DRTTF 10-K & 10-Q changes, risk factors and insider trading

Our industry is highly competitive, and wepotential clients may not be successful in educating potential clients aboutrecognize the benefits of our innovative and unique approach to interior construction as compared to conventional interior construction methods.

We operate in the highly competitive interior construction industry that is constantly developing and changing. We compete against conventional construction firms, individual tradespeople, modular systems, and commercial furniture manufacturers. Competitive factors include price, speed, quality, customization, and service. New market entrants and conventional construction firms are also beginning to develop customizable wall paneling and other modular interior construction solutions, and we expect this trend to continue. In addition, we may face pricing pressure from competitors or new market entrants who take on projects at reduced prices or employ other competitive strategies. While we believe our innovative design, quality, schedule and cost certainty, and network of Construction Partners makes us well-positioned in the market, increasing competition could make it difficult to secure new projects at acceptable operating margins.

We currentlyremain do not engage in many direct sales projects and rely almost exclusivelyreliant on our network of Construction Partners to promote brand awareness, sell and market DIRTT Solutions,Solutions and provide design, installation, distribution and other services to clients on each project. While we are not dependent on any single Construction Partner, sales generated by approximately 10% of our Construction Partners comprised approximately 34%47% of our total revenues for 20242025 (20232024 – 37%34%) with one Construction Partner making up approximately 9% of total revenues (20232024 - 12%9%). The loss of any top performing Construction Partners, particularly to our competitors, may negatively affect our sales, financial condition or results of operations. It may further impair our ability to maintain a market presence in a particular geographic region until a new Construction Partner relationship is established, which would require significant time and resources, given DIRTT is typically a standalone line of business in their portfolio.

The management teamCompany is working onundergoing a strategic transformation plan,process, weacross the Commercial, Operational and Manufacturing departments. We may not be able to achieve some or all of the anticipated benefits of this transformation plan.

In response, the management team is working on a transforming plan to advance the business and grow revenue and manage profitability. Implementation of this transformation plan will require robust and reliable systems and processes across the organization. There is also no assurance that successful implementation will lead to sustainable, profitable growth, and may itself be disruptive to the Company. Failure to implement our transformation plan could materially and adversely affect our near-term sales, commercial activities, and ability to develop and sustain profitable growth. In addition, the success and timing of our implementation may be dependent upon external factors outside of our control.

Our strategytransformation plan also depends in part on our ability to maintain and manage growth effectively. Growth in our headcount and operations may place significant demands on our management and operational and financial resources. Additionally, managing growth of our operations and personnel requires continuous improvement of our internal controls and reporting systems and procedures. Failure to effectively manage growth could result in difficulty providing current DIRTT Solutions and introducing future solutions, difficulty in securing clients and Construction Partners, declines in quality or client satisfaction, increases in costs or other operational difficulties. Any of these difficulties could lead to a loss of investor confidence and adversely affect our business performance, financial condition and results of operations.

As a result of amendments to the Competition Act (Canada), certain public representations by a business regarding the benefits of the work it is doing to protect or restore the environment or mitigate the environmental and ecological causes or effects of climate change may violate the Competition Act (Canada)'s deceptive marketing practices provisions. These amendments include substantial financial penalties and, effective June 20, 2025, a private right of action which will permit private parties to seek an order from the Competition Tribunal under the deceptive marketing practices provisions.penalties. Uncertainty surrounding the interpretation and enforcement of this legislation may expose the Company to increased litigation and financial penalties, the outcome and impacts of which can be difficult to assess or quantify and may have a material adverse effect on DIRTT’s business, reputation, financial condition, and results.

Aluminum represents the largest component of our raw materials consumption. We have experienced fluctuations in the price of aluminum and anticipate that these fluctuations will continue in the future. In particular, during 2021 through 2023, we experienced significant price inflation across substantially all of our materials, largely due to pandemic-induced supply chain constraints. FromStarting timein to time,2025, the U.S. government has imposed 50% tariffs on steel and aluminum and limited the amounts of steel and aluminum coming into the United States based on the countries of origin of those imports.imports and Canada reacted by implementing a series of counter-tariff measures (ranging from 25% to 50% ad valorem) to protect Canadian steel and aluminum producers impacted by the U.S. actions. In 2024, we sourced the majority of our aluminum from North America and sourced under 10% of our raw materials from outside North America. Nonetheless, substantial, prolonged upward trends in aluminum and other commodity prices, along with tariffs and import limitations, could significantly increase our costs and adversely affect our liquidity, operating margins, and financial condition. In particular, additional tariffs imposed by the U.S. government, and any potential retaliatory measures, may affect us and our suppliers, including on the costs of raw materials and pricing of our solutions. See also “—New and existing trade policies, tariffs or import/export regulations imposed by the U.S., Canada or other foreign governments may adversely affect our ability to source and sell our products profitably, or at all.”

We rely on certain key suppliers for raw materials and components, including aluminum, glass, wood, paint, and hardware. We maintain multiple suppliers for key materials, although for the year ended December 31, 2024,2025, (i) one supplier accounted for approximately 65%78% of our aluminum supply and two additional suppliers provided approximately 21%9% and 9%, respectivelyeach, (ii) two suppliers accounted for approximately 64% and 25%26% of our wood supply, (iii) one supplier accounted for 100% of our paint, and (iv) one supplier accounted for approximately 50%45% of our hardware supply.supply and one additional supplier provided 20%.

New and existing trade policies, tariffs or import/export regulations imposed by the U.S., Canada or other foreign governments may adversely affect our ability to source and sell our products profitability, or at all. The Canada-United States-Mexico Agreement is due for review in 2026.

On February 1, 2025, the U.S. government announced a 25% tariff on product imports from certain countries, including Mexico and Canada, and 10% tariffs on product imports from certain other countries, including China. These actions have resulted in, and may result in additional retaliatory measures on U.S. goods. Specifically, the Canadian federal government imposed similar tariffs on U.S. goods imported into Canada in response to the U.S.’s imposition of tariffs. The Canadian government has put a six month pause on these tariffs, effective April 15, 2025, which was extended to June 30, 2026. The impact of these tariffs have been limited as the Company’s products fall under The Canada-United States-Mexico Agreement (“CUSMA”). A review of CUSMA is required to be performed by June 30, 2026.

Further, onOn February 10, 2025, President Trump issued an Executive Order imposing 25% tariffs on steel and aluminum imported into the U.S. These tariffs are proposed to become effective March 12, 2025 and would be in addition to any other tariffs on such imported goods. This tariff was increased to 50%, effective June 3, 2025. DIRTT imports raw materials from, and has manufacturing facilities in, both Canada and the U.S. Accordingly, while the extent and duration of any tariffs imposed by the U.S. or Canada, and the resulting impact on our business, are difficult to predict at this time, such tariffs may affect our ability to import raw materials and sell our products profitably. The imposition of trade barriers, including tariffs, quotas, embargoes, safeguards, and customs restrictions between Canada and the U.S., may increase the cost or reduce the supply of materials and products available to us, increase shipping times, affect our customers’ construction needs or budgets, affect the demand for our products or our product mix or require us to modify our supply chain organization, manufacturing facilities, or other current business practices, any of which could harm our business, financial condition, and results of operations.

Our industry is cyclical and highly sensitive to macroeconomic conditions including inflation, deflation, interest rates, recession, availability of capital, and the effects of governmental initiatives to manage economic conditions. Overall declines or reductions in construction and renovation due to economic downturns, unemployment and office vacancies, changing return-to-office trends, difficulties in the financial services sector and credit markets, and imposition of tariffs, embargoes or other trade barriers can impact the demand for our products. Financial difficulties experienced by our suppliers, Construction Partners or clients could also result in, among other things, inadequate project financing, project delays, inability to pay accounts receivable or disruptions in our supply chain. The current conflicts in Ukraine and the Middle East, and other conflicts involving Canada and the United States, resulting sanctions and related countermeasures other countries, could lead to market disruptions, including significant volatility in the credit and capital markets and the economy in general, which could weaken our operations and financial performance. Any development or escalation of these conflicts, or any new conflicts, including those resulting from the policies of the U.S. Presidential Administration, could significantly affect worldwide political stability and cause turmoil in the capital markets and generally in the global financial system. Additionally, geopolitical and macroeconomic consequences of these events cannot be predicted but could severely impact the world economy. Political uncertainty surrounding trade or other international disputes could also have a negative impact on customer confidence, inflation, interest rates and the economy in general. Any general economic, political, or social conditions that may contribute to financial difficulties experienced by us, our suppliers, Construction Partners, or clients may adversely affect our liquidity, financial condition and results of operations.

Most of DIRTT’s debt is on fixed interest rates. The FourthFifth Extended RBC Facility (as defined below) is subject to market interest rates. We are not currently using interest rate derivatives to manage interest rate risks. If interest rates rise, this could have a material and adverse effect on our cash flows, revenues and results of operations and may adversely affect our ability to access financing. We are currently undrawn on our FourthFifth Extended RBC Facility.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions around the world have increased. In the ordinary course of our business, we generate, collect and store confidential and proprietary information, including intellectual property, business information, and other proprietary information. The secure storage, maintenance, and transmission of, and access to, this information is important to our operations and reputation. We use automated software and hardware solutions to protect our on-premise and cloud infrastructure; conduct routine third-party evaluations and vulnerability testing to identify and mitigate risks; and deploy employee training programs throughout the company. Although we have experienced cyber-based attacks, to our knowledge, we have not experienced any material disruptions or breaches of our information technology systems or platforms. However, despite every measure we take to address cybersecurity matters, there is no guarantee that our security systems, or processes or procedures designed to protect our information technology systems are adequate to safeguard against all cybersecurity risks or human error. Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target. In some cases, these breaches are designed to be undetected and, in fact, may not be detected. Any security breach involving the misuse, loss or other unauthorized disclosure of confidential information of a client, Construction Partner, employee, supplier or Company information could result in financial losses, exposure to litigation and liability (including regulatory liability), damage to our reputation, and disruption to our operations, all of which could have a material adverse effect on our business, financial condition or results of operations. While we maintain commercially prudent cybersecurity insurance consistent with industry practice, such insurance may not be sufficient to cover all losses relating to data loss or an information security breach.

Our core intellectual property in the ICE Software Code is jointly owned with a third party, who may fail to comply with its contractual obligations to protect and enforce our intellectual property rights.

AWI owns a 50% interest in the rights, title and interests in certain intellectual property rights in the Applicable ICE Software Code, including a 50% interest in the patent rights that relate to the Applicable ICE Software Code. As part of AWI’s purchase of the Applicable ICE Software Code, AWI must comply with contractual obligations designed to protect the Applicable ICE Software Code from infringement, misappropriation, misuse or exposure to unauthorized third parties. However, despite our efforts to monitor AWI’s actions, we may not become aware of AWI’s failure to comply with its obligations or we may not have adequate time to address such failure before there are adverse impacts to our business. Additionally, even if we attempt to require AWI to comply with its obligations to enforce our intellectual property rights, AWI may refuse or may not take adequate steps to do so. AWI’s failure to protect or maintain the proprietary nature of the Applicable ICE Software Code could adversely affect our ability to sell original products or adversely affect our business, financial condition or results of operations.

AWI may fail to meet certain security and non-disclosure obligations designed to prevent our competitors or other unauthorized third parties from accessing the Applicable ICE Software Code. Despite our efforts to enforce our rights and monitor any inadequacies, we may not have access to AWI’s internal security or business practices. Additionally, we may not be successful in preventing AWI from exposing the source code of the Applicable ICE Software Code to third parties or in protecting our intellectual property rights in the Applicable ICE Software Code. Any unauthorized access to the Applicable ICE Software Code in AWI’s possession could substantially and adversely affect our business or competitive advantage and management may have to expend significant time and resources to address unauthorized access and disclosure, all of which could have a material adverse effect on our business, financial condition or results of operations.

We had negative cash flow from operating activities for prior years, including the year ended December 31, 2025. We had $7.3 million and $14.8 million in cash provided from operating activities for the years ended December 31, 20222024 and 2021.2023, respectively but incurred a negative cash flow from operating activities for the year ended December 31, 2025 of $0.2 million. Continued negative operating cash flow may compromise our ability to make interest and principal payments on the issued and outstanding 6.00% convertible unsecured subordinated debentures due January 31, 2026 (the “January Debentures”) and the issued and outstanding 6.25% convertible unsecured subordinated debentures due December 31, 2026 (the “December Debentures”, and collectively with the JanuaryBDC Debentures,(defined theherein) “Debentures”debt) on a timely basis, or at all, and to execute our transformation plan. Until we are able to generate positive cash flow from operating activities over a sustained period, our ability to finance our operations will be dependent on our cash reserves and available credit facilities and, if required, our ability to obtain additional external financing. Although we had $7.3 million and $14.8 million in cash provided from operating activities for the years ended December 31, 2024 and 2023, respectively, and we anticipate we will have positive cash flow from operating activities over at least the next twelve months, we cannot guarantee that such future cash flow will be sufficient, or other changes to our circumstances will not necessitate additional financial resources to fund our operating activities.

We have incurred significant losses since commencing business. We incurred net losses after tax of $14.6$14.4 million and $55.0$14.6 million for the years ended December 31, 20232025 and 2022,2023, respectively.respectively, Forand had net income of $14.8 million in the year ended December 31, 2024,2024. weThe have net income after tax of $14.8 million, but still have an accumulated deficit of $166.1 million. Theseearlier losses and accumulated deficits were due in part to the substantial investments made to grow our business and acquire clients, to further develop our service offerings through product and software development, to ensure that we have sufficient production capacity and capability to deliver on our commitment of rapid delivery times and to preserve our production, innovation and commercial capabilities through the economic disruption caused by the global COVID-19 pandemic in anticipation of an increase in construction activity as the pandemic impacts abated. 2025 was impacted by the tariffs on the economy. Past results may not be indicative of our future performance, and there can be no assurance that we will continue to generate net income in the future.

Significant negative industry or economic trends, disruptions to our business, planned or unexpected significant changes in the use of the assets, and sustained market capitalization declines may result in the impairment of non-current assets. In 2022, we had an indicator of impairment for our non-current assets. In 2023, we announced our intention to close our facility at Rock Hill, South Carolina (the “Rock Hill Facility,Facility”), which resulted in an impairment charge on the reclassification of assets held for use to assets held for sale. As at December 31, 2024,2025, we impaired leasehold improvements related to the Rock Hill Facility upon termination of the lease and impairment on a portion of our Phoenix Facility (as defined herein) right-of-use assets. Apart from this impairment, we did not have any impairment indicators for our remaining non-current assets. Any further charges relating to impairments could have a material adverse impact on our consolidated statement of operations in the period in which the impairment is recognized.

Our common shares are listed on the TSX under the symbol “DRT” and are quoted on the OTC’s Pink TierOTCQX® under the symbol “DRTTF.” The price of our common shares has in the past fluctuated significantly, and may fluctuate significantly in the future, depending upon a number of factors, many of which are beyond our control and may adversely affect the market price of our common shares. These factors include: (i) variations in quarterly results of operations; (ii) deviations in our earnings from publicly disclosed forward-looking guidance; (iii) changes in earnings estimates by analysts; (iv) our announcements or our competitors’ announcements of significant contracts, acquisitions, strategic partnerships or joint ventures; (v) general conditions in the offsite construction and manufacturing industries; (vi) sales of our common shares by our significant shareholders; (vii) fluctuations in stock market price and volume; and (viii) other general economic conditions. Additionally, the Shares NCIB and the Share Repurchase from NGEN (each as defined herein) and any other common share repurchase we may complete in the future, may further decrease the number of outstanding common shares, which could decrease liquidity in the market of the common shares and increase the volatility of its trading price.

Our common shares are quoted on the OTC’s Pink Tier,OTCQX®, and there may be a limited trading market in the Company’s 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 TierOTCQX® under the symbol “DRTTF.” There may be a limited trading market in the Company’s 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 common shares, which may limit their ability to sell their shares in the open market.

Our twothree largest shareholders, 22NW22NW, WWT, and WWT,the 726 Entities, are able to exercise voting influence over matters which may require shareholder approval due to their ownership of our common shares, and their interests may conflict with or differ from the interests of our other shareholders. In addition, the Amended and Restated SRP and the Support Agreement limitlimits the concentration of ownership of our common shares by shareholders other than 22NW and WWT,22NW, which may make it more difficult for a shareholder to acquire the Company.

As of NovemberFebruary 5,13, 2024,2026, 22NW Fund, L.P. (“22NW”) and Aron English (collectively, the “22NW Group”) and, WWT Opportunity #1 LLC (“WWT”) and Shaun Noll (collectively, the “WWT Group”) ownedand 29.7%726 BF LLC and 27.6%726 BC LLC (collectively, the “726 Entities”) owned 30%, 13% and 15% of our outstanding common shares, respectively, together beneficially owning approximately 57.3%58% of our outstanding common shares. So long as thesuch 22NW Group and WWT Groupshareholders and their respective affiliates continue to directly or indirectly own a significant amount of our common shares, they will, in certain circumstances, have voting influence over matters requiring shareholder approval, including amendments to our amended and restated articles of amalgamation, and approval of significant corporate transactions (barring any requirement for such shareholder to recuse itself from any such vote pursuant to applicable securities law, corporate law or the rules and regulations of any applicable stock exchanges). Further, Aron English and Shaun Noll, who serve as the investment manager and Managing Member of the 22NW Group and WWT Group, respectively, also serve as directors on the Company’s Board of Directors. This could have the effect of delaying or preventing a change of control of the Company, and would make the approval of certain transactions difficult or impossible without the support of these shareholders.

We are a corporation amalgamated and existing under the laws of Alberta with our principal place of business in Calgary, Alberta, Canada. Some of our directors and officers are residents of Canada and a substantial portion of our assets and those of such persons are located outside the United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon us or our directors or officers who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon civil liabilities under the Securities Act of 1933. Investors should not assume that Canadian courts: (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or blue sky laws of any state within the United States or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue sky laws.

The repurchase and cancellation of our Debentures in 2024 could adversely affect the price or liquidity of the Debentures.

On August 26, 2024, the Company announced a normal course issuer bid for its outstanding 6.00% convertible unsecured subordinated debentures due January 31, 2026 (“the January Debentures”) and the December Debentures (the “Debentures NCIB”). Forwhich expired on August 27, 2025. On August 26, 2025, the quarterCompany endedannounced Decemberthe 31,renewal 2024,of C$0.3the Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB (the “Renewed Debentures NCIB”). Under the Debentures NCIB and the Renewed Debentures NCIB. C$0.4 million and C$0.01C$0.07 million principal amounts of the December Debentures and January Debentures, respectively, were acquired and cancelled. The January Debentures were repaid on maturity on January 31, 2026.

The IssuerDebentures Bid, the Debenture Repurchase,NCIB and the Renewed Debentures NCIB have decreased, and the Debentures NCIB may further decrease, the number of outstanding December Debentures, which could decrease liquidity in the market of the Debentures and increase the volatility of the prices at which they trade. Repurchases of the December Debentures may also cause the prices of the December Debentures to differ from what they would be in the absence of such repurchase. There can be no assurance any such repurchases will ultimately enhance shareholder value.

DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE softwareSoftware”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE Software is also licensed to our Construction Partners and certain third parties, 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 softwareSoftware that is used by AWI.

Gross profit and gross profit margin for the fourth quarter of 20242025 was $18.6 million or 36.6% of revenue, an increase from $17.5 million or 35.9% of revenue, a decrease from $19.2 million or 37.8% of revenue for the same period of 2023.2024. Adjusted Gross Profit and Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) for the fourth quarter of 20242025 was $19.0$19.7 million or 38.8%38.7% of revenue. This represents an increase in Adjusted Gross Profit from $19.0 million, but a decrease fromcompared $20.1to millionAdjusted orGross 39.5%Profit Margin of 38.8% of revenue in the fourth quarter of 2023.2024. TheseThe slight decreases in Adjusted Gross Profit Margin aredespite higher revenue is the result of lowertariff revenues and a $0.7 million increase to our inventory obsolescence provision.costs.

Net incomeloss after tax for the fourth quarter of 20242025 was $4.0$3.7 million compared to a $1.0$4.0 million net income after tax for the same period of 2023.2024. The increasedecrease in net income is primarily the result of aone-time $2.0impairment charges of $2.9 million decreaselargely inrelating operating expenses (operating expenses into the fourth quartertermination of 2023 included a $0.8 million impairment charge on the Rock Hill, South Carolina manufacturing facility (the “Rock Hill Facility”) whichlease, was not repeated in the fourth quarter of 2024), a $2.6 millionan increase in foreign exchange gain,loss aof $0.8$2.4 millionmillion, decreaseand an increase in interestreorganization expense of $1.8 million, and a $0.3$1.5 million decreaseincrease in taxother expense.operating Theseexpenses, benefits werepartially offset by a $1.7$1.1 million decreaseincrease in gross profit, and a $1.0 million decrease of gain on sale of software and patents that resulted from the completion of the knowledge transfer to AWI that occurred in the fourth quarter of 2023 and was not repeated in 2024.profit.

Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the fourth quarter of 20242025 was $5.5$6.2 million, or 11.2%12.1% of revenue, an improvement of $1.2$0.7 million from $4.3$5.5 million or 8.5%11.2% of revenue for the fourth quarter of 2023.2024. Higher Adjusted EBITDA was mainly driven by the decrease in operating expenses, offset by the decrease inincreased Adjusted Gross Profit duediscussed above. Adjusted EBITDA for the fourth quarter of 2025 was in line with the expected guidance range of $5.0 to $7.0 million provided in the abovethird notedquarter reasons.of 2025.

Cash on hand increaseddecreased by $5.7$5.8 million in the fourth quarter of 20242025 to $29.5$20.3 million, compared to a $2.7$5.7 million increase in cash in the fourth quarter of 2023.2024. The increasedecrease in cash in the fourth quarter of 20242025 was driven by $6.2$4.3 million of net cash flows fromused operationsby operating activities, $1.2 million used in investing activities, and a positive impact of $0.3 million foreignused exchangein gain,financing offsetactivities. byWe $0.7experienced a negative cash flow from operating activities due to an $6.5 million decrease in working capital expenditureswhich andarose $0.1from record sales occurring in December 2025 as well as a $1.0 million fromlease repaymenttermination payment associated with the exit of debtthe andRock otherHill financingFacility activities .lease.

On December 18, 2024,2025, the Company announced a normal course issuer bid for its common shares (the “renewal of the Shares NCIB” (as defined herein), which commenced on December 20,22, 20242025 and will terminate no later thanon December 19,21, 2025.2026 (the “Renewed Shares NCIB”). The Renewed Shares NCIB permits DIRTT to acquire up to 7,515,2339,593,878 of its common shares. All purchases 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 Renewed Shares NCIB will be immediately cancelled.

On February 5,2, 2025,2026, the USCompany’s District8-week Court for the Northern District of Utah dismissed DIRTT’s lawsuittrial against Falkbuilt Ltd. (“Falkbuilt”), inMessrs. UtahSmed onand proceduralLoberg grounds.and Inseveral DIRTT’sother similarformer lawsuitDIRTT againstemployees Falkbuiltalleging in Canada, the Courtbreaches of King’srestrictive Benchcovenants, offiduciary Albertaduties, hasemployment scheduledduties anand eight-weekconfidentiality trial to commence February 2, 2026. With (the Canadian“Falkbuilt trialLitigation”) commencing less than a year away,commenced. DIRTT is pursuing damages and losses it suffered in Canada, the United States, and abroad in the Court of King'sKing’s Bench of Alberta.

Revenues for the year ended December 31, 2024,2025, were $174.3$168.9 million, a decrease of $7.6$5.5 million or 4%3% from $181.9$174.3 million for the year ended December 31, 2023.2024. The decrease in revenue, as compared to the same period of 2023,2024, was primarily the result of threehigher largethan healthcarenormal projects,order one key education project and a larger volume of commercial projects that were completed in 2023 and were not repeated in 2024. Annual revenue was in line with the expected guidance range of $165 million to $175 million provideddelays in the second quarterand third quarters of 2024.the year related to macroeconomic uncertainty and specific job site readiness.

Gross profit and gross profit margin for the year ended December 31, 2024,2025, was $55.4 million or 32.8% of revenue, a decrease from $64.4 million or 36.9% of revenue, an increase from $59.5 million or 32.7% of revenue for the year ended December 31, 2023.2024. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the year ended December 31, 2024,2025, was $68.3$59.5 million, ana increasedecrease from $65.1$68.3 million for the year ended December 31, 2023.2024. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) for the year ended December 31, 2024,2025, was 39.2%,35.2%, ana improvementdecrease from 35.8%39.2% for the year ended December 31, 2023.2024. The improveddecreased Adjusted Gross Profit and Adjusted Gross Profit Margin are the result of improveda materialdecline optimizationin torevenues offsetas thewell inflationaryas impacts$6.8 onmillion materialin costs. Fixedtariff-related costs decreasedincurred $2.3 million compared to 2023 as we aligned overhead costs and support costs with current operations after having finalized the decision to close the Rock Hill Facilitybeginning in theMarch third quarter of 2023.2025.

Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the year ended December 31, 20242025 was $7.4 million or 4.4% of revenue, a decrease of $8.0 million from $15.4 million or 8.8% of revenue, an improvement of $7.5 million from $7.9 million or 4.4% of revenue for the year ended December 31, 2023,2024, for the above noted reasons. Adjusted EBITDA for the year ended December 31, 2024 exceeded the guidance range of $12 to $15 million.

On August 2,26, 2024,2025, the Company and 22NW Fund, L.P. (“22NW”) closedannounced the Debenturerenewal Repurchaseof inthe normal course issuer bid for the Company’s outstanding January Debentures and December Debentures (as defined herein) (the “Renewed Debentures NCIB”), which thecommenced Companyon purchasedAugust for28, cancellation2025 anand aggregatepermits ofDIRTT C$18.9to millionacquire ($14.0up million)to C$1,656,900 principal amount of the January Debentures and C$13.6 million ($10.1 million)C$1,493,500 principal amount of the December Debentures from 22NW.Debentures. As at December 31, 2024,2025, C$16.6C$0.01 million ($11.6and C$nil principal amounts of the December Debentures and January Debentures were acquired through the Renewed Debentures NCIB, respectively. For the year ended December 31, 2025, C$0.4 million) principal amount of the December Debentures, and C$0.1 million principal amount of the January Debentures, had been acquired through the Debentures NCIB and C$15.3Renewed millionDebentures ($10.6NCIB, million)collectively. principalOn amountJanuary of31, 2026, the DecemberCompany repaid the January Debentures remainedon outstanding, and 22NW no longer held any Debentures.maturity.

The table below presents our qualified leads and twelve-month forward pipeline as at January 1, 20252026 and January 1, 2024.2025. We define qualified leads as the quantity of projects being pursued as of the date presented, and define our pipeline as the estimated potential revenue from qualified leads where a client has engaged DIRTT and is assessing DIRTT as a potential provider of prefabricated interior solutions. We believe these metrics are helpful to estimate near-term performance, particularly given the macroeconomic factors that affect our operating environment, including labor availability, interest rate changes, and potential recessionary impacts on construction projects. There can be no assurance that our estimated qualified leads is accurate or that such qualified leads will deliver the revenue we expect.

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 on Form 10-Q for the quarter ended MarchJune 31,30, 2026 (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.

DIRTT’s proprietary design integration software, DIRTT Design Editor also known as the ICE® software and technology platform (“Design Editor”, “ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to our Construction Partners and certain third parties, 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.

Key FirstSecond Quarter Highlights and Other Recent Developments

Revenue for the quarter ended MarchJune 31,30, 2026 was $42.4$40.3 million, an increase of $1.1$1.4 million or 3%,4%, from $41.3$38.9 million for the same period of 2025. We entered the first quarter of 2026 with twelve-month forward pipeline 20% higher as compared to January 1, 2025. The first quarter is historically a low revenue quarter due to seasonality.

Gross profit and gross profit margin for the quarter ended MarchJune 31,30, 2026 were $13.0$14.0 million or 30.6%34.7% of revenue compared to $14.5$10.8 million or 35.2%27.8% of revenue for the quarter ended MarchJune 31,30, 2025. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended MarchJune 31,30, 2026 was $13.9$14.9 million, aan decreaseincrease from $15.5$11.8 million Adjusted Gross Profit for the firstsecond quarter of 2025. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) was 32.9%37.0% in the firstsecond quarter of 2026, aan decreaseincrease from 37.5%30.4% in the comparative period of 2025. Gross profit and Adjusted Gross Profit for the quarter ended MarchJune 31,30, 2026 wereimproved negativelyfrom impactedprior periods primarily due to lower tariff and tariff mitigation costs, which was partially offset by rising aluminum costs, lower margins on installation projects,projects. andA tariff1% costs.aluminum price surcharge was put in place on orders placed after March 18, 2026 to help mitigate the impact of rising aluminum prices. We incurred $2.0$0.3 million of tariff and tariff mitigation costs in the firstsecond quarter of 2026 compared to $0.6$2.0 million tariff and tariff mitigation costs in the firstsecond quarter of 2025.

DuringReorganization theexpenses threerelated months ended March 31, 2026, the Company undertook activities associated withto the deployment of itsthe Transformation Office (as defined herein). An aggregate of $2.4 million of associated costs were recognized as reorganization expenses infor the three months ended MarchJune 31,30, 2026 included $1.1 million primarily related to termination benefits.

Net lossincome after tax and net lossincome margin for the firstsecond quarter of 2026 was $3.3$1.1 million and 7.7%2.6% of revenue, respectively, compared to $0.7$6.6 million net loss after tax and net loss margin of 1.6%17.0% for the same period of 2025. The increase in net lossincome is primarily the result of a $1.5$3.2 million decreaseincrease in gross profit, a $2.2 million increase in reorganization expenses, offset by a $0.8 million decrease in other operating expenses, and a $0.5$2.0 million increase in foreign exchange gain.gain, a $1.2 million decrease in general and administrative expenses, $1.1 million decrease in sales and marketing expense, a $0.6 million decrease in operations support expenses, a $0.6 million decrease in technology and development expenses, offset by a $0.9 million increase in reorganization expenses.

Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the firstsecond quarter of 2026 was $1.4$4.7 million, or 3.3%11.8% of revenue, aan decreaseincrease of $0.7$6.8 million from $2.1$(2.0) million, or 5.1%(5.2%) of revenue, for the firstsecond quarter of 2025. LowerHigher Adjusted EBITDA was mainly driven by a $1.6$3.1 million decreaseincrease in Adjusted Gross Profit, offset by the decrease in other operating expenses discussed above.

On February 2, 2026, the Company’s 10-week trial against Falkbuilt Ltd. (“Falkbuilt”), Messrs. Smed and Loberg and several other former DIRTT employees alleging breaches of restrictive covenants, fiduciary duties, employment duties and confidentiality (the “Falkbuilt Litigation”) commenced. DIRTT is pursuing damages and losses it suffered in Canada, the U.S., and abroad in the Court of King’s Bench of Alberta. TheAn additional three weeks of trial is in progress and additional dates have been reserved inbegan July 2026,20, On February 11, 2026, in connection with the financing from BDC, the Company entered into a priority agreement with RBC and BDC, and amended the Fifth Extended RBC Facility (as defined herein).2026.

The table below presents our qualified leads and twelve-month forward pipeline as at AprilJuly 1, 2026, January 1, 2026, and AprilJuly 1, 2025. We define qualified leads as the quantity of projects being pursued as of the date presented, and define our pipeline as the estimated potential revenue from qualified leads where a client has engaged DIRTT and is assessing DIRTT as a potential provider of prefabricated interior solutions. We believe these metrics are helpful to estimate near-term performance.

As of AprilJuly 1, 2026, our twelve-month forward pipeline increasedremained by 16%consistent year-over-year and decreased by 1%7% from January 1, 2026, illustrated in the table below.

On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act. As a result of this ruling, we may be eligible for a refund of certain tariffs previously paid on imported goods. The financial impactAs of theseJune events30, is2026, uncertain,the asU.S. itCustoms isand unclearBorders Protection has confirmed that we are eligible to whata extentrefund tariffof payments$0.3 willmillion beunder refunded,Phase what1 processesof willthe governprogram suchincluding refunds,$0.02 ormillion ifof weinterest. can fully collectThese amounts previouslyhave paid.been Werecorded are evaluating the impact of these developments onin our business and financial statements. NoWe may be eligible for additional refunds in the future under Phase 2 and Phase 3. However, no adjustments have been recorded in the accompanying interim condensed consolidated financial statements for these two phases as the recoverability and timing of any such refund remains uncertain and we cannot reasonably predict or estimate the financial impact.

With ample liquidity, a growingstrong pipeline,liquidity position, improving conversioncommercial trends,discipline, and a streamlined operating model, DIRTT remains focused on disciplined execution and long-term value creation for shareholders, partners, and employees.

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), tax consequences, reorganization expense, unusual or infrequent charges or gains (such as gain on extinguishment of debt), and stock-based compensation, and government subsidies.compensation. We remove the impact of foreign exchange gain (loss) 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. In addition, management bases certain forward-looking estimates and budgets on non-GAAP financial measures, primarily Adjusted EBITDA. We have not reconciled forward-looking non-GAAP measures to its corresponding GAAP measures due to the high variability and difficulty in making accurate forecasts and projections, particularly with respect to non-operating income and expenditures, which are difficult to predict and subject to change.

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

Three and Six Months Ended MarchJune 31,30, 2026, Compared to the Three and Six Months Ended MarchJune 31,30, 2025

Revenue mainly reflects sales to our construction partners (“Construction Partners”) for resale to their clients and, in some circumstances, our direct sales to clients. We are investing in our Construction Services channel to grow revenue and increase direct sales to clients where such opportunities are not available to our Construction Partners. Our revenue is generally affected by the timing of whenorder orders are executed,execution, particularly large orders, which can add variability to our financial results and shift revenue between quarters.

Revenue for the three months ended MarchJune 31,30, 2026 was $42.4$40.3 million, an increase of $1.1$1.4 million compared to $41.3$38.9 million in the comparative period of 2025. The firstsecond quarter is our seasonally slowest quarter and was relatively flat compared to the samesecond quarter of 2025. Revenue for the six months ended June 30, 2026 was $82.7 million, an increase of $2.5 million from $80.2 million in the priorcomparative year.period of 2025 due to pricing increases issued in response to tariffs. See “Price Increases and Impact of Tariffs.” for a discussion on pricing increases announced in the quarter.

Installation and other services revenue was $1.6$1.4 million for the quarter ended MarchJune 31,30, 2026 compared to $0.9$1.2 million in the quarter ended MarchJune 31,30, 2025 and $3.0 million for the six months ended June 30, 2026 compared to $2.1 million for the same period of 2025. Historically, this revenue primarily reflects services performed by our ICE teams for third parties. Except in limited circumstances, historically our Construction Partners, rather than the Company, perform installation services. For the quarterthree and six months ended MarchJune 31,30, 2026, our Construction Services channel was involved in a higher number of installation projects resulting in a 70%20% and a 42% growth in that revenue stream.stream, respectively.

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 MarchJune 31,30, 2026, we had 6059 Construction Partners (MarchJune 31,30, 2025: 6970; December 31, 2025: 66) servicing multiple locations. We also continue to workboth on developingdevelop our Construction Services team and partneringpartner with our Construction Partner network to drive increased revenue for DIRTT.

For the three months ended MarchJune 31,30, 2026, 14%13% of revenue was from Canada, as compared to 17%10% for the three months ended MarchJune 31,30, 2025. Historically, approximately 10-15% and 85-90% of revenues are derived from sales to Canada and the United States, respectively. We expect the historical split to continue.

Sales and marketing expenses decreased by $0.1$1.2 million to $5.0$9.2 million for the threesix months ended MarchJune 31,30, 2026, compared to $5.2$10.5 million for the threesix months ended MarchJune 31,30, 2025. The decrease is primarily due to a $0.6 million decrease in salaries and benefits costs and a $0.3 million decrease in commissions.

General and administrative expenses weredecreased $5.4by $1.2 million to $10.0 million for the threesix months ended MarchJune 31,30, 2026, acompared minorto decrease from $5.5$11.2 million for the threesix months ended MarchJune 31,30, 2025. The decrease is primarily related to a $0.6 million decrease in professional services costs and a $0.4 million decrease in salaries and benefits costs.

Operations support is comprised primarily of project managers, order entry, and other professionals that facilitate the integration of our Construction Partner project execution, our manufacturing operations, and support staff for the operational processes team. Operations support expenses decreased by $0.4$0.6 million for the three months ended MarchJune 31,30, 2026 to $1.6$1.2 million from $2.0$1.9 million for the comparative period of 2025 primarily due to a $0.3$0.7 million decrease in salaries and benefits costs.

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 $0.3$0.6 million to $0.9 million for the three months ended MarchJune 31,30, 2026 compared to $1.2$1.5 million for the three months ended MarchJune 31,30, 2025. The decrease is primarily related to a $0.2$0.3 million decrease in salaries and benefits costs.

Stock-based compensation expense for the three months ended MarchJune 31,30, 2026 was $0.9$0.7 million compared to $0.7$0.6 million in the same period of 2025. The increase in expense was largely due to an increase in performance share units (“PSUs”) expense,expense and an increase in DSU expense in the second quarter of 2026, compared to the second quarter of 2025. The increase was slightly offset by a decrease in DSUrestricted share units (“RSUs”) expense inas a result of a lower amount of RSUs outstanding for the first quarter ofended 2026,June 30, 2026 compared to the firstsame quarterperiod of 2025.

Reorganization expenses for the three and six months ended MarchJune 31,30, 2026 were $2.4$1.1 million and $3.4 million, respectively, compared to $0.2 million and $0.4 million, respectively, in the three and six months ended MarchJune 31,30, 2025. Reorganization expenses for the three and six months ended MarchJune 31,30, 2026, primarily relate to termination benefit costs and consultant costs associated with our transformationTransformation plan,Office, as described in Note 4 of our interim condensed consolidated financial statements, while the reorganization costs for the three and six months ended MarchJune 31,30, 2025 were largely made up of movement of inventory and equipment from the facility at Rock Hill, South Carolina (the “Rock Hill Facility”) for use at the Calgary facility.

Foreign exchange gain (loss or gain) increased from a losslosses of $0.1$1.9 million and $2.0 million for the three and six months ended MarchJune 31,30, 2025 to a gaingains of $0.3$0.05 million and $0.4 million for the same periodperiods of 2026. The increase is primarily related to the weakening of the Canadian dollar over the three and six months ended MarchJune 31,30, 2026.