DistributionConstruction Partners and Sales Network

We primarily sell DIRTT Solutions through a network of independent DistributionConstruction Partners working in conjunction with local DIRTT sales representatives, as well as internal DIRTT industry specialists, business development professionals and a dedicated DistributionConstruction Partner support team. DistributionConstruction Partners and local sales representatives are located in cities throughout the United States and Canada.Canada, with additional locations in Saudi Arabia, Mexico, the United Kingdom and Singapore. The use of a dispersed network of DistributionConstruction Partners greatly enhances our ability to drive awareness of the DIRTT brand and understanding of our approach to construction throughout our markets.

As part of our distribution agreements, our DistributionConstruction Partners are typically required to invest in their own DIRTT Experience Center (“DXC”) so that they are able to effectively showcase DIRTT Solutions. These DXCs are showrooms that provide mock-ups of

DIRTT Solutions and related product offerings. As well, DIRTT maintains DXCs in Calgary, Toronto, Chicago, New York City, Savannah, Salt Lake CityDallas and Dallas. On February 22, 2022 we announced our intention to close our Phoenix DXC.Chicago.

Our DistributionConstruction Partners operate under agreements that outline sales goals and marketing territories which are generally non-exclusive. We expect our DistributionConstruction Partners to build regional DIRTT-dedicated teams (sales, design and project management) and to use our ICE Software in the sales process. In addition to sales and marketing, our DistributionConstruction Partners provide value throughout the construction process. At the pre-construction stage, DistributionConstruction Partners provide design assistance services to the architect and designer; throughout the construction process, DistributionConstruction Partners act as a specialty subcontractor to the general contractor and provide installation and other construction services. Post-move in, DistributionConstruction Partners provide warranty work, ongoing maintenance and reconfiguring support. Local DIRTT sales representatives work closely with the DistributionConstruction Partners throughout the process to ensure successful project implementation and the highest client satisfaction. DistributionConstruction Partners generally place orders for DIRTT Solutions directly with us and pay us directly for such orders.

We have the ability to bring on new DistributionConstruction Partners in a wide range of geographic areas, which permits us to quickly establish a presence in new market areas. Our DistributionConstruction Partners also scale our virtual reality technology, such as our smart phone- and tablet-based applications, to fit their capacity and needs.

At December 31, 2021,2023, we had a total of 69 Distribution72 Construction Partners and 6539 sales representatives across North America. We are not dependent on any one DistributionConstruction Partner or sales representative.

Strategic accounts are a cornerstone in our strategy to drive long-term sustainable and predictable growth. These types of clients manage large real estate footprints in numerous locations. For these clients, it is advantageous and important to establish consistency in design and execution, repeatability, and speed to market. While these relationships can take time to develop, once they are established, the time and resources required to execute additional projects is reduced, which we believe will create profitable, predictable revenue streams. In return, clients benefit from a single point of accountability at DIRTT, a strong network of partners, full lifecycle support from established design standards and pre-construction expert support for their architects, designers and general contractors from field work to post installation support.

Manufacturing and Properties

Our DIRTT Solutions are currently manufactured at our facilities in Calgary, Alberta;Alberta (the “Calgary Facility”) and Savannah, Georgia; and Rock Hill, South Carolina.Georgia (the “Savannah Facility”). On February 22, 2022, we announced the closure of our aluminum manufacturing facility in Phoenix, Arizona (the “Phoenix Facility”). On August 23, 2022, we announced the temporary suspension of operations at our Rock Hill, South Carolina facility (the “Rock Hill Facility”). On September 27, 2023, we announced our intention to permanently close the Phoenix manufacturing facility and move related production toRock Hill Facility because the Calgary and Savannah manufacturing facilities. This includes the Phoenix DXC as discussedFacilities can meet current demands with annual production capacity of $400 million in Item 1. Business in this Annual Report. Ourrevenue. Currently our wall surfaces (which we call tiles) are manufactured in Calgary and Rock Hill,panels), casework and timber solutions are manufactured in Calgary, while aluminum, glass and power components are manufactured in Calgary and Savannah. Through distributed manufacturing, we can shift production of some components among our manufacturing sites, reduce transportation times and costs, and meet targeted lead times. In 2019, we conducted an evaluation of our aluminum, tile and millwork capacities under various growth scenarios and concluded that the capacity of our aluminum manufacturing facilities is currently sufficient to support our anticipated growth. Given the longer lead time to acquire tile and millwork manufacturing equipment, combined with a lack of redundancy in those manufacturing facilities, we also concluded that we should commence construction of a new combined tile and millwork facility. In the fourth quarter of 2019, we entered into a lease for a building located in Rock Hill, South Carolina (the “South Carolina Facility”), which added approximately 130,000 square feet of manufacturing space for the combined tile and millwork factory. We substantially completed construction of the South Carolina Facility and commissioned the chromacoat tile line in the second quarter of 2021 with the millwork capabilities deferred until activity improves. In February 2022, we announced our intention to expand our tile manufacturing capabilities at the South Carolina Facility to include thermofoil through the relocation of existing underutilized equipment from the Calgary tile facility and back painted glass capabilities through the relocation of equipment from the Phoenix facility. Should the need arise, we have the right to lease an additional 130,000 square feet of space at our South Carolina Facility. If we experience additional growth, we may need to add or expand additional manufacturing facilities.

Suppliers and Raw Materials

Our inventory balances consist primarily of raw materials, which are kept on hand as components of our custom manufacturing process. Managing our raw material inventory is essential to our business, given our short lead times from order to shipment and our high level of order customization. Our key manufacturing materials are aluminum, hardware, wood and glass. For the twelve months ended December 31, 2021,2023, aluminum accounted for approximately 30.1%31% of our purchased materials, while wood, hardware wood and glassfinishing powder & paint accounted for approximately 13.9%12%, 11.1%9%, and 7.8%9%, respectively. While we maintain multiple suppliers for key materials, for the twelve months ended December 31, 2021,2023, (i) one supplier accounted for approximately 59%61% of our aluminum supply with threeand two additional suppliers providing approximately 14% each,provided 19% and 18%, respectively, (ii) two suppliers accounted for approximately 58%46% and 36%44% of our wood supply (iii) one supplier accounted for 100% of our paint & powder and (iv) one supplier accounted for approximately 44%42% of our hardware supply.

Materials are sourced domestically and, to a much lesser extent, overseas. Approximately 93% of our materials are manufactured and purchased in North America. Purchase decisions are made on the basis of quality, cost, and ability to meet delivery requirements. We do not typically enter into long-term agreements with suppliers. In general, adequate supplies of raw materials are available to all our operations, andbut we continue to date we have not been materiallybe impacted by supply chain disruptions due to the COVID-19 pandemic, other than inflationary price pressures across substantially all of our raw material requirements althoughand aluminum purchases may be subject to market capacity constraints.

Technology and Development

We continue to focus on developing client-centric innovations and enhancements of both ICE Software and DIRTT Solutions with a primary focus on improving client experience, increasing market penetration and growing key markets. At December 31, 2021,2023, we employed 10073 employees within our technology and development groups and, including capitalized amounts, invested $8.3 million, $10.3 million and $11.1 million $11.6 millionin 2023, 2022 and $11.3 million in 2021, 2020 and 2019, respectively, in innovation activities.

ClientsOn May 9, 2023, the Company entered into a Partial Patent Assignment Agreement and a Co-Ownership Agreement (the “AWI Agreement”) with AWI. The AWI Agreements provide for the partial assignment to AWI and co-ownership of an undivided 50% interest in certain intellectual property rights (including related patents) in a portion of the Company’s ICE software that is used by AWI (the “Applicable ICE Code”), in exchange for a cash payment of $10.0 million. As part of the AWI Agreements, the Company has agreed to provide AWI a transfer of knowledge concerning the Applicable ICE Code, upon completion of which the Company received an additional cash payment of $1 million. This additional cash payment was received in the fourth quarter of 2023. The AWI Agreement provide that the Company and AWI will have separate exclusive fields of use and restrictive covenants with respect to the Applicable ICE Code and related intellectual property rights which survive until either party elects to separate its relationship from the other and for a period of five years thereafter.

Clients

DIRTT’s principal geographic markets are the United States and Canada. Our revenue is derived almost entirely from projects in North America sold by our North American DistributionConstruction Partners.

Our revenue opportunities primarily come from commercial projects, including both new construction projects and renovations of existing buildings. Clients range from small owner-managed businesses to multinational Fortune 500 companies across a variety of industries, including healthcare, education, financial services, government and military, manufacturing, non-profit, energy, professional services, retail, technology, and hospitality. We view DIRTT Solutions as generally industry agnostic, with applications in many different industries with minimal adjustments. We are not dependent on any one client or industry segment. NoIn 2023, one Construction Partner represented more than 10% of our revenue (12% in 2023), while no single client represented more than 10% of our revenue for the years ended December 31, 2021, 2020,2022 or 2019.2021.

Competition

The overall market for interior construction is fragmented and highly competitive. The principal competitive factors in the interior construction industry include price (including cost certainty), speed, quality, customization, and service. Our main competitors are comprised primarily of conventional construction firms, individual tradespeople (including framers, drywall installers, and interior product designers) and modular systems manufacturers. Additionally, conventional construction firms are beginning to develop customizable wall paneling and other interior construction solutions and may directly compete with our DIRTT Solutions. We also compete with commercial furniture manufacturers, such as Teknion Corporation, Haworth Inc. and Allsteel Inc., who offer a variety of prefabricated interior wall solutions. We expect competition to increase as new entrants or solutions enter the interior construction market. See Item 1A. “Risk Factors”.

Seasonality

The construction industry has also historically experienced seasonal slowdowns related to winter weather conditions and holiday schedules, which affect shipping and on-site installation dates, in the fourth and first quarters of each calendar year. Our business has generally, but not always, followed this trend with a slight time lag, leading to stronger sales in the second half of the year versus the first half. Weather factors can also influence third-party exterior construction schedules and site conditions, which may in turn affect timing of interior renovations.builds.

Due to the fixed nature of certain of our manufacturing costs, such as our facilities leases and related indirect operating costs, periods of higher revenue volume tend to generate higher gross profit and operating income margins, while periods of lower volume tend to result in lower gross profit and operating income margins. Quarters that contain consistent monthly manufacturing volumes tend to generate higher gross profit than those where manufacturing levels vary significantly from month to month.

Patent and Intellectual Property Rights

Our success depends, in part, upon our intellectual property rights relating to our products, production processes, our technology, including our ICE Software, and other operations. We rely on a combination of trade secret, nondisclosure and other contractual arrangements, as well as patent, copyright and trademark laws, to protect our proprietary rights and competitive advantage. We register our patents and trademarks as we deem appropriate and take measures to defend patents where we deem others are

infringing on our patents. The following table presents the status as of December 31, 20212023, of our issued and pending patents relating to various aspects of DIRTT Solutions and ICE Software:

Our issued patents expire between 20222024 and 2039. We do not believe that the expiration of any individual patent will have a material adverse effect on our business, financial condition or results of operations. As we develop innovations and new technology, we expect to file additional and supplemental patents to protect our rights in those innovations and new technology.

Sustainability and Environmental Matters

The construction industry generates As described in more detail above, the Company entered into the AWI Agreement with AWI, under which AWI owns a significant amount of waste and is estimated to contribute approximately 39% of global carbon emissions.In order to address the growing climate challenges and meet the goals set50% interest in the Paris Agreement,rights, title and interests in all the construction industry has begun moving towards decarbonization and sustainable design integration. This includes sustainable material selection and offsite construction.Applicable ICE Code, including a 50% interest in the patent rights that relate to the Applicable ICE Code.

 Sustainability is an integral component of DIRTT's corporate brand identity. From our solution design and material selection to installation and beyond, sustainable behaviors are built into our decisions and processes. DIRTT's industrialized construction approach utilizes lean manufacturing methods and strategic material sourcing to limit waste production. Renewable energy is leveraged to help reduce the carbon footprint of our operations and solutions. Our innovations and products generally work with prior iterations, and our solutions can adapt to changing needs. We believe our projects help reduce the wastefulness present in conventional construction methods because our clients obtain customized spaces that can be more easily reconfigured over time and with higher recycled or recyclable content.

 In 2021, we released our first Environment, Social and Governance (ESG) report outlining our commitment to sustainability and the environment, as well as providing full disclosure of our current environmental and sustainability impacts. As we continue to work towards the goals set forth in our ESG report and advance our efforts by setting new goals, we continue to better our business and solutions for our clients.

Government Regulations

The operation of our business is subject to stringent and complex laws and regulations pertaining to health, safety, and the environment. As an owner or operator of various manufacturing facilities, we must comply with these laws and regulations at the federal, state, provincial and local levels in both the United States and Canada. Failure to comply with environmental laws and regulations may trigger a variety of administrative, civil, or criminal enforcement actions, including the assessment of monetary penalties, the imposition of investigative or remedial requirements, or the issuance of orders limiting current or future operations. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances or industrial wastes have been mismanaged or otherwise released.

While we do not believe that compliance with federal, state, provincial, or local environmental laws and regulations will have a material adverse effect on our business, financial position or results of operations, we cannot provide any assurances that future events, such as changes in existing laws or regulations, the promulgation of new laws or regulations, or the development or discovery of new facts or conditions related to our operations, will not cause us to incur significant costs.

Legal and Regulatory Proceedings

We may be involved from time to time in various lawsuits, claims, investigations, and other legal matters that arise in the ordinary course of business, including matters involving our products, intellectual property, relationships with suppliers, relationships with DistributionConstruction Partners, relationships with competitors, employees, and other matters. We may, for example, be a party to various litigation matters that involve product liability, tort liability, and claims under other allegations, including claims from our employees either individually or collectively. We do not believe that any current claims, individually or in the aggregate, will have a material

adverse effect on our financial condition, liquidity or results of operations. For additional information regarding our current legal proceedings, see Item 3. “Legal Proceedings.”

Implications of Being an Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act enacted in April 2012. Certain specified reduced reporting and other regulatory requirements are available to public companies that are emerging growth companies. These provisions include:

We will continue to be an emerging growth company until the earliest of:

We have elected to take advantage of certain of the reduced disclosure obligations in this Annual Report and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than what you might receive from other public reporting companies in which you hold equity interests. However, we have irrevocably elected not to avail ourselves of the extended transition period for complying with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We expect to lose emerging growth company status by December 31, 2024.

Human Capital Resources

As ofat December 31, 2021,2023, DIRTT employed 1002879 employees, 99% full time, 1% part time. We had 989874 full-time employees consisting of 588592 employees in production, 110100 employees in sales and marketing, 10073 employees in technology and development, 11248 employees in operations support, and 7961 general and administrative employees. At year-end, approximately 56%45% of our workforce are salaried employees and approximately 44%55% are compensated on an hourly basis. As ofat December 31, 2021,2023, approximately 33%24% of our workforce was based in the United States, and approximately 67%76% was based in Canada. Our 20212023 hiring efforts were directed towards both our manufacturing and non- manufacturingnon-manufacturing functions. This reflects the build out of our commercial organization, accounting for 20% of our new hires, and streamlining our operations space, accounting for 59% of our hiring activities. The Company’s recent gender diversity data shows that 28% (202025% (2022 – 28%25%) of our employees are female company wide. In 20212023, we hired 137174 employees, with 36%27% of new employees being female. On February 22, 2022, we announced an intended reduction of our salaried headcount by approximately 18%.

Diversity & Inclusion

DIRTT recognizes the importance of progressing conversations and initiatives around diversity and inclusion. “Grow through diversity” is one of our core values. Our strategy encompasses leadership training around key topics related to unconscious bias, allyship, and the value of attracting and retaining a diverse and inclusive organization. The strategy further focuses on the establishment and deployment of learning streams, mentoring circles, and incorporation of inclusive language into our offer packages and benefit materials. Our efforts begin at the early stages of the employee life cycle, where diversity candidates are highlighted and

presented to hiring managers for review. We seek to hire based on talent, skill, capability needs, and fit. DIRTT has also incorporated diversity into various internal programs including succession planning and risk profiles.

Culture & Engagement

DIRTT has put measures in place to assess and enhance the level of engagement and satisfaction of our employees. Specific activities include the deployment of a performance management tool catered to drive discussions around team goals, performance and development opportunities, and greater transparency around policy and procedures tied to cost and risk mitigation.

In the first quarter of 2021,2023, we introducedconducted two employee engagement surveys through a leadership development program with a total of 146 employees registeredplatform called Employee Voice that focuses on six core leadership competencies; feedback, communication, conflict, emotional intelligence, leadership presence and navigating change.

In the fourth quarter of 2021, we deployed our company-wide engagement surveysurveys focused on core themes of meaningful work, supportive management, positive work environment, growth opportunity, trust in leadershipworkplace civility, communication, work-life balance, retention, job satisfaction, employee engagement and mental health awareness.diversity and inclusion. Targeted initiatives are being put in place companywide to assess the progression of themes from the survey on overall employee engagement and experience.

Additional initiatives that we attribute to the progression of culture and engagement include launching learning and development opportunities, enhanced communication platforms, employee recognition programs, a company-wide philanthropic organization, and a strong focus on virtual social events to further support engagement and connection throughout the COVID-19 pandemic.of remote employees.

Connecting to our community is a critical piece of the DIRTT story. We continue to focus on establishing a stronger community investment program that demonstrates our drive to put community at the center of the business. This involves developing a strategy, carving out a roadmap of initiatives, and establishing a committee of employees across the organization. As part of our strategy, we are focusing our efforts on establishing meaningful engagement opportunities, creating inclusive giving campaigns, driving sustainable impact, and enabling our employees to connect on philanthropic efforts. In the fourth quarter of 2021,2023, we successfully completed our holiday giving campaign which was a coordinated in-person and virtual effort in support of food banks across North America, focusing on the cities in which we operate. The support for this campaign helped to reconnect DIRTT employees’ desire to give back with tangible outcomes for their communities. We take measures to address the mental health of our employees through a variety of company-wide initiatives.

Our core commitment to organizational safety resulted in a Total Recordable Incident Frequency (“TRIF”)(TRIF) of 0.50.4 in 2021 and 2020,2023, more than 88%92% below the industry average and a significant improvement from 4.9 TRIF in 2019. Our enhanced health and safety protocols have been effective thus far in mitigating the spread of COVID-19 infections within our facilities and have helped us to avoid any material production disruptions.average.

We use a range of compensation incentives which vary by role, including annual variable compensation determined based on a combination of achieving team objectives and financial targets for the Company; quarterly bonuses for our manufacturing personnel paid on adherence to targets related to safety, quality, delivery, inventory and productivity; and commissions based on sales. We also use various forms of stock-based compensation as a retention tool and to further align employee interests with the interests of our shareholders. We monitor our retention by way of voluntary turnover, which was 15%14% in 2021.

In response to the COVID-19 pandemic, DIRTT established a business continuity and response committee to develop robust company-wide COVID-19 protocols and guidelines. Our COVID protocols encompass our employees, visitors and our contractors. The committee has prepared easily accessible COVID-19 guidelines for all areas of the business, including manufacturing, travel, client tours and day-to-day operations. In addition, we have established protocols for reporting and contact tracing, and we have a mandate to limit access to our facilities, offices and other spaces to only essential personnel to further minimize the risk of exposure to COVID-19. DIRTT provides financial support to our employees who test positive or have been identified as a close contact. To ensure that our teams are healthy and safe, we have implemented regular fogging (sanitization) at all our manufacturing facilities and our head office. We have also implemented enhanced cleaning protocols (including the use of stronger chemical concentrations with a focus on high touch areas), increased signage, shift rotations in cafeterias, limited headcounts in conference and meeting rooms, and work-from-home guidelines and other best practices. We provide all our employees, visitors, and contractors with the required COVID-19 controls including personal protective equipment.

In addition, we have taken measures to address the mental health of our employees through a variety of company-wide initiatives. We have established a safety champions committee responsible for ensuring any employee or visitor coming into our spaces is briefed on our COVID-19 protocols and guidelines. Lastly, we have implemented an app for reserving workspaces to help

our employees adhere to our social distancing protocols, provide for greater support of contact tracing and ensure we adhere to capacity levels that will help us maintain safety protocols related to COVID-19.2023.

None of our employees are covered by collective bargaining agreements. We have never experienced labor-related work stoppages or strikes, and we believe we currently have a positive relationship with our employees.

Investing in our common shares involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Annual Report, including our consolidated financial statements and the related notes and Part II, Item 7. entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in any documents incorporated in this Annual Report by reference, before deciding whether to invest in our common shares. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our common shares could decline, and you may lose all or part of your investment. Although we have discussed all known material risks, the risks described below are not the only ones that we may face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair our business operations. Certain statements below are forward-looking statements. See also “Special Note Regarding Forward-Looking Statements” in this Annual Report.

Risks Related to Our Business and Industry

OurWe are under the leadership of a reconstituted Board of Directors who are in the process of implementing a variety of operational, organizational, cultural and other changes to our business, financial condition, results of operations and growth could be harmed by the effects of the COVID-19 pandemic and related government measures.

The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption. The extent to which COVID-19, or other public health pandemics or epidemics, impact our employees, operations, customers, suppliers and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scopeachieve some or all of the COVID-19 pandemic (and whetheranticipated benefits of this transformation plan.

Our Board of Directors was entirely reconstituted at our annual and special meeting of shareholders held on April 26, 2022 and, since that meeting, there has been significant turnover in the Company’s leadership. In addition to overseeing the changes to DIRTT’s leadership, the reconstituted Board of Directors has undertaken an extensive review of DIRTT’s operations, a process which is still ongoing (see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook”), and are in the process of implementing a resurgence or multiple resurgencesvariety of operational, organizational, cultural and other changes to our business, including plans to meet pipeline demand and expand revenues. The timely integration of senior management will be critical in the successful implementation of the virusBoard of Directors’ plans. We may not be successful in achieving some or all of the future, including as a resultanticipated benefits of strain variations); the actions taken by governments and public health officials in response to the pandemic; the availability and effectiveness of vaccines, approvals thereof and the speed of vaccine distribution; the impact on construction activity (including related supply chain and labor shortages and their effects on construction schedules and timing); the effect on our customers’ demand for our DIRTT solutions; our ability to manufacture and sell our products; and the ability of our customers to pay for our products. For example, while many of our products support life sustaining activities and essential construction, we, and certain of our customers or suppliers, may be impacted by state or provincial actions, orders and policies regarding the COVID-19 pandemic, including temporary closures of non-life sustaining businesses, shelter-in-place orders, and travel, social distancing and quarantine policies, the implementation and enforcement ofthese plans, which may vary by individual jurisdictions. On September 9, 2021, President Biden issued executive orders establishing, among other things, new vaccination requirements applicable to U.S. federal workers and contractors, large employers and healthcare workers. Subject to limited exceptions, the executive order requires U.S. employees of federal contractors to be fully vaccinated against COVID-19 by January 18, 2022. In January 2022, the U.S. District Court for the Southern District of Georgia issued a ruling enjoining the vaccine mandate portion of the executive order. As a federal contractor, we are subject to the executive order and, despite the injunction, have implemented mandatory vaccination rules for all U.S. employees and subcontractors to satisfy the requirements by January 18, 2022. Further, additional vaccine mandates may be announced in jurisdictions in which our businesses operate. Our implementation of these rules may result in attrition, including attrition of skilled labor, and difficulty securing future labor needs. Additionally, our implementation of these rules may impact our ability to maintain satisfactory arrangements with third-party vendors and service providers, to the extent they are subject to vaccination requirements and they or their employees are unable or unwilling to comply. Any of the foregoing events could have a materialan adverse effect on our business, liquidity or results of operations.

The shareholder meeting requisition notice delivered by 22NW Fund, LP (“22NW Fund”) could cause us to incur substantial costs, disrupt ourfrom operations and strategy, divert the board’s and management’s attention, or have other material adverse effects on us.financial condition.

On November 17, 2021, 22NW Fund took steps to requisition a special meetingCertain elements of the Company’s shareholders in order to remove six of the independent directors of the Company and replace them with hand-picked nominees of Mr. Aron English of 22NW Fund.The intentions of 22NW FundDIRTT’s administrative systems may not be aligned witheffective.

DIRTT has identified the interests of ourneed to upgrade its inventory management and cost accounting systems at some point in the future to enable scalable growth, and other shareholders. Respondinginformation technology investments may be required in the future. The Company is currently unable to estimate the costs and timeline related to such actions mayupgrades. However, the success, in whole or in part, of such investments cannot be costly and time-consuming, disrupt our operations and strategy, and divert the attention of the board of directors (the “Board”) and our management team from running our business, executing our strategic plan and maximizing performance for our shareholders. In addition, the uncertainty arising from the shareholder requisition could lead to the perception of a change in the direction of our

business or instability with our Distribution Partners, clients, suppliers or customers, which may be exploited by our competitors, and may result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel and business partners, any of which could materially and adversely affect our business and operating results. Moreover, the results of the requisition could impact the strategic direction ofguaranteed. If the Company in a manner that is adversedoes not successfully or timely upgrade its inventory management and cost accounting systems, it may experience unforeseen challenges to our businessits inventory and operating results.pricing strategies.

We may not be successful in implementing our strategic plan or managing growth.growth

In November 2019, we unveiled a four-year strategic plan to scale our business based on three key pillars: commercial execution, manufacturing excellence and innovation. We have implemented several steps in furtherance of our strategic plan, including improvements in our commercial function and enhancements to our product suite and software platform.  

While we are confident in our strategy, we no longer believe that the financial targets articulated in November 2019 will be achieved by the end of 2023.Implementation of our strategy will require maturity of 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 strategic 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, including the COVID-19 pandemic and its negative impact on construction activities as a whole. However, we remain confident that DIRTT’s value proposition will be as or even more relevant in the post-pandemic world.control.

Our strategy 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 DistributionConstruction 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.

Our industry is highly competitive, and we may not be successful in educating potential clients about the benefits of our innovative and unique approach to interior construction as compared to traditionalconventional 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, and modular systems, and commercial furniture manufacturers. 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 DistributionConstruction Partners makes us well-positioned in the market, increasing competition could make it difficult to secure new projects at acceptable operating margins.

Our products are unique and offer an alternative to traditionalconventional construction techniques. Although offsite construction methods are gaining market acceptance, this still represents only a fraction of all construction methods and the overall construction market. Our ability to grow and increase market share depends, in part, on our success in continuing to increase demand for modular construction methods and products as an alternative to more traditional construction methods. While we intend to follow a strategy of innovative product development and strategic marketing efforts to enhance our position, there is no assurance that our solutions will attain a degree of market acceptance sufficient for sustained profitable operations. Failure to compete effectively by, among other things, meeting consumer preferences, developing and marketing innovative solutions, maintaining strong client service and distribution relationships, growing market share, and expanding our solutions capabilities could have a material adverse effect on our liquidity, financial condition, or results of operations.

Our co-founders’ and former co-founders’executives' competitive behavior against us could have an adverse effect on our business, financial condition and results of operations.

Our co-founders and former executives, Mogens Smed and Barrie Loberg, have started an interior construction and manufacturing company that we believe competes with us. They, along with a number of our former employees and DistributionConstruction Partners who have joined their company, have in-depth knowledge about our business, including our customers, employees, products and prospects, and we may be adversely affected by increased competition arising out of this business venture. We are engaged in litigation with Messrs. Smed and Loberg, entities with which they are involved, and other individuals relating to, among other things, enforcement of non-competition and non-solicitation obligations, alleged patent infringement, and alleged misappropriation of proprietary information by them or by us. See Note 18 to the Consolidated Financial Statements. If Messrs. Smed and Loberg further engage in a competitive business against us or if we are not successful in litigation, our business, financial condition and results of operations may be adversely affected. See Item 3. “Legal Proceedings.”

We depend heavily on our network of DistributionConstruction Partners, and the loss or inattention of our DistributionConstruction Partners, or the failure of our DistributionConstruction Partners to meet their obligations to us, could materially and adversely affect our business, financial condition and results of operations.

We currently do not engage in many direct sales projects and rely almost exclusively on our network of DistributionConstruction Partners to promote brand awareness, sell and market DIRTT Solutions, and provide design, installation, distribution and other services to clients on each project. While we are not dependent on any single DistributionConstruction Partner, sales generated by approximately 10% of our DistributionConstruction Partners comprised approximately 40%37% of our total revenues for 2021 (20202023 (2022 – 40%39%) with one Construction partner making up approximately 12% of total revenues (2022 - 7%). The loss of any top performing DistributionConstruction 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 DistributionConstruction Partner relationship is established, which would require significant time and resources.resources, given DIRTT is typically a standalone line of business in their portfolio.

Although we provide our DistributionConstruction Partners with training, education, and support, they may be unable to successfully sell our DIRTT Solutions, execute projects or manage client experiences and relationships. In addition, our DistributionConstruction Partners and their clients may face financial difficulties or may become insolvent, which could result in the delay or cancellation of their plans to purchase DIRTT Solutions or lead to our inability to obtain payment of accounts receivable that they may owe. If we are unable to maintain a successful DistributionConstruction Partner network, our business, financial condition, and results of operations could be materially and adversely affected.

Increasing attention to environmental, social and governance (ESG) matters and conservation measures may adversely impact our or our customers’ business.

Increasing attention to, and societal expectations on companies to address, environmental and social impacts and investor, regulatory and societal expectations regarding voluntary and mandatory ESG-related disclosures may result in increased costs, reduced demand for our customers’ products, reduced profits, increased investigations and litigation, negative impacts on our stock price and reduced access to capital markets.

Moreover, while we may publish voluntary disclosures from time to time, certain statements in those voluntary disclosures may be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith. Mandatory ESG-related disclosure is also emerging as an area where we may be, or may become, subject to required disclosures in certain jurisdictions, and any such mandatory disclosures may similarly necessitate the use of hypothetical, projected or estimated data, some of which is not controlled by us and is inherently subject to imprecision. Disclosures reliant upon such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring and reporting on many ESG matters. Further, we have announced various voluntary ESG targets in our annual Environmental, Social, and Governance (ESG) report outlining our commitments to sustainability, the environment, health and safety, and diversity and inclusion. However, we cannot guarantee that we will be able to meet such voluntary targets in the manner or on such a timeline as initially contemplated, including, but not limited to, as a result of unforeseen costs or technical difficulties associated with achieving such results. Any actual or perceived failure to meet our ESG targets could adversely impact our reputation and our customers’ image of our products and result in the loss of business or impede our growth initiatives. Adverse publicity regarding ESG issues and similar matters, whether or not justified, could have a negative impact on our reputation and may result in the loss of customers and our inability to secure new customer relationships. Further, our customers may be more selective for products that meet their ESG goals or standards, such as increasing demand for goods that result in lower emissions, and our products could be less competitive if we are unable to meet these standards. Despite our efforts to adapt to and address these concerns, our efforts may be insufficient. Additionally, the implementation of these initiatives may increase our costs. It is difficult to predict how our efforts with respect to social and sustainability matters will be evaluated by current and prospective investors or by our customers or business partners. Despite our voluntary actions, we may receive pressure from certain investors, lenders, or other groups to adopt more aggressive ESG-related goals or policies, but we cannot guarantee that we will be able to implement such goals because of potential costs or technical or operational obstacles.

Furthermore, our reputation, as well as our stakeholder relationships, could be adversely impacted as a result of stakeholder perceptions of statements made by us, our employees and executives, agents, or other third parties or public pressures from investors or policy groups to change our policies. Such statements with respect to ESG matters are becoming increasingly subject to heightened scrutiny from public and governmental authorities related to the risk of potential “greenwashing,” i.e., misleading information or false claims overstating potential ESG benefits. As a result, we may face increased litigation risks from private parties and governmental authorities related to our ESG efforts. Moreover, any alleged claims of greenwashing against us or others in our industry may lead to negative sentiment. To the extent that we are unable to respond timely and appropriately to any negative publicity, our reputation could be harmed. Damage to our overall reputation could have a negative impact on our financial results and require additional resources to rebuild our reputation. Additionally, to the extent ESG matters negatively impact our reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations. Such ESG matters may also impact our customers, which may result in reduced demand for certain of our products and services.

Risks Relating to Our Products and Software

We may be unsuccessful in designing, introducing, or selling new innovative solutions, solution features, or software.software, which also may cause us to become less competitive.

As our competitors and others develop new technologies in the future, we may be placed at a competitive disadvantage if we fail to keep pace with technological advancements within our industry. Our future success depends in part on our continuing ability to promote and demonstrate the value proposition of DIRTT Solutions, as well as our ability to develop and sell new innovative solutions, solution features, or software that differentiate our solutions and achieve market acceptance in a timely and cost-effective manner. We incur significant costs associated with the investment in our research and development in furtherance of our strategy that may not result in increased revenue or demand for DIRTT Solutions and that could negatively affect our results of operations. Rapidly changing technology, evolving regulatory and industry standards, and changing consumer trends, demands, and requirements require us to continuously innovate and develop new, high-quality solutions, solutions features and software. Additionally, such rapid technological changes, standards and preferences could render the complex and proprietary technology of our software and solutions obsolete. We may alsonot be unableable to successfully address these developmentsimplement new technologies on a timely basis or at all.an acceptable cost. New solutions, solution features, or software may also be less successful than we anticipated, and such offerings may fail to achieve market acceptance. If we fail to respond quickly and cost-effectively to a changing market and changing consumer preferences, our competitive position, financial condition, and results of operations could be materiallyadversely affected. Outside of the ongoing evaluation of new construction market sectors, we are considering various partnerships that aide into the advancement and adversely affected.development of the construction industry. This includes diversifying our current prefabricated offerings, aligning with sourcing companies, and establishing initiatives with other companies embracing the mindset of change. While these actions strengthen our stakes in the prefabrication market, we may be unsuccessful in generating revenue through these initiatives.

Our software and products may have design defects, deficiencies, or other unknown risks, and we may incur additional costs to fix any such defects, deficiencies, or other risks, or be subject to warranty or product liability claims.

Our software and solutions are complex and must meet both the technical requirements of our clients and applicable building codes and regulations. Our solutions may contain undetected errors or design and manufacturing defects, and our software may experience quality or reliability problems, or contain bugs or other defects. Software defects may also cause errors in our manufacturing or miscalculations in ordering and pricing, andwhich could lead us to incur losses and perhaps lose market share to competitors. Product or software defects could cause us to incur warranty costs, product liability costs, and repair and remediation costs. Although we maintain warranty reserves based on production, historical claims, and estimates, future warranty claims may exceed this amount.our reserves. Similarly, while we maintain insurance of the types and amounts we consider commercially prudent and consistent within view of industry practice, such insurance coverage may not be sufficient to protect us against substantial claims. Such claims cancould be expensive to defend, could divert resources, including the attention of management and other personnel for significant periods, and regardless of the ultimate outcome and could result in negative publicity. Increased costs to address product warranty claims or to defend against product liability claims, may result in increased expenses and adversely affect our financial condition andor results of operations.

We are subject to fluctuations in the prices of raw materials and commodities, which could adversely affect our liquidity, operating margins and financial condition.

We purchase raw materials, including aluminum, glass, and wood, from a number of local and global suppliers. The costs of these commodities can fluctuate due to changes in global supply and demand, inflation, speculation in commodities futures, and changes in tariffs or trade barriers, which can also interrupt supply. In addition, we have not historically entered into long-term agreements with vendors and may be exposed to short-term and long-term price fluctuations as a result.

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, and it is unclear whether such price increases will be temporary or permanent in nature. Since 2018,From time to time, the U.S. government has imposed 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. In 2021 and 2020,2023, 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.

We rely on a limited number of outside suppliers for certain key components and materials, and failure or delay in obtaining the necessary components or materials could delay or prevent the manufacturing or distribution of our DIRTT Solutions.

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, 2021,2023, (i) one supplier accounted for approximately 59%61% of our aluminum supply, with threerespectively, and two additional suppliers providingprovided approximately 14% each,19% and 18%, respectively (ii) two suppliers accounted for approximately 58%46% and 36%44% of our wood supply, and(iii) one supplier accounted for approximately 44%100% of our paint and powder supply, and (iv) one supplier accounted for approximately 42% of our hardware supply.

While we believe there are other vendors for most of our key requirements, certain materials and components meeting our quality standards are available only through a limited number of vendors. If we are required to obtain another source for these materials or components, we may not be able to obtain pricing on as favorable terms or on terms comparable to our competitors. Any failure or delay in obtaining the necessary raw materials or components in the quantities and quality required may result in increased costs and delays in manufacturing or distributing our products, which could have a material adverse effect on our liquidity, financial condition, or results of operations. A vendor may also choose, subject to existing contracts, to modify its relationship with us due to general economic concerns or specific concerns relating to that vendor or us, at any time. These modifications might include additional requirements from our suppliers that we provide them additional security in the form of prepayments or with letters of credit. Any significant change in the terms that we have with our key suppliers could materially and adversely affect our liquidity, financial condition, or results of operations.

Risks Relating to Market Conditions

Global economic, political and social conditions and financial markets, such as the Ukraine and the Israel-Hamas war, may impact our ability to do business and adversely affect our liquidity, financial condition, and results of operations.

Our industry is cyclical and highly sensitive to macroeconomic 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 trade barriers can impact the demand for our products. Financial difficulties experienced by our suppliers, DistributionConstruction 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. Any general economic, political, or social conditions that may contribute to financial difficulties experienced by us, our suppliers, DistributionConstruction Partners, or clients may adversely affect our liquidity, financial condition and results of operations.

We are exposed to currency exchange rates, interest rates, tax rates, and other fluctuations, including those resulting from changes in laws.

Our revenues and expenses are collected and paid in different currencies, including the U.S. dollar and Canadian dollar. Fluctuations in the relative values of any such currency expose us to foreign exchange risk and could have a material and adverse effect on our cash flows, revenues and results of operations. We also have currency exchange exposure to the extent of a mismatch between foreign-currency denominated revenues and expenditures – in particular, where U.S. dollar revenues do not equal U.S. dollar expenditures. We are not currently using exchange rate derivatives to manage currency exchange rate risks. There are currently no significant restrictions on the repatriation of capital and distribution of earnings to foreign entities from any of the jurisdictions in which we operate. There can be no assurance that such restrictions will not be imposed in the future.

Most of DIRTT’s debt is on fixed interest rates. The Second 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 Second Extended RBC Facility.

Compliance with new or amended tax laws and regulations could have a material adverse effect on our business. We base our tax positions upon our understanding of the tax laws (including, applicable tax treaties) of the countries in which we have assets or conduct business activities. However, our tax positions are subject to review and possible challenges by taxing authorities, including as to the computation and allocation of income, transfer pricing and other complex issues. This includes adverse changes to the manner in which Canada, the United States and other countries tax local and foreign corporations and interpret or change their tax laws and applicable tax treaties, including in light of the increased focus by the U.S. Congress, the Canadian government, the OrganisationOrganization for Economic Co-operation and Development and other government agencies in jurisdictions where we do business on issues related to the taxation of multinational corporations. We cannot determine in advance the extent to which such jurisdictions may amend their tax laws, review our tax positions, or assess additional taxes or interest and penalties on such taxes. In addition, our effective tax rate may be increased by changes in the valuation of deferred tax assets and liabilities, our cash management strategies, local tax rates, or interpretations of tax laws.

Risks Relating to Intellectual Property and Information Security

We may be unable to maintain, protect or enforce our intellectual property adequately from infringement by third parties,rights, and we may also be subject to claims that we infringe onaccused of infringing intellectual property rights of others.

We rely on a combination of contract, copyright, patent, trademark and trade secret laws, confidentiality procedures and other measures to protect our intellectual property. There can beis no assuranceguarantee that our various contractual rights, patents, copyrights, or trademarks and trade secrets will offer sufficient protection of our products and services or prevent misappropriation of our proprietary rights in our products, software or processes. We also may not be granted patents, copyrights registrations or trademarkstrademark registrations on our pending or proposed applications, and granted applications may be challenged, invalidated or circumvented in the future. Despite our best efforts to maintain and enforce our intellectual property, monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken may not be sufficient to effectively prevent third parties from infringing, misappropriating, diluting or otherwise violating our intellectual property rights. Despite our precautions, it may be possible for unauthorized third parties to copy our applications and use information that we regard as proprietary to create products or services that compete with ours. We enforce our intellectual property rights where appropriate, but the cost of doing so may be substantial and could outweigh the potential benefits, and we may be unsuccessful in our enforcement efforts. Failure to protect or maintain the proprietary nature of our intellectual property could adversely affect our ability to sell original products and materially and adversely affect our business, financial condition and results of operations.

Additionally, our competitors or other third parties may own, or claim to own, intellectual property in technology areas relating to our technology, including ICE Software, manufacturing processes, and DIRTT Solutions. Although we do not believe that our software or DIRTT Solutions infringe onor misappropriate the proprietary rights of any third parties, litigation related to such claims, may arise regarding infringementwhether or invalidity claims (or claims for indemnification resulting from infringement claims). Such assertions or prosecutions, regardless of their merit,not meritorious, may subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from assembling certain of our products or licensing certain of our products,intellectual property, subject us to injunctions restricting our sale of products or services, cause severe disruptions to our operations or the marketplaces in which we compete, or require us to satisfy indemnification commitments with our clients, including contractual provisions under various license arrangements. A damages award against us could include an award of royalties or lost profits and, if thea court finds willful infringement, treble damages and attorneys’ fees. This may cause us to expend significant costs and resources, and could adversely affect our business, financial condition or results of operations.

If we are unable to protect our information technology systems against data corruption, cyber-based attacks or network security breaches, our operations could be disrupted and our reputation and profitability could be negatively affected.

In the ordinary course of our business, we generate, collect and store confidential and proprietary information, including intellectual property, business information, and businessother 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. WeAlthough we have experienced cyber-based attacks, but to our knowledge, we have not experienced any material disruptions or breaches of our information technology systems or platforms. However, 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 data security breaches, misuse of data, cyber-attacks, acts of vandalism, computer viruses, misplaced or lost data, programmingcybersecurity risks or human errors or other similar events.error. Any security breach involving the misappropriation,misuse, loss or other unauthorized disclosure of confidential information of a client, DistributionConstruction Partner, employee, supplier or Company information could result in financial losses, exposure to litigation risks and liability (including regulatory liability), damage to our reputation, and disruptions indisruption to our operations, all of which could have a material adverse effect on our business, financial condition andor results of operations. While we maintain cybersecurity insurance of the types and amounts, we consider it commercially prudent andcybersecurity insurance consistent with industry practice, such insurance may not be sufficient to cover all losses relating to data loss or an information security breach.

The regulatory environment related to information security, data collection and use, and privacy is increasingly rigorous, with newcomplex and frequently changing requirements,continuously evolving and compliance with thoselaws, rules, regulations or other requirements could result in additional costs. The costs associated with information security, such as increased investment in technology, the costs of compliance with privacy laws, and costs incurred to prevent or remediate information security breaches, could be substantial and adversely affect our business. A significant compromise of sensitive employee, DistributionConstruction Partner, client or supplier data in our possession could result in legal damages and regulatory penalties. In addition, the costs of defending such actions, responding to complaints, or remediating breaches could be material.

Damage to our information technology and software systems could impair our ability to effectively provide DIRTT Solutions and adversely affect our reputation, relationships with clients, financial condition andor results of operations.

Our information technology and software networks and systems, which include the processing, transmission and storage of information, are integrated with our manufacturing processes andare essential to our business operations. These systems are vulnerable to, among other things, damage or interruption from power outages, network failures or natural disasters, loss or corruption of data, human error, employee misconduct and difficulties associated with upgrades, installations of major software or hardware, and integration with new systems. While we maintain retention backups to geo-diverse digital and physical locations and have a recovery data center, the data center and other protective measures we take could prove to be inadequate. Any disruption in our systems or unauthorized disclosure of information could result in delayed manufacturing and delivery of our DIRTT Solutions, legal claims, a

loss of intellectual property and a disruption in operations, all of which could adversely affect our reputation, relationships with clients, financial condition or results of operations.

Our core intellectual property in the ICE 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 Code, including a 50% interest in the patent rights that relate to the Applicable ICE Code. As part of AWI’s purchase of the Applicable ICE Code, AWI must comply with contractual obligations designed to protect the Applicable ICE 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 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 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 Code to third parties or in protecting our intellectual property rights in the Applicable ICE Code. Any unauthorized access to the Applicable ICE 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.

Risks Relating to Government Regulations and Enforcement

We may incur significant costs complying with environmental, health and safety laws and related claims, and failure to comply with these laws and regulations could expose us to significant liabilities, which could materially adversely affect our business and results of operations.

We are subject to laws, regulations, and other requirements with respect to workers’ health and safety and environmental matters in the United States, Canada and other countries in which we operate. Environmental laws and regulations impose, among other things, restrictions, liabilities and obligations in connection with the production, processing, preparation, handling, storage, transportation, disposal and management of wastes and other substances, and the prevention and remediation of environmental effects. Health and safety laws and regulations impose, among other things, requirements designed to ensure the protection of workers. New or more stringent laws and regulations, including those relating to climate change and greenhouse gas emissions, may be adopted in the future and could impact our facilities, raw material suppliers, the transportation and distribution of our solutions, and our clients, which could reduce demand for our solutions or cause us to incur additional operating costs. In addition, certain foreign laws and regulations may affect our ability to export products outside of, or import products into, the United States or Canada. Failure to comply with these requirements may result in civil or criminal liability, damages and fines, and our operations could be curtailed, suspended or shutdown and our reputation, ability to attract employees, and results of operations could be adversely affected. Private lawsuits, including claims for remediation of contamination, personal injury or property damage, or actions by regional, national, state and local regulatory agencies, including enforcement or cost-recovery actions, may materially increase our costs.

These factors may materially increase the amount we must invest to bring our processes into compliance with legal requirements and impose additional expenses on our operations. In addition, any changes in these laws or regulations or changes in our manufacturing processes may require us to request changes to our existing permits or obtain new permits. We may also be unable to obtain or maintain, from time to time, all required environmental regulatory approvals. A delay in obtaining any required environmental regulatory approvals or the failure to obtain and comply with such approvals could materially adversely affect our business and results of operations.

Risks Relating to Financial Results

We have had negative cash flow from operating activities.

We had negative cash flow from operating activities for prior years, including the years ended December 31, 2022 and 2021. Continued negative operating cash flow may compromise our ability to make interest and principal payments on the convertible unsecured subordinated debentures issued on January 25, 2021 and December 1, 2021 (collectively, the “Debentures”) on a timely basis, or at all, and to execute our strategic 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 $14.8 million in cash provided from operating activities for the year ended December 31, 2023, 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 undertaken various actions to improve our cash flow and balance sheet in the short term, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources”. Although we anticipate these actions will strengthen our balance sheet and liquidity position, 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 experienced a history of losses, and despite certain periods of profitability in recent years, we may not be able to generate sufficient revenue to achieve and sustain profitability.

We have incurred significant losses since commencing business. We incurred net losses after tax of $53.7$14.6 million, $55.0 million and $11.3$53.7 million for the years ended December 31, 2023, 2022 and 2021, and 2020, respectively. AtAs at December 31, 2021,2023, we had an accumulated deficit of $111.3$180.9 million. These 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 a significantan increase in construction activity as the pandemic impacts abate.abated. Past results may not be indicative of our future performance, and there can be no assurance that we will generate net income in the future.

We have experienced, and may experience in the future, quarterly and yearly fluctuations in results of operations and financial condition.

Our results of operations and financial condition may continue to fluctuate from one quarter or year to another due to a number of factors, some of which are outside of our control. For example, we usually experience seasonal slowdowns in the first and fourth quarters of each calendar year, leading to stronger sales in the second half of the year versus the first half, and weather conditions may also delay delivery and installation on some projects. Furthermore, sales that we anticipate in one quarter may be pushed into another quarter, affecting both quarters’ results, and our actual or projected results of operations may fail to match our past performance. These events could in turn cause the market price of our common shares to fluctuate. In particular, if our results of operations do not meet the expectations of securities analysts or investors, who may derive their expectations by extrapolating data from recent historical results of operations, the market price of our common shares will likely decline. Due to our high fixed manufacturing costs and operating expenses, quarterly volatility in sales volumes could result in periods of low operating cash flow and negatively affect our liquidity. Due to these risk factors, quarter-to-quarter or year-to-year comparisons of our results of operations may not be an indicator of future performance.

We have negative cash flow from operating activities.

We had negative cash flow from operating activities for the year ended December 31, 2021. Continued negative operating cash flow may compromise our ability to make interest and principal payments on the convertible unsecured subordinated debentures issued on January 25, 2021 and December 1, 2021 (collectively, the “Debentures”) on a timely basis, or at all, and to execute our

strategic plan. Until we are able to generate positive cash flow from operating activities, 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 anticipate we will have positive cash flow from operating activities in future periods, we cannot guarantee that such future cash flow will be sufficient or that a prolonged recovery from the COVID-19 pandemic, or other changes to our circumstances, will not necessitate additional financial resources to fund our operating activities.

In response to our negative cash flow from operations, on February 22, 2022, we commenced the process of closing our Phoenix aluminum manufacturing facility, shifting related manufacturing to both our Savannah and Calgary aluminum facilities. This is expected to result in a net headcount reduction of approximately 26 and annualized cost savings of approximately $2.4 million. Additionally, we announced our intention to eliminate approximately 18% of our salaried workforce including manufacturing and office positions which, along with other cost reduction initiatives, are expected to yield annualized savings of approximately $13.0. One-time costs associated with these workforce reductions and other costs savings measures are approximately $5 million.

We have recognized, and may recognize in the future, impairment charges for our goodwill and certain other non-current assets.

During the year ended December 31, 2021, we impaired the $1.4 million net carrying value of goodwill on our consolidated balance sheet. 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 goodwill or other intangiblenon-current assets. We annually testIn 2022 and 2021, we had an indicator of impairment for our goodwillnon-current assets. In 2023, we announced our intention to close the Rock Hill Facility, which resulted in an impairment charge on the reclassification of assets held for impairment during the fourth quarter of the calendar year. Based on our testing, the fair value of goodwill did not exceed the carrying value of its netuse to assets and, accordingly, the entire $1.4 million balance of goodwill was impaired asheld for sale. As at December 31, 2021.2023, we did not have any impairment indicators for our non-current assets. Any further charges relating to impairments could have a material adverse impact on our resultsconsolidated statement of operations in the period in which the impairment is recognized.

Risks Related to Our Common Shares and Corporate Structure

Our share price has been and may continue to be volatile, which could cause the value of your investment to decline.

Our common shares are currently listed on the TSX under the symbol “DRT” and are quoted on Nasdaqthe OTC under the symbol “DRTT.“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.

In the past, following periods of volatility in the trading price of a company’s securities, securities class action litigation has been brought against that company. If our share price is volatile, we may become the target of securities litigation in both the United States and Canada. Securities litigation could result in substantial costs and divert management’s attention and resources from our business and could have an adverse effect on our business, financial condition and results of operations.

Our common shares are quoted on the OTC’s Pink Tier, 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 Tier 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.

We are governed by the corporate laws of Alberta, Canada, which in some cases have a different effect on shareholders than the corporate laws of the United States.

We are governed by the ABCA and other relevant laws, which may affect the rights of shareholders differently than those of a company governed by the laws of a U.S. jurisdiction, and may, together with our charter documents, have the effect of delaying, deterring or discouraging another party from acquiring control of our company by means of a tender offer, a proxy contest or otherwise, or may affect the price an acquiring party would be willing to offer in such an instance. The material differences between the ABCA and Delaware General Corporation Law (“DGCL”), that may have the greatest such effect include, but are not limited to, the following: (i) for certain extraordinary corporate transactions (such as amalgamations or amendments to our articles), the ABCA generally requires the voting threshold to be a special resolution passed by not less than two-thirds of the votes cast by the shareholders who voted in respect of the resolution, whereas DGCL generally only requires a majority vote; and (ii) under the ABCA, registered holders or beneficial owners (as defined in the ABCA) of not less than 5% of our common shares in aggregate can requisition our directors to call a special meeting of shareholders, whereas such right does not exist under the DGCL. We cannot predict whether investors will find our company and our common shares less attractive because we are governed by the corporate laws of Alberta, Canada.

We will cease to be an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act enacted in April 2012, no later than December 31, 2024.

On December 31, 2024, we will cease to be an emerging growth company. Once we cease to be an emerging growth company, we may be required to have our independent registered public accounting firm attest to the effectiveness of our internal controls if no other exemptions to such requirements apply. Once it is required to do so, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, operated or reviewed. Compliance with these requirements may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

Additionally, if our independent registered public accounting firm is required to express an opinion on the effectiveness of our controls when we cease to be an emerging growth company, we may be unable to confirm that our internal control over financial reporting is effective. If that is the case, or if our independent registered public accounting firm is unable to express an unqualified opinion on the effectiveness of our controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our common shares to decline.

Our two largest shareholders are able to exercise a significant amount of control over the Company due to their significant ownership of our common shares, and their interests may conflict with or differ from the interests of our other shareholders.

As of February 16, 2024, 22NW Fund, LP and Aron English (collectively, the “22NW Group”) and WWT Opportunity #1 LLC (“WWT”) each owned 30.1% and 27.9% of our common shares, respectively, together beneficially owning approximately 58.0% of our common shares. Shaun Noll is the Managing Member of WWT. In addition to the common shares, the 22NW Group owns C$18,915,000 principal amount of our January Debentures (as defined below) and C$13,638,000 principal amount of our December Debentures (as defined below). Both the January Debentures and the December Debentures are convertible into common shares in accordance with the terms thereof. Thus, the 22NW Group could further increase its ownership in the Company through the conversion of its January Debentures or December Debentures into common shares.

So long as the 22NW Group and WWT and their respective affiliates continue to directly or indirectly own a significant amount of our common shares, they will be able to exercise a significant level of control over all matters requiring shareholder approval, including the election of directors, 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, affiliates of the 22NW Group and WWT also serve as directors on the Company’s Board of Directors. This control could have the effect of delaying or preventing a change of control of the Company or changes in management and would make the approval of certain transactions difficult or impossible without the support of these shareholders. Additionally, the perception that these shareholders would have the ability to control or significantly influence the Company could cause our common shares to be less attractive to certain investors or otherwise result in a decline in the trading price of our common shares. To the Company’s knowledge, the 22NW Group and the WWT are not acting in concert and do not constitute a “group” (as defined in Section 13(d)(3) of the Exchange Act).

Since the 22NW Group and WWT each exercise a significant amount of control over the Company due to their significant ownership of our common shares, if the 22NW Group and WWT were to disagree about key decisions with respect to the Company we may not be able to effectively address challenges facing our business, which could adversely affect our business, financial condition or results of operations.

Because we are a corporation incorporated in Alberta and some of our directors and officers are residents of Canada, it may be difficult for investors in the United States to enforce civil liabilities against us or our directors and officers based solely upon the

federal securities laws of the United States. Similarly, it may be difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.

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.

Similarly, some of our directors and officers are residents of countries other than Canada and all or a substantial portion of the assets of such persons are located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these non-Canadian residents. In addition, it may not be possible for Canadian investors to collect from these non-Canadian residents judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada. It may also be difficult for Canadian investors to succeed in a lawsuit in the United States, based solely on violations of federal, provincial or territorial securities laws.

General Risks

Difficulties in recruiting and retaining qualified officers or employees, or experiencing labor shortages or disruptions, could have a material adverse effect on our business and results of operations.

Our success will depend in part on our ability to attract, develop, and retain qualified personnel as needed. We are currently searching forhave undergone significant changes at a permanent replacement for our chief executive officer position; however, the marketplace for attracting senior executives is competitive, and there can be no assurances concerning the timing or outcome of our search for a new chief executive officer.management level during recent years as discussed elsewhere in this Annual Report. Although we anticipate smooth transitions, any changes to members of our senior management may be disruptive to our operations, including by diverting our Board’sBoard of Directors’ and management’s time and attention and a decline in employee morale. If there are any delays in this process, our business could be negatively impacted. We may be affected by labor shortages or disruptions, particularly in locations where we operate manufacturing facilities. If we fail to attract or retain qualified personnel, or experience labor shortages or disruptions, we could incur higher recruiting expenses, a loss of manufacturing capabilities, or inability to respond to significant increases in demand, all of which could have a material adverse effect on our business and results of operations.

We may have additional capital needs in the future and may not be able to obtain additional capital or financing on acceptable terms.

We plan to continually invest in business growth and may require additional funds to respond to business opportunities, such as expanding our sales and marketing activities, developing new software, acquiring complementary businesses, products or technology, and expanding or enhancing our manufacturing capabilities, including factory automation. To the extent that our existing capital is insufficient to meet our requirements, we may need to undertake equity or debt financings to secure additional funds. Further issuances of equity or convertible debt securities may result in significant share dilution. Additional new equity securities issued could have rights, preferences and privileges superior to those of our currently issued and outstanding common shares. Additional debt financings may involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. We cannot provide any assurance that sufficient debt or equity financing will be available for necessary or desirable expenditures or acquisitions, or to cover losses, and accordingly, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, and our liquidity could be materially and adversely affected.

We may engage in future mergers, acquisitions, agreements, consolidations, or other corporate transactions that could adversely affect our business, financial condition, and results of operations.

While we currently have no specific plans to acquire any businesses, we may, in the future, seek to expand our business and capabilities through acquiring compatible technology, products or businesses. Additionally, we may explore other corporate transactions, including mergers, agreements, consolidations, or joint ventures, that we believe may be beneficial to our business or further specific business goals. Acquisitions involve certain risks and uncertainties, including, among other things, (i) difficulty integrating the newly acquired businesses and operations in an efficient and cost-effective manner; (ii) inability to maintain relationships with key clients, vendors and other business partners of the acquired businesses; (iii) potential loss of key employees of the acquired businesses; (iv) exposure to litigation or other claims in connection with our assumption of certain claims and liabilities of the acquired businesses; (v) diversion of management’s time and focus; and (vi) possible write-offs or impairment charges related to the acquired businesses. The occurrence of any of these risks could adversely affect our business, financial condition, and results of operations.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

The security of our information technology systems and Company data is important to our operations and reputation. Accordingly, we are committed to identifying and managing cybersecurity risks. Our Cybersecurity team performs periodic risk assessments and, on a quarterly basis, provides to our Enterprise Risk Management Committee (“ERM”) information related to the Company’s cybersecurity, including statistics on attempted cyber-attacks, status of employee information security training awareness, and information on any security investigations. The Cybersecurity team advises the ERM of significant global cyber events that occurred during the quarter and whether they impacted DIRTT. The Cybersecurity team regularly discusses with the ERM the Company’s cybersecurity posture and whether the Company should implement additional protections and controls to assist the Company in protecting, responding to, or mitigating potential future cyber-attacks.

DIRTT has developed and implemented a cybersecurity risk management strategy which consists of 5 phases: Identify, Protect, Detect, Respond, and Recover. Each phase has multiple processes and technologies supporting those processes.

Identify

Identification processes at DIRTT include: system asset identification, threat identification, vulnerability identification and maintaining cybersecurity policies and standards.

Protect

Protection processes at DIRTT include: cyber awareness training, cyber awareness assessment (each employee is assigned a cybersecurity awareness grade calculated by a best in class cybersecurity vendor), implementation of identity and access controls, perimeter and endpoint security, annual vulnerability assessments and remediation, data encryption in transit, key vendor (third parties) control effectiveness assessment, and pre-implementation of software and systems cybersecurity assessments.

Detect

Detection processes at DIRTT include: automated event collection, collation, analysis, alerting and end user incident reporting.

Respond

Respond processes at DIRTT include: containment, communication, investigation and analysis, and long-term mitigation planning.

Recover

Recovery processes at DIRTT include: impact identification and analysis, system restoration, internal and external communications as deemed necessary.

DIRTT engages external assessors annually for specific controls, to assess and provide assurance on the health of DIRTT’s cybersecurity posture and controls.

None.

Our principal executive offices are located in Calgary, Alberta, where we lease approximately 73,000 square feet of office and manufacturing space. Our lease expires in September 2022 and we are in the process of negotiating a five-year extension.2027. Our principal manufacturing facilities are currently located in Calgary, Alberta; Rock Hill, South Carolina; and Savannah, Georgia. On February 22, 2022, we announced our intention to close the Phoenix manufacturing facility and DXCDXC. On September 27, 2023, we announced our intention to permanently close the Rock Hill Facility, as discussed in Item 1. “Business” in this Annual Report. As a result, in February 2022, we announced our intention to expand our tile manufacturing capabilities at the South Carolina Facility to include thermofoil through the relocation of existing underutilized equipment from the Calgary tile facility and back painted glass capabilities through the relocation of equipment from the Phoenix facility.

Our wall surfaces (which we call tiles) are manufactured in Calgary and Rock Hill,panels), casework and timber solutions are manufactured in Calgary, while aluminum, glass and power components are manufactured in Calgary and Savannah. In Calgary, we lease an aggregate of approximately 358,000400,000 square feet of manufacturing space across threefour facilities (excluding our principal offices), which leases expire in January 20232026, January 2027, September 2027, and January 2024.2034. In Phoenix, we lease approximately 130,000 square feet of manufacturing space across two facilities, which leases expire in March 2027 and we intend to sublease2027. We are currently utilizing the Phoenix manufacturingspace as a storage facility and DXC upon closure.have subleased the remaining premises. In Savannah, we lease approximately 81,000 square feet of manufacturing space, which lease expires in February 2029. In October 2019, we entered into a 15-yearfifteen-year lease, which DIRTT may extend for two additional 5 yearfive-year periods at its option, for a tilepanel factory of approximately 130,000 square feet in Rock Hill, South Carolina. Should the need arise, we have the expansion rights to lease an additional 130,000 square feet of space. We are pursuing options to sublease this area following the September 27, 2023, announcement of our intention to permanently close operations at this location and do not plan to exercise the additional five-year extension period. In March 2020, we entered into an 8 yeareight-year lease, which DIRTT may extend an additional 5five years at its option, of approximately 18,000 square feet of space for a DXC in Dallas, Texas. During March 2023, we entered into an agreement to sublease our DXC in Dallas to one of our Construction Partners in that region, from April 1, 2023, through December 31, 2024.

Our ICE development offices are located in Calgary, Alberta and Salt Lake City, Utah. In Calgary, we sublease approximately 8,700 square feet of office space pursuant to a lease that expires on January 31, 2023. In our Salt Lake City development office, which also houses a DXC, we lease approximately 6,600 square feet of office space pursuant to a lease that expires in December 2023. In New York City, New York, we lease approximately 4,100 square feet of space to operate a DXC; this lease expires in February 2024. In Chicago, Illinois, we own approximately 6,200 square feet of office space, which we use to operate a DXC.

Through distributed manufacturing, we can shift production of some components among our manufacturing sites, reduce transportation times and costs, and meet targeted lead times. We believe that our current and planned facilities are adequate for our current needs and that suitable additional or substitute space would be available if needed.

We areItem 3. Legal Proceedings.

DIRTT is pursuing multiple lawsuits against our formerits founders, Mogens Smed and Barrie Loberg, their new companyas well as Falkbuilt Ltd. (“Falkbuilt”), and otherFalkbuilt, Inc. (collectively, “Falkbuilt”) and related individualindividuals and corporate defendants for violationscorporations. DIRTT alleges breaches of fiduciary duties and noncompetitionnon-competition and non-solicitation covenants, contained in their executive employment agreements, and the misappropriation of ourits confidential and proprietary information in(in violation of numerous Canadian and U.S. state and federal laws pertaining to the protection of our trade secrets and proprietary information and the prevention of false advertising and deceptive trade practices.

As ofpractices). Except as described below, there have been no material developments in the legal proceedings previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, our2022.

DIRTT’s litigation against Falkbuilt, Messrs. Smed and Loberg, and their associates wasis comprised of fourthree main lawsuits: (i) an action in the Alberta Court of Queen’sKing’s Bench institutedcommenced on May 9, 2019 against Falkbuilt, Messrs. Smed and Loberg, and several other former DIRTT employees alleging breaches of restrictive covenants, fiduciary duties, and duties of loyalty, fidelity and confidentiality, and the misappropriation of ourDIRTT’s confidential information (the “Canadian Non-Compete Case”); (ii) an action in the U.S. District Court for the Northern District of Utah instituted on December 11, 2019 against Falkbuilt, Smed, and other individual and corporate defendants alleging misappropriation of ourDIRTT’s confidential information, trade secrets, business intelligence and customer information (the “Utah Misappropriation Case”); (iii) an action for federal patent infringement in the U.S. District Court for the Northern District of Illinois instituted on August 6, 2020 against Falkbuilt, alleging that Falkbuilt is infringing certain of DIRTT’s patents relating to our proprietary ICE® software (the “Patent Infringement Case”); and (iv)(iii) an action in the U.S. District Court for the Northern District of Texas instituted on June 24, 2021 alleging that Falkbuilt has unlawfully used ourDIRTT’s confidential information in the United States and intentionally caused confusion in the United States in an attempt to steal customers, opportunities, and business intelligence, with the aim of establishing a competing business in the United States market (the “Texas Unfair Competition Case”). We intendDIRTT intends to pursue the cases vigorously. We recently requested the Court of King’s Bench of Alberta to schedule the summary judgment application for our Canadian litigation. The court has proposed three potential dates in September 2025 and we expect to have the date finalized in the next several weeks.

In the Canadian Non-Compete Case, we have conducted extensive document productionon February 14, 2023, the Court of King’s Bench of Alberta granted DIRTT’s application to schedule the hearing of its summary judgment application and questioning ofdismissed Falkbuilt’s cross-application to strike the defendants that support our claims, as follows: (i) Smed and Loberg, and others, breached their duties owed to DIRTT, including their contractual and

fiduciary duties; (ii)  Smed, Loberg, and others began developing the new competing company immediately after Smed’s departure; (iii) before it was called Falkbuilt, the new competing company operated through a covert group comprised of then-current DIRTT employees and distribution partners known as the TTIMit Group (which stands for “This Time I Mean It”); (iv) members of the TTIMit Group took steps to conceal their communications by creating and using alias names, using private and personal email addresses and phone numbers, and holding secret meetings and gatherings; (v) the TTMit Group also used then-current DIRTT employees to build out Falkbuilt's warehouse premises and offices, source and purchase equipment for Falkbuilt, assist with market research and develop Falkbuilt's products, build vignettes and drawings, address Falkbuilt's software and computer needs, and name Falkbuilt; and (vi) members of the TTIMit Group conspired together to solicit DIRTT employees and distribution partners, design and sell competing products using DIRTT's confidential information, including DIRTT's pricing lists, DIRTT's product designs, DIRTT's personnel information, and revenue forecast information for DIRTT's distribution partners.summary judgment application. DIRTT is seeking, among other things, an order stopping the defendants from competing with DIRTT,aggressively pursuing its summary judgment for damages and losses, and an accounting and disgorgement of the defendants' gains from their wrongful misconduct.application.

In the Utah Misappropriation Case, on April 11, 2023, the United States Court dismissed certain of Appeals for the defendants, Falkbuilt Ltd., Falkbuilt, Inc. and Mogens Smed without prejudice, findingTenth Circuit reversed the U.S. District Court for the Northern District of Utah’s decision that Utah was an inconvenient forum. Weforum for DIRTT’s claims against Falkbuilt and others for the misappropriation of confidential information, trade secrets, business intelligence and customer information. The Utah Court had previously, and erroneously, found that DIRTT’s United States-based claims should be litigated in Canada. The Court of Appeals remanded the matter back to the Utah District Court. Falkbuilt filed motions to stay the Tenth Circuit decision pending its petition for a Writ of Certiorari to the Supreme Court of the United States. The Court of Appeals promptly denied the motion to stay. A similar motion subsequently filed with the Supreme Court of the United States on the same basis was also promptly denied. Falkbuilt also petitioned the Supreme Court to accept review, even after losing the stay motion, which petition was also denied in early October 2023. As a result of these appellate orders, the Utah federal trial court assumed jurisdiction over the pending claims. The Utah judge who issued the erroneous order dismissing DIRTT’s claims recused himself and the newly assigned judge reaffirmed all prior orders. As such, the case is resumed in the posture it was when the appeals began but with a different Judge.

The Texas Unfair Competition Case was dismissed in March 2022, without prejudice, in reliance upon the now-reversed decision in the Utah Misappropriation Case, described above. DIRTT appealed that decision, and the United States Court of Appeals for the Fifth Circuit stayed the appeal pending the Tenth Circuit ruling at Falkbuilt’s request. After prevailing in the Tenth Circuit, DIRTT asked Falkbuilt if it would, consistent with its prior representations, agree to remand the appeal to the Texas Court for disposition to Utah. Falkbuilt refused and alsoDIRTT filed a motionMotion to set aside the previously granted order granting a partial motion to dismiss without prejudice.Remand. The Court denied the Motion for Remand without prejudice and asked for full briefing. Argument proceeded on December 7, 2023 in New Orleans. The Court will either order the claims transferred to Utah or, if it affirms the lower court, those claims would proceed, inconveniently, in Canada. We believe it is very unlikely the claims would proceed in Texas as neither DIRTT or Falkbuilt currently desires that denial is consolidated withoutcome.

Prior to the initial appeal. The remaining portionargument, DIRTT sought leave to amend the Utah claims to include the Texas claims and notified the Fifth Circuit Court of Appeals of the proposed amendment in Utah. Falkbuilt did not object to the amendment, but answered the Complaint and reserved the right to dismiss the Amended Complaint on grounds of inconvenient forum or international comity. The Amended Complaint not only presents the Texas claims in Utah Misappropriation Case is stayed pending resolution of the appeal.

In the Patent Infringement Case, we are seeking, among other things, an order enjoining Falkbuilt from infringing our patentsbut also updates DIRTT’s allegations as to events and damages for past or continuing infringement. Recently, Falkbuilt was unsuccessfulincurred during the time the parties were participating in attempting to initiate an inter partes review and post grant review of our subject patents. The Patent Office found that Falkbuilt had not shown it would be likely to succeed in its invalidity challenges to our patents. Following those denials, the U.S. District Court ordered Falkbuilt to produce discovery regarding our claims. In January 2022, Falkbuilt informedappellate process.

On February 4, 2024, the Court that it had discontinued use of its infringing “Echo Dome” software. On the basis of this representation, the partiesCompany entered into a stipulated dismissal without prejudice, which was filedLitigation Funding Agreement with a third party for the funding of up to $4.0 million of litigation costs in respect of specific claims against Falkbuilt, Inc., Falkbuilt Ltd. and Henderson. In return, the Company has agreed to pay from any proceeds received from the settlement of such claims, a reimbursement of funded amounts plus diligence and underwriting costs, plus a multiple of such funded amount based on February 14, 2022.certain milestones. For additional information, please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.

In the Texas Unfair Competition Case, we allege violations of the U.S. Lanham Act, the Texas Uniform Trade Secrets Act, the Federal Defend Trade Secrets Act, the Pennsylvania Uniform Trade Secrets Act, the Colorado Consumer Protection Act, and the Ohio Deceptive Practices Act, and are seeking preliminary and permanent injunctive relief to restrain Falkbuilt from using or disclosing our confidential business information in the United States, and awards of compensatory damages, exemplary damages, and attorneys’ fees. The defendants have moved to dismiss the Texas case without prejudice arguing that Texas is an inconvenient forum.

Falkbuilt also filed a lawsuit against us on November 5, 2019 in the Court of Queen’s Bench of Alberta, alleging that DIRTT has misappropriated and misused their alleged proprietary information in furtherance of DIRTT’s product development. Falkbuilt seeks monetary relief and an interim, interlocutory and permanent injunction of DIRTT’s alleged use of the alleged proprietary information. We believe that the suit is without merit and filed an application for summary judgement to dismiss Falkbuilt’s claim.

Item 4.Mine SafeSafety Disclosures.ty Disclosures.

Not applicable.

PART II

Market Information; Holders of Record

Our common shares are traded on the TSX under the symbol “DRT” and are quoted on Nasdaqthe OTC Markets on the “OTC Pink Tier” under the symbol “DRTT.”“DRTTF”. Quotations of our common shares on the OTC Pink Tier reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

As of February 23, 2022,16, 2024, there were 85,351,261191,110,385 common shares outstanding and 192158 shareholders of record.

Dividends

We have not declared or paid any cash dividends on our common shares to date. The declaration and payment of dividends is at the discretion of the Board of Directors, taking into account (i) our earnings, capital requirements and financial condition, (ii) restrictions on our ability to pay dividends under ourthe Second Extended RBC Facility, (as defined below), and (iii) such other factors as the Board of Directors considers relevant. OurThe Second Extended RBC Facility generally limits our ability to pay any dividends or make any other distribution on our outstanding common shares. See

Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Credit Facility” for more information.

Performance Graph

The following graph illustrates a comparison If and when our Board of the total cumulative shareholder return ofDirectors declares cash dividends on our common shares, with the cumulative return of the S&P/TSX Composite Indexsuch dividends may be declared and the S&P 600 Building Products Index for the period commencing December 31, 2016 and ending on December 31, 2021. The graph assumes an initial investment of $100 on December 31, 2016,paid in our common shares, the shares comprising the S&P/TSX Composite Index, and the shares comprising the S&P 600 Building Products Index. The below shareholder return calculations are based on the exchange rates as reported by the H.10 statistical release of the Board of Governors of the Federal Reserve System as of the year-end exchange rate for the applicable period. The comparisons in the table are required by the SEC and applicable securities laws in Canada and are not intended to forecasteither U.S. dollars or be indicative of possible future performance of our common shares. This graph and related materials shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.Canadian dollars.

Recent Sales of Unregistered Securities; Issuer’s PurchasesSecurities

None.

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Equity SecuritiesFinancial Condition and Results of Operations

None.

You should read the following discussion and analysis of our financial condition and results of operations for the fiscal years ended December 31, 20212023 and 20202022 together with our consolidated financial statements and related notes and other financial information appearing in this Annual Report. The discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions concerning events and financial trends that may effectaffect 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 “Special Note Cautionary Statement Regarding Forward LookingForward-Looking Statements” appearing elsewhere in the Annual Report.

Overview

We are an innovative manufacturing company featuring proprietary software and virtual reality visualization platform, coupled with vertically integrated manufacturing that designs, configures and manufactures prefabricated interior solutions used primarily in non-residential spaces across a wide range of industries and businesses. We combine innovative product design with our industry-leading, proprietary ICE Software, and technology-driven, lean manufacturing practices and sustainable materials to provide end-to-end solutions for the traditionally inefficient and fragmented interior construction industry. We create customized interiors with aesthetics of conventional construction but with greater schedule and cost certainty, shorter lead times, greater future flexibility, and better environmental sustainability than conventional construction.

Our ICE Software allows us to sell, design, visualize (including 3D virtual reality modeling of interiors), configure, price, communicate, engineer, specify, order and manage projects, thereby reducing challenges associated with traditional construction, including cost overruns, change orders, inconsistent quality, delays and material waste. While other software programs and virtual reality tools are used in the architectural and construction industries, our ICE Software is the only interior construction technology that provides end-to-end integration, from design through order engineering, manufacturing and installation. Our interior construction solutions include prefabricated, customized interior modular walls, ceilings, and floors; decorative and functional millwork; power infrastructure; network infrastructure; and pre-installed medical gas piping systems. We strive to incorporate environmentally sustainable materials and reusable components into our solutions while creating flexible, functional and well-designed environments for the people who will use them.

We offer our interior construction solutions throughout the United States and Canada through a network of independent Distribution Partners and an internal sales team. Our Distribution Partners use ICE to work with stakeholders, including end users, to envision and design their spaces, and orders are electronically routed through ICE to our manufacturing facilities for production, packing and shipping. Our Distribution Partners then coordinate the receipt and installations of our interior solutions at the end users’ locations.

Summary of Financial Results

DIRTT Environmental Solutions Ltd. and its subsidiary (“DIRTT”, the “Company”, “we” or “our”) is a leader in industrialized construction for interior spaces. DIRTT’s system of physical products and digital tools empowers organizations, together with construction and design leaders, to build high-performing, adaptable, interior environments. Operating in the workplace, healthcare, education, and public sector markets, DIRTT’s system provides total design freedom, and greater certainty in cost, schedule, and outcomes.

DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to unrelated companies and Construction Partners of the Company. As of May 9, 2023, AWI owns a 50% interest in the rights, title and interest in certain intellectual property rights in the Applicable ICE Code, including a 50% interest in the patent rights that relate to the Applicable ICE Code.

Key Fourth Quarter 2023 Highlights

Outlook

DIRTT believes there are two very significant changes taking place in the market that it can capitalize on. The first is that organizations are beginning to decisively move forward with planning and implementing ‘return to work’ strategies. There is a strong need to modify their workspace to accommodate a more flexible environment in the short-term, which in turn could change again over the medium- to long-term as post-pandemic requirements continue to evolve. The second, not related to the pandemic, is one in which many organizations in different sectors are trying to enhance their physical presence in local communities by adopting a single design model that works in multiple jurisdictions. We believe we are well-positioned to capitalize on both trends, but DIRTT needs to modify how it operates to capture these opportunities.

As a result, on January 18, 2022, we announced a change in its leadership, appointing Todd Lillibridge, the Board Chair, as interim chief executive officer and he is expected to serve until a permanent chief executive officer is selected. Mr. Lillibridge has led the implementation of a process that the Board was directing since the summer of 2021 to modify and adapt the Company’s strategic plan.

Subsequent to the change in leadership, DIRTT announced several initiatives to better position itself to pursue these market opportunities while simultaneously establishing goals to achieve or exceed break-even profitability through both operational efficiency and improved sales effectiveness in the context of our long-term strategic plan.

We are implementing a master facility plan which will expand aluminum manufacturing in our Calgary and Savannah manufacturing facilities while closing its Phoenix facility. This is expected to result in net headcount reduction of approximately 26 and annualized cost savings of approximately $2.4 million, excluding severance and other one-time costs of approximately $1.7 million, which costs are expected to be incurred in the first half of 2022. We are also expanding capabilities of the South Carolina Facility, which produces chromacoat panels, to add thermofoil panels and back-painted glass production. This enhancement will enable us to significantly cut the shipping time and cost for thermofoil panels to customers located in the East and Midwest regions of the United States, as well to as leverage the fixed cost base of the South Carolina Facility. This expansion is being achieved through the transfer of existing equipment from the Calgary and Phoenix facilities and is not expected to incur any material capital costs. This is the first of several capability enhancements that were envisioned when the South Carolina Facility was launched last year.

After these changes to our manufacturing facilities, we will continue to have manufacturing capacity close to $500 million in annual revenue, sufficient to remain responsive to fluctuations in demand and to accommodate mid-term growth.

The Company is optimizing its order process, which it believes will facilitate a reduction in standby production capacity. DIRTT is changing its standard payment terms to 50% due on shipment, not order. By separating its deposit requirement from the order entry process, management believes the Company can encourage earlier order entry, thereby improving both internal revenue forecasting and production scheduling such that we expect to reduce standby production labor capacity by up to 20%, while continuing to provide certainty in scheduling.

We have finalized an organization-wide restructuring of positions that reduced our salaried headcount by approximately 18%, including the elimination of manufacturing and office positions which, along with other cost reduction initiatives are expected to yield annualized savings of approximately $13 million.

Lastly, the Company is also implementing several initiatives regarding pricing.

These steps are in addition to the following actions taken in the fourth quarter of 20212022. The increase in Adjusted Gross Profit and Adjusted Gross Profit Margin compared to preserve financial liquiditythe comparative quarter is due to having better leverage over fixed costs through price increases and address inflationary impacts on raw materials and transportation and the effects of that year’s sales softness on our financial position.

Building on the transformative work that has been implemented to date in our commercial function, in 2022 we are focused on improving our overall sales effectiveness by adopting a more strategic sales focus on our core, innovative productsreorganization initiatives, which deliver higher margins, and which continue to provide clients design freedom, and certainty in cost, schedule, and outcomes.

Our partners have been and remain a key element indesigned to align our go-to-market strategy. Enhancing both partner effectiveness and accountability will be a priority in 2022. This includes improvingcost structure with current expected levels of demand.