be successful and will be sufficient for our needs.

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. 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. 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.

On February 9, 2023, the Company extended the RBC Facility. The Extended RBC Facility has a borrowing base of C$15 million and a one year term. Interest is calculated at the Canadian or U.S. prime rate plus 75 basis points or at the Canadian Dollar Offered Rate or Term Secured Overnight Financing Rate ("SOFR") plus 200 basis points plus the Term SOFR Adjustment. Under the Extended RBC Facility, if the trailing twelve month FCCR is above 1.25 for three consecutive months, a cash balance equivalent to one-year's worth of Leasing Facilities payments must be maintained. At September 30, 2023, available borrowings are C$14.6 million ($10.8 million) (December 31, 2022 – $10.8 million and C$7.2 million ($5.3 million) of available borrowings), calculated in the same manner described above, of which no amounts have been drawn. The Company did not meet the three-month FCCR requirement during the third quarter of 2023, which resulted in requiring the restriction of $3.0 million of cash.

35

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.

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$4.4 million ($3.3 million) of cash consideration under the Canada Leasing Facility and commenced the lease term for the Canadian equipment expenditures during 2020. In connection with the Company’s decision to close the Rock Hill Facility, we intend to settle the liability related to the U.S. Leasing Facility of $8.2 million in the next twelve months. With the settlement of this liability, we expect approximately $2.6 million to be released from restricted cash. On October 31, 2023, the Company paid off $1.0 million of the U.S. Leasing Facility.

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

Since our disclosure in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” in our Annual Report on Form 10-K the following material contractual changes have occurred:

• additional commitments related to the extension of one of our factory leases in Calgary for an additional ten years beyond the original term;

• our entry into the Debt Settlement Agreement with the 22NW Group; and

• the modification of our Rock Hill Facility lease.

See Note 15, “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 September 30, 2023, 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 3, “Adoption of New and Revised Accounting Standards” to our condensed consolidated interim financial statements appearing in this Quarterly Report, there were no new accounting standards adopted during the three months ended September 30, 2023. We have disclosed the accounting policy applied for the assets held for sale related to the Rock Hill Facility.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, please refer to Note 3, “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. The Company’s cash and cash equivalents are predominantly all with one AA rated financial institution.

36

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.

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 September 30, 2023. 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 September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

37

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

DIRTT is pursuing multiple lawsuits against its former founders, Mogens Smed and Barrie Loberg, as well as Falkbuilt Ltd. and Falkbuilt, Inc. (collectively, “Falkbuilt”) and related individuals and corporations. DIRTT alleges breaches of fiduciary duties and non-competition and non-solicitation covenants, and the misappropriation of its confidential and proprietary information (in violation of numerous U.S. state and federal laws pertaining to the protection of trade secrets and proprietary information and the prevention of false advertising and deceptive trade practices). Except as described below, there have been no material developments in the legal proceedings previously disclosed in our Annual Report on Form 10-K.

DIRTT’s litigation against Falkbuilt, Messrs. Smed and Loberg, and their associates is comprised of three main lawsuits: (i) an action in the Alberta Court of King’s Bench commenced on May 9, 2019 against Falkbuilt, Messrs. Smed and Loberg, and several other former DIRTT employees alleging breaches of restrictive covenants, fiduciary duties, and duties of loyalty, fidelity and confidentiality, and the misappropriation of DIRTT’s confidential information (the “Canadian Non-Compete Case”); (ii) an action in the U.S. District Court for the Northern District of Utah instituted on December 11, 2019 against Falkbuilt, Smed, and other individual and corporate defendants alleging misappropriation of DIRTT’s confidential information, trade secrets, business intelligence and customer information (the “Utah Misappropriation Case”); and (iii) an action in the U.S. District Court for the Northern District of Texas instituted on June 24, 2021 alleging that Falkbuilt has unlawfully used DIRTT’s confidential information in the United States and intentionally caused confusion in the United States in an attempt to steal customers, opportunities, and business intelligence, with the aim of establishing a competing business in the United States market (the “Texas Unfair Competition Case”). DIRTT intends to pursue the cases vigorously.

In the Canadian Non-Compete Case, on February 14, 2023, the Court of King’s Bench of Alberta granted DIRTT's application to schedule the hearing of its summary judgment application and dismissed Falkbuilt’s crossapplication to strike the summary judgment application. On April 5, 2023, the parties appeared before the Associate Chief Justice of the Court of King’s Bench of Alberta for a Case Management Conference. In the Conference, the Associate Chief Justice offered the parties an expedited six-week trial on both liability and damage issues, as an alternative to DIRTT proceeding with its summary judgment application, on the condition that the parties could reach an agreement on the terms of the alternative process. The parties have not reached consensus regarding the terms of an expedited six-week trial, however, DIRTT remains fully cooperative with the Court of King’s Bench. In the meantime, DIRTT plans to aggressively pursue its summary judgment application.

In the Utah Misappropriation Case, on April 11, 2023, the United States Court of Appeals for the Tenth Circuit reversed the U.S. District Court for the Northern District of Utah’s decision that Utah was an inconvenient forum for DIRTT’s claims against Falkbuilt and others for the misappropriation of confidential information, trade secrets, business intelligence and customer information. The Utah Court had previously, and erroneously, found that DIRTT’s United States-based claims should be litigated in Canada. The Court of Appeals remanded the matter back to the Utah District Court. Falkbuilt filed motions to stay the Tenth Circuit decision pending its petition for a Writ of Certiorari to the Supreme Court of the United States. The Court of Appeals promptly denied the motion to stay. A similar motion subsequently filed with the Supreme Court of the United States on the same basis was also promptly denied. Fallkbuilt also petitioned the Supreme Court to accept review, even after losing the stay motion, that petition was also denied in early October.

The Texas Unfair Competition Case was dismissed, without prejudice, in reliance upon the now-reversed decision in the Utah Misappropriation Case, described above. DIRTT appealed that decision, and the United States Court of Appeals for the Fifth Circuit stayed the appeal pending the Tenth Circuit ruling at Falkbuilt's request. After prevailing in the Tenth Circuit, DIRTT asked Falkbuilt if it would, consistent with its prior representations, agree to remand the appeal to the Texas Court for disposition to Utah. Falkbuilt refused and DIRTT filed a Motion to Remand. The Court denied the Motion for Remand without prejudice and asked for full briefing. Argument is currently scheduled for December 7th, 2023 in New Orleans. The Court will either order the claims transferred to Utah or, if it affirms the lower court, those claims would proceed, inconveniently, in Canada. We believe it is very unlikely they would proceed in Texas as neither DIRTT or Falkbuilt currently desires that outcome.

38

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, 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.

Our common shares are quoted on the OTC’s Pink[®] Open Market, and there may be a limited trading market in our common shares in the United States. As a result of the limited trading market, investors may experience limited liquidity, and may experience limited ability to sell shares in the open market.

Our common shares are quoted on the OTC’s Pink® Open Market under the symbol “DRTTF.” There may be a limited trading market in our common shares in the United States. As a result of the limited trading market of our common shares, investors in our common shares may experience limited demand for their shares of common shares, which may limit their ability to sell their shares in the open market.

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.

39

Item 6. Exhibits

EXHIBIT INDEX

Exhibit No. 3.1 3.2 4.1 4.2 4.3 10.1 10.2 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). Executive Employment Agreement, dated August 2, 2023, by and between DIRTT Environmental Solutions Inc. and Fareeha Khan Indemnity Agreement, dated August 2, 2023, between DIRTT Environmental Solutions Ltd and Fareeha Khan 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

40

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/ Fareeha Khan Fareeha Khan

Chief Financial Officer (Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)

Date: November 9, 2023

41

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT is made as of the Effective Date.

BETWEEN:

DIRTT ENVIRONMENTAL SOLUTIONS, LTD.

(the “ Company ”)

• and -

Fareeha Khan (the “ Executive ”)

RECITALS:

• A. The Company wishes to employ the Executive and the Executive wishes to work for the Company in the role of Chief Financial Officer.

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

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement, including severance provisions, 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, including the recitals, the following terms shall have the following meanings:

• (a) “ Affiliated ” has the meaning set out in the Securities Act (Alberta), as amended from time to time, and an “ Affiliate ” means one of two or more Affiliated persons.

• (b) “ Agreement ” means this Executive Employment Agreement, as may be amended or supplemented from time to time.

• (c) “ Applicable Laws ” means, in relation to this Agreement, all applicable provisions of laws, statutes, rules, regulations, official directives and orders of and the terms of all judgments, orders and decrees issued by any authorized authority by which such person is bound or having application to this Agreement.

• (d) “ Applicable Privacy Laws ” means any and all Applicable Laws relating to privacy and the collection, use and disclosure of Personal Information in all applicable jurisdictions including, but not limited to, the Personal Information Protection and Electronic Documents Act (Canada) and/or any comparable provincial law, including the Personal Information Protection Act (Alberta).

• (e) “ Board ” means the board of directors of the Company.

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

DOCPROPERTY "CUS_DocIDChunk0" NATDOCS\46431445\V-1

• 2 -

• (g) “ 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) prefabricated 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; and

• (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.

• (h) “ 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.

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

• (j) “ Effective Date ” means August 25, 2023.

• (k) “ ESC ” means the Employment Standards Code (Alberta), as amended from time to time.

• (l) “ Good Reason ” means:

• (i) a material diminution in the Executive’s Salary or authority, duties and responsibilities with the Company; provided, however, that if the Executive is serving as an officer or member of the Board (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; or

• (ii) the relocation of the geographic location of the Executive’s principal place of employment by more than 50 kilometres from the location of the Executive’s principal place of employment as of the Effective Date; provided, however, that travel in the course of the 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 a Good Reason event under this Section 1(l)(ii).

• 3 -

Notwithstanding the foregoing provisions of this Section 1(l) 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(l)(i) or (ii) giving rise to Good Reason 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 30 days after the initial occurrence of such condition(s); (C) the condition(s) specified in such notice must remain uncorrected for 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 60 days after the initial occurrence of the condition(s) specified in such notice.

• (m) “ Just Cause ” means any reason which would entitle the Company to terminate the Executive’s employment without notice or payment in lieu of notice at common law and includes, without limiting the generality of the foregoing:

• (i) fraud, misappropriation of the property, assets or funds of the Company, embezzlement, malfeasance, misfeasance or nonfeasance in office which is willfully or grossly negligent on the part of the Executive;

• (ii) conviction of or plea other than not guilty by the Executive of a criminal offence involving dishonesty or fraud, or which is likely to injure the Company's business or reputation;

• (iii) the breach by the Executive of any of her material covenants or obligations under this Agreement, including any non-solicitation or confidentiality covenants contained herein;

• (iv) the failure by the Executive to substantially perform her obligations according to the terms hereof after the Company has given the Executive reasonable notice of such failure and a reasonable opportunity to correct, or cause to be corrected, such failure; or

• (v) the intentional or negligent involvement or participation by the Executive in any act which is materially injurious to the Company, financially or otherwise.

• (n) “ Materials ” has the meaning set out in Section 12(a).

• (o) “ 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.

• (p) “ Personal Information ” means information about an identifiable individual, but excludes business contact information.

• (q) “ Restricted Period ” means 12 months from the Termination Date.

• (r) “ Restricted Territory ” means Canada and the United States of America.

• (s) “ Salary ” means an annual base salary of CAD $300,000.00.

• (t) “ Severance Period ” means 12 months from the Termination Date.

• 4 -

• (u) “ Termination Date ” means the last day actively worked by the Executive for the Company, regardless of the reason for the cessation of employment.

2. Employment of the Executive and Position

Commencing on the Effective Date, the Executive shall hold the position of Chief Financial Officer and shall report directly to the Chief Executive Officer, Benjamin Urban. As the Chief Financial 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 and its Affiliates.

3. Performance of Duties

• (a) The Executive’s principal place of employment as of the Effective Date shall be the Company’s offices in Calgary, Alberta; provided, however, the Executive acknowledges and agrees that business travel will be required in the course of performing her duties.

• (b) The Executive shall devote substantially all of her working time and attention to the performance of her duties on behalf of the Company and its Affiliates, shall faithfully, honestly and diligently serve the Company and its Affiliates and shall use her 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 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.

• (c) In performing her 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 its discretion.

4. Employment Period

The Executive shall continue to be employed by the Company hereunder commencing on the Effective Date until this Agreement is terminated in accordance with this Agreement.

5. Remuneration

• (a) Salary. For the Executive’s services under this Agreement, the Company shall pay the Executive the Salary, paid semi-monthly on the 15[th] and the last day of each month.

• (b) Benefits. The Executive shall be eligible to participate in any health and dental 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 sole 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.

• (c) Bonus. The Executive will be eligible to participate in the Company's Variable Pay Plan (“ VPP ”), as amended from time to time, 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 as set forth in the company's annual VPP program. For 2023 , the target bonus shall be equal to 50-

• 5 -

100% of the salary paid in 2023 . Notwithstanding the forgoing, the Target Bonus for the 2023 calendar year shall be reduced on a pro-rata basis for the portion of the 2023 calendar year that the Executive is employed by the Company. 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) One-Time Cash Bonus. The Executive will be eligible to receive a one-time cash bonus of CAD $50,000.00, less required withholdings and deductions, paid after one year of the Effective Date. If the Employee is terminated by the Corporation without Just Cause prior to the Payment Dates, the Executive will be eligible for a pro rata portion of the One-Time Cash Bonus based on the number of days between the Effective Date and the termination date. In the event the Executive is terminated for Just Cause or voluntarily resigns prior to the Payment Date, the Executive is not entitled to any portion of the One-Time Cash Bonus.

• (e) Equity Based Incentive Compensation. The Executive will be eligible to receive grants of equitybased incentives under the Company's 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. 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.

• (f) One-Time Grant of Time-Vested Restricted Share Units. The Executive shall receive a one-time grant of time-vested restricted share units in the amount of 150,000 DIRTT shares, to be granted on or about August 25, 2023. The share units shall become fully vested one year after the date of grant.

• (g) Employee Share Purchase Plan. The Executive shall be eligible to participate in the Employee Share Purchase Plan (“ ESPP ”) subject to the terms and conditions of the ESPP, as may be amended by the Company from time to time.

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 her duties, upon the presentation of expense statements or other supporting documentation as the Company may reasonably require, in accordance with any expense reimbursement policies implemented by the Company from time to time. Any such reimbursement of expenses shall be made by the Company as soon as practicable following receipt of such documentation. At no time shall any reimbursement be made to the Executive for any expenses incurred after the Termination Date.

7. Vacation

The Executive shall be eligible for 5 weeks’ paid vacation per complete calendar year (pro-rated for partial calendar years), increased by 1 week for each five years of service up to a maximum of 6 weeks. Vacation shall accrue and be taken in accordance with Company vacation policies as in effect from time to time.

8. Termination

• (a) The Company may terminate the Executive’s employment and this Agreement for Just Cause at any time, without notice and without any payment to the Executive whatsoever, save and except for the payment of any Salary, expenses and vacation pay accrued but unpaid up to the Termination Date.

• 6 -

• (b) The Executive may terminate this Agreement and her employment with the Company at any time, for any reason, by providing 30 days’ advance written notice to the Company. The Executive shall only be entitled to the payment of any Salary, expenses and vacation pay accrued but unpaid up to the Termination Date. 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 termination date is 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 without Just Cause pursuant to Section 8(d) of this Agreement).

• (c) This Agreement shall automatically terminate upon the death of the Executive and the Executive’s estate will only be entitled to payment of any Salary, expenses and vacation pay accrued but unpaid up to the Termination Date.

• (d) The Company may terminate this Agreement and the Executive’s employment without Just Cause by providing the Executive with only the following:

• (i) all accrued but unpaid Salary to the Termination Date;

• (ii) all accrued but unpaid vacation pay to the Termination Date;

• (iii) any accrued but unpaid expenses at the Termination Date;

• (iv) the continued payment of Salary for the duration of the Severance Period paid in equal monthly payments for the duration of the Severance Period (the “ Severance Payment ”). The Company in its sole discretion may pay the Severance Payment as a lump sum instead of equal monthly payments. In no case will the Executive receive notice or pay in lieu of notice less than the minimum notice requirements set out in the ESC;

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

• (vi) continued eligibility to participate in the benefits provided to the Executive by the Company under Section 5(b), excluding 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 severance period or the date the Executive obtains any alternative benefit coverage (the “ Benefit Continuation ”).

• (vii) payment of the one-time cash bonus referred to in Section 5(d) (if unpaid at the Termination Date), pro-rata from the Effective Date until the Termination Date.

• (e) Notwithstanding Section 8(b), the Executive shall be entitled to terminate this Agreement for Good Reason. If Good Reason exists, the Executive shall be entitled to receive the payments set out in Section 8(d).

• (f) The payments under Sections 8(d) and 8(e) are subject to and conditioned upon the Executive: (i) executing and returning a release in favour of the Company of all claims, in a form acceptable to the Company, and (ii) abiding by the terms of each of Sections 9, 10, 11, 12 and 13. If the

• 7 -

Executive fails to sign and return the release, the Executive shall only be entitled to receive those minimum entitlements set out under the ESC.

• (g) The payments and benefits referred to in this Section 8 are not subject to mitigation and will not be reduced by any amounts received by the Executive in mitigation during the Severance Period.

• (h) On the Termination Date, the Executive shall: (i) 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; (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 her by or on behalf of the Company or any Affiliate.

9. Non-Competition

The Executive shall not, during the term of this Agreement and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it), anywhere within the Restricted Territory, directly or indirectly, in any manner whatsoever, including, either individually, through an affiliate or subsidiary or in partnership, jointly or in conjunction with any other Person, or as employee, principal, agent, consultant, contractor, director, shareholder, interest holder, partner, limited partner, lender or in any other manner:

• (a) be engaged in, participate in, operate, be retained by, consult for, or be employed by any undertaking, endeavour, activity or business;

• (b) have any financial or other interest, including an interest by way of royalty or other compensation arrangements, in or in respect of an undertaking, endeavour, activity or business; or

• (c) advise, manage, lend money to or guarantee the debts or obligations of, or permit the use of the Executive’s name or any part thereof, in an undertaking which carries on a business,

which is the same as, or substantially similar to, or that competes, or could be expected to compete, with the Business, or any material part thereof. For greater certainty, Falkbuilt Ltd., or any affiliate or subsidiary of Falkbuilt Ltd., is competitive with the Business.

Notwithstanding the foregoing, the Executive shall be permitted to own (as a passive investment) not more than 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.

10. Non-Solicitation and No Hire

The Executive shall not, during the term of this Agreement and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it), directly or indirectly, in any manner whatsoever including, either individually, through an affiliate or subsidiary or in partnership, jointly or in conjunction with any other Person, or as employee, principal, agent, consultant, contractor, director, shareholder, interest holder, partner, limited partner, lender or in any other manner:

• 8 -

• (a) contact, solicit or interfere with any Person reasonably known to be a prospective, current or former client or customer of the Company (“ Customer ”) for the purpose of selling to such Customer any products or services which are the same as or substantially similar to, or competitive with, the products or services sold by the Company at such date or to persuade or attempt to persuade any Customer to change its relationship or potential relationship with the Company or to restrict, limit, discontinue or cease considering purchasing any products or services provided by any member of the Company or to reduce the amount of business or potential business which any such Customer has customarily done with any member of the Company;

• (b) contact, solicit or interfere with any Person reasonably known to be a prospective, current or former supplier, distributor, Distribution Partner, or joint venture partner of the Company (a “ Supplier ”) for the purpose of persuading or attempting to persuade any Supplier to change its relationship with any member of the Company or to restrict, limit or discontinue or to reduce the amount of business which any such Supplier has customarily done with any member of the Company (or its predecessors);

• (c) solicit or attempt to solicit or hire, or assist or encourage any Person to solicit or hire any employee of the Company or any consultant or contractor who regularly provides services to the Company, or assist or encourage any such employee, consultant or contractor to accept employment or engagement elsewhere; or

• (d) in any manner, directly or indirectly, knowingly do or cause or permit to be done any acts that would reasonably be expected to impair the relationship between the Company and its Suppliers, Customers, employees, regulatory authorities or any other Person.

11. 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 of this Agreement 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

• 9 -

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 Laws.

12. 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, technology, engineering systems, inventions, patents, patent applications, industrial designs, publications, research, reports, models, diagrams, processes, procedures, specifications, interfaces, software, trademarks (whether registered or unregistered), trade names, trade styles, service marks, logos, designs, domain names and without restricting the generality of the foregoing, any other intellectual property of any kind, created, developed, made or conceived, or modified or improved, by the Executive either alone or in conjunction with others: (i) in connection with the Executive’s duties and responsibilities in the course of employment; and/or (ii) in connection with the Executive’s duties or responsibilities under this Agreement; and/or (iii) resulting from the use of any documents, data, information, equipment, materials or any other resources and property 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) Disclosure of Materials. The Executive will immediately disclose to the Company in writing all Materials that the Executive conceives, develops, invents, authors, creates or contributes to the creation or improvement of, in whole or in part, during the term of the Executive's employment.

• (c) 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, but not limited to, any right to the integrity of any Materials, any right to be associated with any Materials, and any right to restrict or prevent the development, improvement, 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.

• (d) 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 future, current or 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.

• (e) Registrations. The Company will have the exclusive right to apply for, obtain, renew and maintain copyright registrations, letters patent and patent registrations, industrial design registrations, trade-mark registrations, domain name registrations or any other protection in

• 10 -

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.

• (f) Obligations In the Event of Infringement. The Executive shall protect and safeguard the Materials from dissemination. In the event the Executive observes or becomes aware that any person, firm, company or entity is infringing on the Company’s rights in and to Materials or has filed any claims against the Company regarding the Materials, the Executive shall immediately notify the Company of such infringement or claim and will confer with the Company with regard thereto. Upon the Company becoming aware of infringement or claim of infringement against it, the Company may act in its sole discretion and the Executive agrees that the Company may take any action against in its sole and absolute discretion. The Executive shall cooperate and provide all necessary assistance to the Company in any such action or defence of claims whether during or after the term of its employment with the Company, and such co-operation and assistance may include the execution of reasonable documents and in accordance with applicable laws.

13. Fiduciary and Other Obligations

The Executive acknowledges that the obligations contained in Sections 9, 10, 11 and 12 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 of this Agreement. 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.

14. Reasonableness and Enforceability of Restrictions

• (a) The Company shall provide the Executive access to Confidential Information for use only during the term of this Agreement, 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 Sections 9, 10, 11, 12 and 13.

• (b) The Executive acknowledges and agrees that all of the restrictions contained in Sections 9, 10, 11, 12 and 13 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 9, 10, 11, 12 and 13 of this Agreement, and that monetary damages would be impossible to quantify and

• 11 -

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 monetary 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 9, 10, 11, 12, 13, Error! Reference source not found. and 14 of this Agreement shall survive the termination of this Agreement for any reason.

15. Privacy

• (a) The Executive acknowledges and agrees that the Executive will take all necessary steps to protect and maintain the Personal Information of the employees, contractors, consultants and customers of the Company and its Affiliates. The Executive shall at all times comply, and shall assist the Company to comply, with all Applicable Privacy Laws.

• (b) The Executive acknowledges and agrees that the disclosure of the Executive’s Personal Information may be required as part of the ongoing operations of the Company's business, as required by law or regulatory agencies, as part of the Company’s audit process, as part of a potential business or commercial transaction, or as part of the Company’s management of the employment relationship, and the Executive hereby grants consent as may be required by Applicable Privacy Laws to the disclosure of the same.

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 nonbusiness 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 day following deposit with an internationally-recognized second-day courier service with proof of receipt maintained. Notices and other communications shall be addressed as follows:

(i) if to the Executive:

• (ii) if to the Company:

DIRTT Environmental Solutions, Ltd. 7303 – 30[th] Street SE Calgary, Alberta T2C 1N6

Attn: Legal Department

• 12 -

17. Headings

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

18. 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.

19. 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 9, 10, 11, 12, 13, and 14 and shall be entitled to enforce such representations, covenants and obligations as if a party hereto.

20. 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 Company to the Executive dated April 1, 2019). 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.

21. 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.

22. Currency

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

23. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta 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.

• 13 -

24. Severability

If a 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.

25. 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.

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

27. Legal Advice

The Executive acknowledges that she has been afforded the opportunity to obtain independent legal advice with respect to this Agreement and that she fully understands the nature and consequences of this Agreement.

28. 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.

• 14 -

IN WITNESS WHEREOF the parties acknowledge and agree that they have read and understand the terms of this Agreement and have executed this Agreement as of the Effective Date.

DIRTT ENVIRONMENTAL SOLUTIONS, LTD.

By: /s/ Benjamin Urban

______ Name: Benjamin Urban Title: Chief Executive Officer

/s/ Savannah Kuemper____ /s/ Fareeha Khan _______ Witness (Signature) Fareeha Khan

Savannah Kuemper_____ Witness (Print)

Exhibit 10.2

INDEMNITY AGREEMENT

THIS INDEMNITY AGREEMENT is made as of this 2[nd] day of August, 2023

BETWEEN:

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

-and-

Fareeha Khan , an individual residing in Calgary, Alberta (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

DOCPROPERTY "CUS_DocIDChunk0" NATDOCS\46431445\V-1

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

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,

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 enforcedby 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

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,

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

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

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.

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

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.

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 suchsuit.

• (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.

• (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 INSURANC E

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.

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 sentenceexist.

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

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

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

ARTICLE 5 CONTRIBUTIO N

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

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).

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: at: Fareeha Khan

(b) in the case of a Notice to the Corporation at: DIRTT Environmental Solutions Ltd.

Attn: Legal Department 7303 30th Street S.E. Calgary, Alberta T2C 1N6 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).

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]

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

DIRTT ENVIRONMENTAL SOLUTIONS LTD.

Per: /s/ Benjamin Urban Name: Benjamin Urban Title: Chief Executive Officer

SIGNED, SEALED AND DELIVERED In the presence of:

/s/ Savannah Kuemper /s/ Fareeha Khan Witness Fareeha Khan

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 September 30, 2023;

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: November 9, 2023

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, Fareeha Khan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “registrant”) for the quarter ended September 30, 2023;

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: November 9, 2023

By: /s/ Fareeha Khan Fareeha Khan 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 September 30, 2023, 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: November 9, 2023

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 September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fareeha Khan, 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: November 9, 2023

By: /s/ Fareeha Khan Fareeha Khan Chief Financial Officer (Principal Financial Officer)