DIRTT Environmental Solutions Ltd. — Interim / Quarterly Report 2025

Jul 30, 2025

These financial statements for DIRTT Environmental Solutions Ltd. are also included in the Form 10-Q for the quarterly period ended June 30, 2025 filed on SEDAR+ on July 30, 2025 in its entirety.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

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

	As at June 30,	As at December 31,
	2025	2024
ASSETS
Current Assets
Cash and cash equivalents	23,100	29,288
Restricted cash	243	243
Trade and accrued receivables, net of expected credit losses of $0.1 million at June 30, 2025 and December 31, 2024	16,998	19,494
Other receivables	1,095	416
Inventory	15,824	15,109
Prepaids and other current assets	3,436	2,609
Total Current Assets	60,696	67,159
Property, plant and equipment, net	18,915	20,199
Capitalized software, net	3,062	2,548
Operating lease right-of-use assets, net	23,998	25,369
Other assets	2,830	2,945
Total Assets	109,501	118,220
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities	15,979	16,352
Other liabilities	3,681	3,217
Customer deposits and deferred revenue	3,388	4,028
Current portion of long-term debt and accrued interest	12,384	359
Current portion of lease liabilities	5,525	5,619
Total Current Liabilities	40,957	29,575
Long-term debt	11,155	21,993
Long-term lease liabilities	22,901	24,062
Total Liabilities	75,013	75,630
SHAREHOLDERS’ EQUITY
Common shares, unlimited authorized without par value, 190,445,186 issued and outstanding at June 30, 2025 and 193,605,237 issued and outstanding at December 31, 2024	214,485	219,023
Additional paid-in capital	10,115	8,206
Accumulated other comprehensive loss	(16,735)	(18,541)
Accumulated deficit	(173,377)	(166,098)
Total Shareholders’ Equity	34,488	42,590
Total Liabilities and Shareholders’ Equity	109,501	118,220

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

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

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
Product revenue	37,741	40,176	78,087	79,215
Service revenue	1,181	1,025	2,130	2,833
Total revenue	38,922	41,201	80,217	82,048
Product cost of sales	27,362	25,389	53,718	50,381
Service cost of sales	742	437	1,139	1,644
Total cost of sales	28,104	25,826	54,857	52,025
Gross profit	10,818	15,375	25,360	30,023
Expenses
Sales and marketing	5,293	6,062	10,470	11,982
General and administrative	5,743	4,391	11,223	8,957
Operations support	1,872	1,841	3,902	3,616
Technology and development	1,480	1,436	2,708	2,687
Stock-based compensation	594	427	1,333	1,102
Reorganization	174	202	384	340
Impairment charge on Rock Hill Facility	-	-	-	530
Total operating expenses	15,156	14,359	30,020	29,214
Operating (loss) income	(4,338)	1,016	(4,660)	809
Gain on extinguishment of convertible debentures	7	-	14	2,931
Foreign exchange (loss) gain	(1,912)	358	(2,024)	1,277
Interest income	232	482	494	971
Interest expense	(485)	(945)	(936)	(1,999)
	(2,158)	(105)	(2,452)	3,180
Net (loss) income before tax	(6,496)	911	(7,112)	3,989
Income taxes
Current and deferred income tax expense	106	315	151	348
Net (loss) income after tax	(6,602)	596	(7,263)	3,641
Net (loss) income per share
Net (loss) income per share – basic	(0.03)	0.00	(0.04)	0.02
Net (loss) income per share – diluted	(0.03)	0.00	(0.04)	0.02
Weighted average number of shares outstanding (in thousands)
Basic	190,537	192,031	190,597	187,849
Diluted	190,537	310,088	190,597	305,869

Interim Condensed Consolidated Statement of Comprehensive (Loss) Income

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
Net (loss) income after tax for the period	(6,602)	596	(7,263)	3,641
Exchange differences on translation of foreign operations	1,739	(310)	1,806	(607)
Comprehensive (loss) income for the period	(4,863)	286	(5,457)	3,034

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3

Interest expense for the three and six months ended June 30, 2025 includes $nil earned by a related party ($0.4 and $0.7 million for the three and six months ended June 30, 2024). Refer to Note 16.

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

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

	Number of Common shares	Common shares	Additional paid-in capital	Accumulated other comprehensive loss	Accumulated deficit	Total shareholders’ equity
As at December 31, 2023	105,377,667	196,128	7,954	(16,125)	(180,856)	7,101
Stock-based compensation	-	-	248	-	-	248
Issued on vesting of RSUs	521,253	771	(771)	-	-	-
Issued on Rights Offering (as defined in Note 14)	85,714,285	21,273	-	-	-	21,273
Issued for employee share purchase plan	267,021	122	-	-	-	122
RSUs withheld to settle employee tax obligations	-	-	(76)	-	-	(76)
Foreign currency translation adjustment	-	-	-	(297)	-	(297)
Net income for the period	-	-	-	-	3,045	3,045
As at March 31, 2024	191,880,226	218,294	7,355	(16,422)	(177,811)	31,416
Stock-based compensation	-	-	194	-	-	194
Issued on vesting of RSUs and Share Awards	702,918	300	(300)	-	-	-
Issued for employee share purchase plan	384,499	135	-	-	-	135
RSUs and Share Awards withheld to settle employee tax obligations	-	-	(131)	-	-	(131)
Foreign currency translation adjustment	-	-	-	(310)	-	(310)
Net income for the period	-	-	-	-	596	596
As at June 30, 2024	192,967,643	218,729	7,118	(16,732)	(177,215)	31,900
As at December 31, 2024	193,605,237	219,023	8,206	(18,541)	(166,098)	42,590
Stock-based compensation	-	-	566	-	-	566
Issued on vesting of RSUs	343,455	366	(366)	-	-	-
RSUs withheld to settle employee tax obligations	-	-	(1)	-	-	(1)
Issued for employee share purchase plan	236,834	152	-	-	-	152
Cancelled from Shares NCIB and Share Repurchase (each as defined in Note 9)	(4,439,107)	(4,880)	1,368	-	-	(3,512)
Foreign currency translation adjustment	-	-	-	67	-	67
Net loss for the period	-	-	-	-	(661)	(661)
As at March 31, 2025	189,746,419	214,661	9,773	(18,474)	(166,759)	39,201
Stock-based compensation	-	-	561	-	-	561
Issued on vesting of RSUs	1,130,876	524	(524)	-	-	-
RSUs withheld to settle employee tax obligations	-	-	(60)	-	(16)	(76)
Issued for employee share purchase plan	298,039	152	-	-	-	152
Cancelled from Shares NCIB	(730,148)	(852)	365	-	-	(487)
Foreign currency translation adjustment	-	-	-	1,739	-	1,739
Net loss for the period	-	-	-	-	(6,602)	(6,602)
As at June 30, 2025	190,445,186	214,485	10,115	(16,735)	(173,377)	34,488

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

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

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
Cash flows from operating activities:
Net (loss) income for the period	(6,602)	596	(7,263)	3,641
Adjustments:
Depreciation and amortization	1,547	1,521	3,027	3,055
Impairment charge on Rock Hill Facility	-	-	-	530
Stock-based compensation	594	427	1,333	1,102
Foreign exchange loss (gain)	1,809	(493)	2,065	(1,471)
Gain on extinguishment of convertible debt	(7)	-	(14)	(2,931)
Accretion of convertible debentures	91	205	175	385
Loss on disposal	-	290	115	290
Changes in operating assets and liabilities:
Trade and accrued receivables	(632)	(1,955)	2,661	(1,989)
Other receivables	(420)	(146)	(667)	(149)
Inventory	(727)	634	(76)	1,231
Prepaid and other assets, current and long term	(582)	(1,111)	(565)	326
Accounts payable and accrued liabilities	1,263	1,487	(431)	(2,585)
Customer deposits and deferred revenue	(286)	(168)	(657)	(2,370)
Current portion of long-term debt and accrued interest	7	59	(3)	(93)
Lease liabilities	23	297	62	628
Net cash flows (used in) provided by operating activities	(3,922)	1,643	(238)	(400)
Cash flows from investing activities:
Purchase of property, plant and equipment, net of accounts payable changes	(503)	(319)	(801)	(663)
Capitalized software development expenditures	(451)	(482)	(930)	(924)
Other asset expenditures	(85)	(53)	(91)	(132)
Recovery of software development expenditures	60	-	114	121
Proceeds on sale of property, plant, and equipment	-	10	-	10
Proceeds on sale of assets held for sale	-	-	-	1,025
Net cash flows (used in) investing activities	(979)	(844)	(1,708)	(563)
Cash flows from financing activities:
Common share repurchases	(488)	-	(3,993)	-
Repayment of long-term debt	(94)	(19)	(190)	(5,093)
Net proceeds received from Rights Offering	-	-	-	21,273
Employee tax payments on vesting of RSUs	(60)	(131)	(60)	(207)
Net cash flows (used in) provided by financing activities	(642)	(150)	(4,243)	15,973
Effect of foreign exchange on cash, cash equivalents and restricted cash	200	(109)	1	(339)
Net (decrease) increase in cash, cash equivalents and restricted cash	(5,343)	540	(6,188)	14,671
Cash, cash equivalents and restricted cash, beginning of period	28,686	39,230	29,531	25,099
Cash, cash equivalents and restricted cash, end of period	23,343	39,770	23,343	39,770
Supplemental disclosure of cash flow information:
Interest paid	(351)	(673)	(709)	(1,678)
Income taxes paid	1	(411)	(4)	(411)

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

	As at June 30,
	2025	2024
Cash and cash equivalents	23,100	39,529
Restricted cash	243	241
Total cash, cash equivalents and restricted cash	23,343	39,770

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

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6

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 (“Construction Partners”), including Armstrong World Industries, Inc. (“AWI”), which owns a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE software that is used by AWI.

DIRTT is incorporated under the laws of the province of Alberta, Canada. Its headquarters is located at 7303 – 30th Street S.E., Calgary, AB, Canada T2C 1N6 and its registered office is located at 4500, 855 – 2nd Street S.W., Calgary, AB, Canada T2P 4K7. DIRTT’s common shares trade on the Toronto Stock Exchange under the symbol “DRT”. On June 12, 2025, the Company began trading on the OTCQX® Best Market (“OTCQX”) under the symbol “DRTTF.” The Company previously traded on, and upgraded to OTCQX from, the OTC Pink® Market.

2. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the Financial Statements contain all adjustments necessary, consisting of only normal recurring adjustments, for a fair statement of its financial position as of June 30, 2025, and its results of operations and cash flows for the three and six months ended June 30, 2025 and 2024. The condensed balance sheet at December 31, 2024, 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, 2024 and 2023 and for each of the three years in the period ended December 31, 2024 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.

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.

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Basis of measurement

These Financial Statements have been prepared on the historical cost convention except for certain financial instruments, assets held for sale and certain components of stock-based compensation that are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The Company's quarterly tax provision is based upon an estimated annual effective tax rate.

Seasonality

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

3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

On December 14, 2023, the FASB issued Accounting Standards Update No. 2023-09, "Improvements to Income Tax Disclosures" ("ASU-2023-09") further disaggregated information on an entity's tax rate reconciliation and income taxes paid. The amendments in ASU-2023-09 are effective for fiscal years beginning after December 15, 2024, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard and expects the impact to be limited to disclosures.

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

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

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

4. GAIN ON EXTINGUISHMENT OF CONVERTIBLE DEBENTURES

On February 15, 2024, the Company commenced a substantial issuer bid and tender offer (the "Issuer Bid") pursuant to which the Company offered to repurchase for cancellation: (i) up to C$6.0 million principal amount of its issued and outstanding January Debentures (as defined in Note 7) at a purchase price of C$720 per C$1,000 principal amount of January Debentures, and (ii) up to C$9.0 million principal amount of its issued and outstanding December Debentures (as defined in Note 7 and together with the January Debentures, the "Debentures"), at a purchase price of C$600 per C$1,000 principal amount of December Debentures.

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

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On August 28, 2024, the Company commenced a normal course issuer bid (the "Debentures NCIB") for the Debentures which will terminate no later than August 27, 2025. Under the Debentures NCIB, DIRTT is permitted to acquire up to C$1,664,200 principal amount of the January Debentures and C$1,558,700 principal amount of the December Debentures. For the three and six months ended June 30, 2025, C$0.1 million ($0.1 million) and C$0.2 million ($0.1 million) principal amounts of the December Debentures and C$0.02 million ($0.01 million) and C$0.05 million ($0.04 million) principal amounts of the January Debentures, respectively, had been acquired through the Debentures NCIB ($nil for the three and six months ended June 30, 2024).

In accordance with GAAP, it was determined that the C$0.1 million ($0.1 million) repayment on convertible debt through the Debentures NCIB in the three months ended June 30, 2025 ($nil for the three months ended June 30, 2024), triggered an extinguishment of C$0.1 million ($0.1 million) ($nil for the three months ended June 30, 2024) of principal amount of debt. The gain on extinguishment of C$0.01 million ($0.01 million) for the three months ended June 30, 2025 ($nil for the three months ended June 30, 2024), was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs.

In accordance with GAAP, it was determined that the C$0.2 million ($0.2 million) repayment on convertible debt through the Debentures NCIB in the six months ended June 30, 2025 (C$6.9 million ($5.1 million) repayment of convertible debt through the Issuer Bid in the six months ended June 30, 2024), triggered an extinguishment of C$0.2 million ($0.2 million) (C$10.5 million ($7.8 million) for the six months ended June 30, 2024) of principal amount of debt. The gain on extinguishment of C$0.02 million ($0.01 million) for the six months ended June 30, 2025 (C$3.9 million ($2.9 million) for the six months ended June 30, 2024), was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs.

5. TRADE AND ACCRUED RECEIVABLES

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

In order to manage and assess our risk, management maintains credit policies that include regular review of credit limits of individual receivables and systematic monitoring of aging of trade receivables and the financial wellbeing of our customers. At June 30, 2025, approximately 70% of our trade accounts receivable are trade credit insured, relating to accounts receivable from counterparties deemed creditworthy by the insurer and excluding accounts receivable from government entities.

Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the three and six months ended June 30, 2025, no single Construction Partner accounted for greater than 10% of revenue (one Construction Partner for the three and six months ended June 30, 2024). In addition, and where possible, we collect a 50% deposit on sales, excluding the government and certain other clients.

The Company's aged receivables were as follows:

	As at
	June 30, 2025	December 31, 2024
Current	14,420	16,677
Overdue	2,678	2,916
	17,098	19,593
Less: expected credit losses	(100)	(99)
Trade and accrued receivables, net of expected credit losses	16,998	19,494

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No adjustment to our expected credit losses of (0.1 million was required for the three and six months ended June 30, 2025. Receivables are generally considered to be past due when over 60 days old, unless there is a separate payment arrangement in place for the collection of the receivable.

6. OTHER LIABILITIES

	As at
	June 30, 2025	December 31, 2024
Warranty provisions (1)	864	849
DSU liability	2,353	2,028
Income taxes payable	128	-
Sublease deposits	206	206
Other provisions and other liabilities	130	134
Other liabilities	3,681	3,217

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

	As at
	June 30, 2025	December 31, 2024
As at January 1,	849	873
Additions to warranty provision	359	640
Payments related to warranties	(344)	(664)
	864	849

7. LONG-TERM DEBT

	Leasing Facilities	Convertible Debentures	Total Debt
Balance at January 1, 2024	484	55,624	56,108
Accretion of issue costs	-	1,491	1,491
Accrued interest	35	2,402	2,437
Interest payments	(35)	(2,839)	(2,874)
Principal repayments	(78)	(21,408)	(21,486)
Gain on extinguishment	-	(10,426)	(10,426)
Exchange differences	(33)	(2,865)	(2,898)
Balance at December 31, 2024	373	21,979	22,352
Current portion of long-term debt and accrued interest	78	281	359
Long-term debt	295	21,698	21,993
Balance at January 1, 2025	373	21,979	22,352
Accretion of issue costs	-	175	175
Accrued interest	15	691	706
Interest payments	(15)	(694)	(709)
Principal repayments	(39)	(151)	(190)
Gain on extinguishment	-	(14)	(14)
Exchange differences	19	1,200	1,219
Balance at June 30, 2025	353	23,186	23,539
Current portion of long-term debt and accrued interest	86	12,298	12,384
Long-term debt	267	10,888	11,155

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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 was able to borrow up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of (i) 75% of the book value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims (the "Borrowing Base"). Interest was calculated at the Canadian or U.S. prime rate plus 30 basis points or at the Canadian Dollar Offered Rate or LIBOR plus 155 basis points. Under the RBC Facility, if the "Aggregate Excess Availability" (defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash), was 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 had been below 1.10:1 for the three immediately preceding months, the Company was required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Canada Leasing Facility (as defined below) and a leasing facility in the United States that is no longer available (together, the "Leasing Facilities"). Should an event of default have occurred or the Aggregate Excess Availability been less than C$6.25 million for five consecutive business days, the Company would have entered a cash dominion period whereby the Company's bank accounts would have been blocked by RBC and daily balances would have offset any borrowings and any remaining amounts made available to the Company.

On February 9, 2023, the Company extended the RBC Facility (the "Extended RBC Facility"). The Extended RBC Facility had a borrowing base of C$15.0 million and a one-year term. Interest was calculated as at the Canadian or U.S. prime rate plus 75 basis points or the Canadian Dollar Offered Rate or Term Secured Overnight Financing Rate ("Term SOFR") plus 200 basis points plus the Term SOFR Adjustment (as defined in the amended loan agreement governing the Extended RBC Facility). Under the Extended RBC Facility, if the trailing twelve-month FCCR was not above 1.25 for three consecutive months, a cash balance equivalent to one-year's worth of Leasing Facilities payments was required to be maintained. Effective October 2023, inventory was scoped out of the Borrowing Base.

On February 9, 2024, the Company extended the Extended RBC Facility (the "Second Extended RBC Facility"). The Second Extended RBC Facility is subject to the borrowing base calculation to a maximum of C$15.0 million and a one-year term. Interest is calculated at the Canadian or U.S. prime rate plus 75 basis points or at the Canadian Dollar Offered Rate or Adjusted Term CORRA or Term SOFR plus the Term SOFR Adjustment, in each case plus 200 basis points. The Second Extended RBC Facility removed the three-month FCCR covenant, which resulted in the release of $0.1 million of restricted cash during the first quarter of 2024. On February 11, 2025, the Company extended the Second Extended RBC Facility (the "Third Extended RBC Facility") for a period of two weeks up to February 25, 2025 whilst the Company and RBC completed negotiations.

On February 20, 2025, the Company extended the Third Extended RBC Facility (the "Fourth Extended RBC Facility"). The Fourth Extended RBC Facility is subject to the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million and matures on November 30, 2025. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. At June 30, 2025, available borrowings are C$10.9 million ($8.0 million) (December 31, 2024 – C$14.4 million ($10.0 million) of available borrowings), calculated in the same manner as the RBC Facility described above, of which no amounts have been drawn. Under the RBC Facility, if the "Aggregate Excess Availability" (defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash), was less than C$3.0 million for at least thirty consecutive calendar days, the Company is subject to a FCCR covenant of 1.10:1 on a trailing twelve-month basis. As at June 30, 2025, the Company is in compliance with its financial covenants. The Fourth Extended RBC Facility also includes a new letter of credit facility guaranteed by the Export Development of Canada of C$5.0 million. The Company has also entered into a bonding facility with Great Midwest Insurance Company, and any other company that is part of or added to Skyward Specialty Insurance Group, Inc. ("Skyward"), which allows access to a $15.0 million bonding facility subject to an individual maximum of $5.0 million. Under the terms of the facility with Skyward, any bonds issued will be secured through Letters of Credit issued pursuant to the Fourth Extended RBC Facility. At June 30, 2025, no bonds have been issued through such bonding facility.

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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$4.0 million ($2.9 million) has been repaid. The Canada Leasing Facility has a seven-year term and bears interest at 4.25%.

The Company did not make any draws on the Canada Leasing Facility during the three and six months ended June 30, 2025 (2024 – $nil). The associated financial liabilities are shown on the consolidated balance sheet in the current portion of long-term debt and accrued interest and long-term debt.

Convertible Debentures

On January 25, 2021, the Company completed a C$35.0 million ($27.5 million) bought-deal financing of convertible unsecured subordinated debentures (the “January Debentures”) with a syndicate of underwriters. On January 29, 2021, the Company issued a further C$5.25 million ($4.1 million) of the January Debentures under the terms of an overallotment option granted to the underwriters. The January Debentures will mature and be repayable on January 31, 2026 (the “January Debentures Maturity Date”) and 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. Costs of the transaction were approximately C$2.7 million, including the underwriters’ commission. As a result of the Rights Offering (refer to Note 14), the conversion price of the January Debentures was adjusted to C$4.03 per common share representing a conversion rate of 248.1390 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$4.7 million ($3.5 million) of the principal balance of the January Debentures, and paid C$0.04 million ($0.03 million) of the interest payable on such January Debentures (refer to Note 4). On August 2, 2024, the Company purchased C$18,915,000 principal amount of the January Debentures for cancellation held by 22NW Fund, LP (“22NW”) (together with the purchase of C$13,638,000 principal amount of the December Debentures for cancellation held by 22NW) (the “Debenture Repurchase”). On August 26, 2024, the Company announced the Debentures NCIB, which commenced on August 28, 2024. During the three and six months ended June 30, 2025, the Company repurchased for cancellation C$0.02 million ($0.01 million) and C$0.05 million ($0.04 million) principal amount of January Debentures as part of the Debentures NCIB. As at June 30, 2025, C$16.6 million ($12.2 million) principal amount of the January Debentures was outstanding.

On December 1, 2021, the Company completed a C$35.0 million ($27.4 million) bought-deal financing of convertible unsecured subordinated debentures (the “December Debentures”) with a syndicate of underwriters. The December Debentures will mature and be repayable on December 31, 2026 (the “December Debentures Maturity Date”) and accrue interest at the rate of 6.25% per annum payable semi-annually in arrears on the last day of June and December of each year commencing on June 30, 2022 until the December Debentures Maturity Date. Interest and principal are payable in cash or shares at the option of the Company. The December Debentures will be convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the December Debentures Maturity Date and the date specified by the Company for redemption of the December Debentures. Costs of the transaction were approximately C$2.3 million, including the underwriters’ commission. As a result of the Rights Offering (refer to Note 14), the conversion price of the December Debentures was adjusted to C$3.64 per common share representing a conversion rate of 274.7253 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$5.8 million ($4.3 million) of the principal balance of the December Debentures and paid C$0.08 million ($0.06 million) of the interest payable on such December Debentures (refer to Note 4). On August 2, 2024, the Company repurchased for cancellation C$13.6 million ($10.1 million) principal amount of December Debentures held by 22NW. On August 26, 2024, the Company announced the Debentures NCIB which commenced on August 28, 2024. During the three and six months ended June 30, 2025, the Company repurchased for cancellation C$0.1 million ($0.1 million) and C$0.2 million ($0.1 million) principal amount of the December Debentures as part of the Debentures NCIB. As at June 30, 2025, C$15.1 million ($11.0 million) principal amount of the December Debentures was outstanding.

11

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8. STOCK-BASED COMPENSATION

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

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

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

Stock-based compensation expense

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
Equity-settled awards	739	521	1,478	1,014
Cash-settled awards	(145)	(94)	(145)	88
	594	427	1,333	1,102

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

	RSU Time-Based	RSU Performance-Based	PSU	DSU
	Number of units	Number of units	Number of units	Number of units
Outstanding at December 31, 2023	3,530,564	64,029	1,845,608	3,086,172
Granted	2,344,500	-	-	1,071,009
Vested or settled	(1,211,597)	(12,574)	-	-
Withheld to settle employee tax obligations	(275,314)	-	-	-
Forfeited or expired	(45,368)	(6,278)	-	-
Outstanding at June 30, 2024	4,342,785	45,177	1,845,608	4,157,181
Outstanding at December 31, 2024	10,260,791	45,177	1,845,608	4,033,894
Granted	25,000	-	-	544,081
Vested or settled	(1,474,331)	-	-	-
Withheld to settle employee tax obligations	(139,186)	-	-	-
Forfeited or expired	(156,791)	(45,177)	-	-
Outstanding at June 30, 2025	8,515,483	-	1,845,608	4,577,975

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13

Restricted share units (time-based vesting)

Except as noted below, outstanding restricted share units (“RSUs”) that vest based on time have an aggregate time-based vesting period of three years and generally one-third of the RSUs vest every year over a three-year period from the date of grant. The RSUs will be settled following vesting by way of the provision of cash or shares to employees (or a combination thereof), at the discretion of the Company. The weighted average fair value of the RSUs granted in the six months ended June 30, 2025 and June 30, 2024 was C$0.82 and C$0.63, respectively, which was determined using the closing price of the Company’s common shares on their respective grant dates. During the third quarter of 2024, certain of the Company’s executives were granted (i) 5 million RSUs which will cliff vest on August 14, 2026 and (ii) 975,000 RSUs, one-third of which will vest every year over a three-year period from the date of grant, at a weighted average fair value of C$0.75 which was determined using the closing price of the Company’s common shares on their respective grant dates.

Restricted share units (performance-based vesting)

During 2022 and 2021, RSUs were granted to executives with service and performance-based conditions for vesting based on the Company’s share price performance (the “PRSUs”). Based on share price performance since the date of grant, 66.7% of the 2021 PRSUs vested on March 1, 2024, but none of the 2022 PRSUs vested upon completion of the three-year service period. As at June 30, 2024, the Company had 45,177 PRSUs outstanding. All PRSUs were expired as of June 30, 2025.

Performance share units

During the second quarter of 2023, certain executives were issued a strategic equity grant through performance share units (“PSUs”). The performance period of the PSUs is from January 1, 2023 to December 31, 2026 with a cliff vesting term for December 31, 2026. 2,584,161 PSUs were granted and depending on the level of performance, the PSUs will vest 100%, 160% or 190% up to a maximum of 4,909,907 PSUs. Settlement will be made in the form of shares issued from treasury. The performance measures are a combination of Revenue and Earnings Before Interest, Taxes, Depreciation and Amortization and both targets have to be achieved. As of June 30, 2025, the fair value of these PSUs have been deemed to be $nil based on the likelihood of achieving the targets compared to current results. During the third quarter of 2023, 738,553 PSUs with a $nil value were forfeited as a result of an executive departure and 1,845,608 PSUs with a $nil value are outstanding at June 30, 2025.

Deferred share units

Granted under the DSU Plan

The fair value of the DSU liability and the corresponding expense is charged to profit or loss at the grant date. Subsequently, at each reporting date between the grant date and settlement date, the fair value of the liability is remeasured with any changes in fair value recognized in profit or loss for the period. DSUs outstanding at June 30, 2025 had a fair value of $0.6 million which is included in other liabilities on the balance sheet (December 31, 2024 – $0.7 million).

Granted under the LTIP

DSUs granted after May 30, 2023 (the “New DSUs”) will be settled by way of the provision of cash or shares (or a combination thereof) to the directors, at the discretion of the Company. The Company intends to settle these DSUs through issuances of common shares. The weighted average fair value of the DSUs granted in the first six months of 2024 and 2025 was C$0.62 ($0.45) and C$0.92 ($0.66), respectively, which was determined using the closing price of the Company’s common shares on the grant date. New DSUs outstanding at June 30, 2025 had a fair value of $1.7 million which is included in other liabilities on the balance sheet (December 31, 2024 – $1.3 million).

Dilutive Instruments

For the three and six months ended June 30, 2025, 1.0 million and 6.7 million RSUs (respectively), 3.2 million New DSUs, 1.8 million PSUs, and 38.6 million common shares which would have been issued if the principal amount of the Debentures was settled in common shares at the quarter-end price were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net loss per share.

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For the three and six months ended June 30, 2024, 2.1 million and 2.3 million RSUs and PRSUs (respectively), 2.3 million and 2.0 million New DSUs (respectively), and 113.7 million shares which would have been issued if the principal amount of the Debentures was settled in common shares at the quarter-end price were included in the diluted net income per share calculation. 0.02 million options, 0.05 million PRSUs and 1.8 million PSUs were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net income per share. See Note 10 for the dilutive impact on net income per share.

9. SHARE REPURCHASES

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

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

In addition to the Share Repurchase, DIRTT acquired and cancelled 730,148 and 1,248,411 common shares during the three and six months ended June 30, 2025, respectively, under the Shares NCIB (58,478 common shares for the year ended December 31, 2024).

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

Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced programs	Maximum number of shares that may yet be purchased under the program
January 1, 2025 - January 31, 2025	109,556	$ 0.77	109,556	7,347,199
February 1, 2025 - February 28, 2025(1)	4,074,200	$ 0.80	153,356	3,272,999
March 1, 2025 - March 31, 2025	255,351	$ 0.69	255,351	3,017,648
April 1, 2025 - April 30, 2025	266,546	$ 0.73	266,546	2,751,102
May 1, 2025 - May 31, 2025	197,129	$ 0.66	197,129	2,553,973
June 1, 2025 - June 30, 2025	266,473	$ 0.61	266,473	2,287,500
Total	5,169,255		1,248,411	2,287,500

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

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10. EARNINGS (LOSS) PER SHARE

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
Net (loss) income per share – basic
Net (loss) income (thousands of U.S. dollars)	$ (6,602)	$ 596	$ (7,263)	$ 3,641
Weighted average number of shares outstanding (thousands of shares)	190,537	192,031	190,597	187,849
Net (loss) income per share (U.S. dollars) – basic	$ (0.03)	$ 0.00	$ (0.04)	$ 0.02
Net (loss) income per share – diluted
Net (loss) income (thousands of U.S. dollars)	$ (6,602)	$ 596	$ (7,263)	$ 3,641
Interest on convertible debentures	NA	723	NA	1,567
	$ (6,602)	$ 1,319	$ (7,263)	$ 5,208
Weighted average number of shares outstanding (thousands of shares)	-	192,031	-	187,849
Dilutive debentures on convertible debt (thousands of shares) (1)	-	113,653	-	113,653
Dilutive RSUs and PRSUs (thousands of shares) (2)	-	2,106	-	2,317
Dilutive New DSUs (thousands of shares) (2)	-	2,298	-	2,050
Weighted average number of shares outstanding (thousands of shares)	190,537	310,088	190,597	305,869
Net (loss) income per share (U.S. dollars) – diluted	$ (0.03)	$ 0.00	$ (0.04)	$ 0.02

(1) For the three and six months ended June 30, 2024, the Net income per share - diluted includes the effect of 113.7 million shares that would be issued if the principal amount of the Debentures was settled in our common shares at the quarter end price as they would have the potential to dilute basic income per share. Refer to Note 8 for the anti-dilutive impact on the three and six months ended June 30, 2025.
(2) For the three and six months ended June 30, 2024, the Net income per share - diluted includes the effect of 2.1 million and 2.3 million RSUs and PRSUs, and 2.3 million and 2.1 million New DSUs, as they would have the potential to dilute basic income per share. Refer to Note 8 for the anti-dilutive impact on the three and six months ended June 30, 2025.

11. REVENUE

In the following table, revenue is disaggregated by performance obligation and timing of revenue recognition. All revenue comes from contracts with customers. See Note 12 for the disaggregation of revenue by geographic region.

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
Product	33,475	36,141	69,699	71,017
Transportation	4,091	3,859	8,029	7,814
License fees from Construction Partners	175	176	359	384
Total product revenue	37,741	40,176	78,087	79,215
Installation and other services	1,181	1,025	2,130	2,833
	38,922	41,201	80,217	82,048

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 June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
At a point in time	37,566	40,000	77,728	78,831
Over time	1,356	1,201	2,489	3,217
	38,922	41,201	80,217	82,048

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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 license fees, installation and ongoing maintenance contracts with customers and is recorded as performance obligations which are satisfied over the term of the contract.

Contract Liabilities

	As at
	June 30, 2025	December 31, 2024	December 31, 2023
Customer deposits	3,030	4,028	5,290
Deferred revenue	358	-	-
Contract liabilities	3,388	4,028	5,290

Contract liabilities primarily relate to deposits received from customers and maintenance revenue from license subscriptions. The balance of contract liabilities was lower as at June 30, 2025 compared to December 31, 2024 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2024 and 2023 totaling $4.0 million and $5.3 million, respectively, were recognized as revenue in the six months ended June 30, 2025 and 2024, respectively.

Sales by Industry

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

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
Commercial	20,808	28,018	48,906	58,197
Healthcare	9,165	4,800	16,369	7,849
Government	3,007	5,092	5,656	8,567
Education	4,586	2,090	6,797	4,218
License fees from Construction Partners	175	176	359	384
Total product and transportation revenue	37,741	40,176	78,087	79,215
Installation and other services	1,181	1,025	2,130	2,833
	38,922	41,201	80,217	82,048

12. 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.

Revenue from external customers

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
Canada	4,044	4,659	10,922	7,728
U.S.	34,878	36,542	69,295	74,320
	38,922	41,201	80,217	82,048

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Non-current assets

	As at June 30, 2025	As at December 31, 2024
Canada	25,883	25,924
U.S.	22,922	25,137
	48,805	51,061

DIRTT has one reportable segment: solutions. The DIRTT solutions segment derives revenues from customers by providing physical products and digital tools through our ICE software to create interior spaces for our customers across the commercial, healthcare, education and government industries. The solutions segment provides digital tools (access to ICE software) and physical products to create modular interior construction spaces for our customers.

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

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

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

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

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2025	2024	2025	2024
	($ in thousands)		($ in thousands)
Revenue	38,922	41,201	80,217	82,048
Cost of sales	28,104	25,826	54,857	52,025
Operating expenses(1)	15,156	14,359	30,020	29,214
Operating (loss) income	(4,338)	1,016	(4,660)	809
Other income/(expenses) and gains/(losses)(2)	(2,264)	(420)	(2,603)	2,832
Net (loss) income after tax	(6,602)	596	(7,263)	3,641
Reconciliation of profit or loss
Adjustments and reconciling items	-	-	-	-
Net (loss) income after tax	(6,602)	596	(7,263)	3,641

(1) Includes Sales and marketing, General and administrative, Operations support, Technology and development, Stock-based compensation, Reorganization costs and Impairment charges.
(2) Includes Tax expenses, non-recurring gains and losses, foreign exchange gains (losses), interest income and interest expenses.

13. INCOME TAXES

As at June 30, 2025, the Company had a valuation allowance of $30.0 million against deferred tax assets as the Company has experienced cumulative losses in recent years (December 31, 2024 – $30.0 million).

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14. RIGHTS OFFERING

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

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

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

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

15. COMMITMENTS

As at June 30, 2025, the Company had outstanding purchase obligations of approximately $2.8 million related to inventory and property, plant and equipment purchases (December 31, 2024 – $4.2 million). As at June 30, 2025, the Company had undiscounted operating lease liabilities of $37.6 million (December 31, 2024 – $39.5 million).

During the quarter ended June 30, 2025, the Company signed a lease agreement for a new DIRTT Experience Center ("DXC") in Houston, Texas. The lease is expected to commence subsequent to June 30, 2025. Undiscounted rent obligations associated with this lease are $1.4 million.

16. RELATED PARTY TRANSACTIONS

As at June 30, 2025, there were no Debentures held by a related party (June 30, 2024 - C$18.9 million and C$13.6 million of the January Debentures and December Debentures, respectively). Interest earned on Debentures held by a related party is $nil for the three and six months ended June 30, 2025 ($0.4 million and $0.7 million for the three and six months ended June 30, 2024). Interest is earned on terms applicable to all Debenture holders.