PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DIRTT Environmental Solutions Ltd.

Interim Condensed Consolidated Balance Sheet

(Unaudited – Stated in thousands of U.S. dollars)


	As at June 30,			As at December 31,
	2026			2025
ASSETS
Current Assets
Cash and cash equivalents		14,826			20,326
Restricted cash		249			249
Trade and accrued receivables, net of expected credit losses of $0.1 million at June 30, 2026 and December 31, 2025		19,085			22,369
Other receivables		1,192			716
Inventory		13,856			15,757
Prepaids and other current assets		2,843			2,970
Total Current Assets		52,051			62,387
Property, plant and equipment, net		13,348			14,930
Capitalized software, net		2,802			3,009
Operating lease right-of-use assets, net		16,744			18,900
Other assets		2,946			3,278
Total Assets		87,891			102,504
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities		16,118			19,430
Other liabilities		6,530			5,436
Customer deposits and deferred revenue		2,593			3,507
Current portion of long-term debt and accrued interest		12,220			23,159
Current portion of lease liabilities		4,853			5,215
Total Current Liabilities		42,314			56,747
Long-term debt		4,905			220
Long-term lease liabilities		14,953			17,002
Total Liabilities		62,172			73,969
SHAREHOLDERS’ EQUITY
Common shares, unlimited authorized without par value, 194,332,596 issued and outstanding at June 30, 2026 and 191,912,548 issued and outstanding at December 31, 2025		216,942			214,990
Additional paid-in capital		9,768			11,189
Accumulated other comprehensive loss		(17,669	)		(17,065	)
Accumulated deficit		(183,322	)		(180,579	)
Total Shareholders’ Equity		25,719			28,535
Total Liabilities and Shareholders’ Equity		87,891			102,504

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

DIRTT Environmental Solutions Ltd.

Interim Condensed Consolidated Statement of Operations

(Unaudited - Stated in thousands of U.S. dollars)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
Product revenue		38,891			37,741			79,707			78,087
Service revenue		1,419			1,181			3,035			2,130
Total revenue		40,310			38,922			82,742			80,217

Product cost of sales		24,388			27,362			51,707			53,718
Service cost of sales		1,938			742			4,050			1,139
Total cost of sales		26,326			28,104			55,757			54,857
Gross profit		13,984			10,818			26,985			25,360

Expenses
Sales and marketing		4,216			5,293			9,247			10,470
General and administrative		4,548			5,743			9,984			11,223
Operations support		1,237			1,872			2,852			3,902
Technology and development		902			1,480			1,843			2,708
Stock-based compensation		724			594			1,599			1,333
Reorganization		1,056			174			3,423			384
Total operating expenses		12,683			15,156			28,948			30,020

Operating income (loss)		1,301			(4,338	)		(1,963	)		(4,660	)
Interest income		105			232			187			494
Gain on extinguishment of convertible debentures		-			7			-			14
Foreign exchange gain (loss)		46			(1,912	)		385			(2,024	)
Interest expense		(354	)		(485	)		(704	)		(936	)
		(203	)		(2,158	)		(132	)		(2,452	)
Net income (loss) before tax		1,098			(6,496	)		(2,095	)		(7,112	)
Income taxes
Current and deferred income tax expense		39			106			119			151
Net income (loss) after tax		1,059			(6,602	)		(2,214	)		(7,263	)

Net income (loss) per share
Net income (loss) per share − basic and diluted		0.01			(0.03	)		(0.01	)		(0.04	)

Weighted average number of shares outstanding (in thousands)
Basic		193,789			190,537			193,081			190,597
Diluted		197,472			190,537			193,081			190,597

Refer to Note 15 for Related Party Transactions included in this statement.

DIRTT Environmental Solutions Ltd.

Interim Condensed Consolidated Statement of Comprehensive Income (Loss)

(Unaudited - Stated in thousands of U.S. dollars)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
Net income (loss) after tax for the period		1,059			(6,602	)		(2,214	)		(7,263	)
Exchange differences on translation of foreign operations		(227	)		1,739			(604	)		1,806
Comprehensive income (loss) for the period		832			(4,863	)		(2,818	)		(5,457	)

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

DIRTT Environmental Solutions Ltd.

Interim Condensed Consolidated Statement of Changes in Shareholders’ Equity

(Unaudited – Stated in thousands of U.S. dollars, except for share data)


										Accumulated
	Number of						Additional			other						Total
	Common			Common			paid-in			comprehensive			Accumulated			shareholders’
	shares			shares			capital			loss			deficit			equity
As at December 31, 2024		193,605,237			219,023			8,206			(18,541	)		(166,098	)		42,590
Stock-based compensation		-			-			566			-			-			566
Issued on vesting of RSUs		343,455			366			(366	)		-			-			-
Issued for employee share purchase plan		236,834			152			-			-			-			152
Cancelled from Shares NCIB and Share Repurchase (as each defined in Note 9)		(4,439,107	)		(4,880	)		1,368			-			-			(3,512	)
RSUs withheld to settle employee tax obligations		-			-			(1	)		-			-			(1	)
Foreign currency translation adjustment		-			-			-			67			-			67
Net loss for the period		-			-			-			-			(661	)		(661	)
As at March 31, 2025		189,746,419			214,661			9,773			(18,474	)		(166,759	)		39,201
Stock-based compensation		-			-			561			-			-			561
Issued on vesting of RSUs		1,130,876			524			(524	)		-			-			-
Issued for employee share purchase plan		298,039			152			-			-			-			152
Cancelled from Shares NCIB		(730,148	)		(852	)		365			-			-			(487	)
RSUs withheld to settle employee tax obligations		-			-			(60	)		-			(16	)		(76	)
Foreign currency translation adjustment		-			-			-			1,739			-			1,739
Net loss for the period		-			-			-			-			(6,602	)		(6,602	)
As at June 30, 2025		190,445,186			214,485			10,115			(16,735	)		(173,377	)		34,488

As at December 31, 2025		191,912,548			214,990			11,189			(17,065	)		(180,579	)		28,535
Stock-based compensation		-			-			537			-			-			537
Issued on vesting of RSUs		1,715,613			1,669			(1,669	)		-			-			-
Issued for employee share purchase plan		188,899			94			-			-			-			94
Cancelled from Shares NCIB (as defined in Note 9)		(208,006	)		(234	)		96			-			-			(138	)
RSUs withheld to settle employee tax obligations		-			-			(401	)		-			(529	)		(930	)
Foreign currency translation adjustment		-			-			-			(377	)		-			(377	)
Net loss for the period		-			-			-			-			(3,273	)		(3,273	)
As at March 31, 2026		193,609,054			216,519			9,752			(17,442	)		(184,381	)		24,448
Stock-based compensation		-			-			380			-			-			380
Issued on vesting of RSUs		582,915			361			(361	)		-			-			-
Issued for employee share purchase plan		140,627			62			-			-			-			62
RSUs withheld to settle employee tax obligations		-			-			(3	)		-			-			(3	)
Foreign currency translation adjustment		-			-			-			(227	)		-			(227	)
Net income for the period		-			-			-			-			1,059			1,059
As at June 30, 2026		194,332,596			216,942			9,768			(17,669	)		(183,322	)		25,719

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

DIRTT Environmental Solutions Ltd.

Interim Condensed Consolidated Statement of Cash Flows

(Unaudited – Stated in thousands of U.S. dollars)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
Cash flows from operating activities:
Net income (loss) for the period		1,059			(6,602	)		(2,214	)		(7,263	)
Adjustments:
Depreciation and amortization		1,406			1,547			2,833			3,027
Stock-based compensation		724			594			1,599			1,333
Foreign exchange (gain) loss		(27	)		1,809			(464	)		2,065
Gain on extinguishment of convertible debt		-			(7	)		-			(14	)
Accretion of convertible debentures		50			91			111			175
Loss on disposal		-			-			-			115
Changes in operating assets and liabilities:
Trade and accrued receivables		4,974			(632	)		3,466			2,661
Other receivables		(503	)		(420	)		(524	)		(667	)
Inventory		859			(727	)		1,495			(76	)
Prepaid and other assets, current and long term		(364	)		(582	)		237			(565	)
Accounts payable and accrued liabilities		(4,756	)		1,263			(3,326	)		(431	)
Other liabilities		439			-			347			-
Customer deposits and deferred revenue		(2,626	)		(286	)		(903	)		(657	)
Current portion of long-term debt and accrued interest		(159	)		7			(293	)		(3	)
Lease liabilities		(135	)		23			(216	)		62
Net cash flows provided by (used in) operating activities		941			(3,922	)		2,148			(238	)

Cash flows from investing activities:
Purchase of property, plant and equipment, net of accounts payable changes		(256	)		(503	)		(692	)		(801	)
Capitalized software development expenditures		(192	)		(451	)		(466	)		(930	)
Other asset expenditures		(149	)		(85	)		(170	)		(91	)
Recovery of software development expenditures		59			60			59			114
Net cash flows (used in) investing activities		(538	)		(979	)		(1,269	)		(1,708	)

Cash flows from financing activities:
Common share repurchases		-			(488	)		(138	)		(3,993	)
Repayment of long-term debt		(321	)		(94	)		(12,386	)		(190	)
Employee tax payments on vesting of RSUs		(3	)		(60	)		(404	)		(60	)
Net proceeds received on long-term debt		-			-			6,908			-
Net cash flows (used in) financing activities		(324	)		(642	)		(6,020	)		(4,243	)
Effect of foreign exchange on cash, cash equivalents and restricted cash		(252	)		200			(359	)		1
Net decrease in cash, cash equivalents and restricted cash		(173	)		(5,343	)		(5,500	)		(6,188	)
Cash, cash equivalents and restricted cash, beginning of period		15,248			28,686			20,575			29,531
Cash, cash equivalents and restricted cash, end of period		15,075			23,343			15,075			23,343
Supplemental disclosure of cash flow information:
Interest paid		(439	)		(351	)		(836	)		(709	)
Income taxes paid		(103	)		1			(176	)		(4	)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within
the consolidated balance sheet.							As at June 30,
							2026			2025
Cash and cash equivalents								14,826			23,100
Restricted cash								249			243
Total cash, cash equivalents and restricted cash								15,075			23,343

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

DIRTT Environmental Solutions Ltd.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(Amounts in thousands of U.S. dollars unless otherwise stated)

1. GENERAL INFORMATION

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

DIRTT’s proprietary design integration software, DIRTT Design Editor, also known as the ICE® software and technology platform (“Design Editor”, “ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to unrelated companies and construction partners of the Company (“Construction Partners”), including Armstrong World Industries, Inc. (“AWI”), which owns a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE software that is used by AWI.

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

2. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the Financial Statements contain all adjustments necessary, consisting of only normal recurring adjustments, for a fair statement of its financial position as of June 30, 2026, and its results of operations and cash flows for the three and six months ended June 30, 2026 and 2025. The condensed balance sheet at December 31, 2025, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. These Financial Statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2025 and 2024 and for each of the three years in the period ended December 31, 2025 included in the Annual Report on Form 10-K of the Company as filed with the U.S. Securities and Exchange Commission (the “SEC”) and applicable securities commission or similar regulatory authorities in Canada on February 25, 2026 (the “Annual Report on Form 10-K”).

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

Principles of consolidation

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

Basis of measurement

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

Seasonality

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

3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

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

On November 27, 2024, the FASB issued Accounting Standards Update No. 2024-04, “Induced Conversions of Convertible Debt Instruments” (“ASU-2024-04”) which requires discussing an entity’s assessment of induced conversion and debt extinguishment of convertible debt instruments. The amendments in ASU-2024-04 are effective for fiscal years beginning after December 15, 2025, on a prospective basis with an option of retrospective application. The Company has adopted this standard and there is minimal impact, as the Company has no existing convertible debt instruments to which this update applies.

On July 30, 2025, the FASB issued Accounting Standards Update No. 2025-05, “Financial Instruments - Credit Losses” (“ASU-2025-05”) which requires additional consideration when estimating the expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. The amendments in ASU-2025-05 are effective for fiscal years beginning after December 15, 2025. The Company has adopted this standard and there is minimal impact to the financial statements and disclosures.

On September 18, 2025, the FASB issued Accounting Standards Update No. 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software” (“ASU-2025-06”) which targets improvements to the accounting for internal-use software. The amendments in ASU-2025-06 are effective for fiscal years beginning after December 15, 2027, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard.

On December 8, 2025, the FASB issued Accounting Standards Update No. 2025-11, “Narrow-Scope Improvements to Interim Reporting” (“ASU-2025-11”) which clarifies the guidance on interim reporting disclosures. The amendments in ASU-2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is evaluating the impact of the adoption of this standard.

On May 19, 2026, the FASB issued Accounting Standards Update No. 2026-02, “Environmental Credits and Environmental Credit Obligations” (“ASU-2026-02”) which establishes guidance for the recognition, measurement, presentation, and disclosure of environmental credits and environmental credit obligations. The amendments in ASU-2026-02 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is evaluating the impact of the adoption of this standard.

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

4. REORGANIZATION

Transformation Office

In early 2025, a transformation office was set up, to accelerate the strategic transformation of our business by streamlining the Company’s processes and procedures, supporting the Construction Services channel, and improving productivity across the Company (the “Transformation Office”). We are incurring one-time consultant costs to assist in, advise, and implement our transformation actions, as well as one-time termination benefits as a result of elimination of positions. The program is planned to be completed in 2026.

For the three and six months ended June 30, 2026 and 2025, the following reorganization costs incurred relate to the above mentioned initiatives:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2026		2025		2026		2025
Termination benefits		583		-		1,987		-
Transformation Office costs		472		-		1,421		-
Rock Hill Facility closure of operations		-		174		-		384
Other costs		1		-		15		-
Total reorganization costs		1,056		174		3,423		384


Reorganization costs in accounts payable and accrued liabilities at January 1, 2026	2,088
Reorganization expense	3,423
Reorganization costs paid	(3,772	)
Reorganization costs in accounts payable and accrued liabilities at June 30, 2026	1,739

Of the $1.7 million of reorganization costs in accounts payable and accrued liabilities as at June 30, 2026 (December 31, 2025 – $2.1 million), $1.67 million relates to termination benefits (December 31, 2025 – $1.8 million) and $0.06 million relates to other reorganization costs (December 31, 2025 – $0.3 million).

5. TRADE AND ACCRUED RECEIVABLES

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

In order to manage and assess our risk, management maintains credit policies that include regular review of credit limits of individual receivables and systematic monitoring of aging of trade receivables and the financial well-being of our customers. At June 30, 2026, approximately 63% of our trade accounts receivable are trade credit insured, relating to accounts receivable from counterparties deemed creditworthy by the insurer and excluding accounts receivable from government entities. In addition, where possible, we collect a 50% deposit on sales, excluding government and certain other clients.

Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the three and six months ended June 30, 2026 and for the three and six months ended June 30, 2025, no single Construction Partner accounted for greater than 10% of revenue.

The Company’s aged receivables were as follows:


	As at
	June 30, 2026			December 31, 2025
Current		16,930			19,894
Overdue		2,231			2,552
		19,161			22,446
Less: expected credit losses		(76	)		(77	)
Trade and accrued receivables, net of expected credit losses		19,085			22,369

No adjustment to our expected credit losses of $0.1 million was required for the three and six months ended June 30, 2026 for our trade receivables. Receivables are generally considered to be past due when over 60 days old, unless there is a separate payment arrangement in place for the collection of the receivable.

6. OTHER LIABILITIES


	As at
	June 30, 2026		December 31, 2025
Warranty provisions (1)		853		863
DSU liability		2,548		1,954
Income taxes payable		187		247
Sublease deposits		112		206
Other provisions and other liabilities(2)		2,830		2,166
Other liabilities		6,530		5,436

(1)

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


	As at
	June 30, 2026			December 31, 2025
As at January 1,		863			849
Additions to warranty provision		462			619
Payments related to warranties		(472	)		(605	)
		853			863

(2)

As previously disclosed, DIRTT Environmental Solutions Inc. received a subpoena for records in relation to an ongoing inquiry by the U.S. Department of Justice into certain projects and services provided by a third party and DIRTT dating back to 2014. The Company is complying with the subpoena and cooperating with the U.S. Department of Justice. There have been ongoing discussions regarding the possible resolution of these matters with the U.S. Department of Justice without admitting or denying liability. Based on the discussions to date, the Company provided $2.0 million as at December 31, 2025 for the cost of a potential settlement of these matters with the U.S. Department of Justice. There has been no update as at June 30, 2026.

7. LONG-TERM DEBT


	Leasing Facilities			Convertible Debentures			BDC Loan			Total Debt
Balance at January 1, 2025		373			21,979			-			22,352
Accretion of issue costs		-			338			-			338
Accrued interest		28			1,384			-			1,412
Interest payments		(28	)		(1,394	)		-			(1,422	)
Principal repayments		(81	)		(314	)		-			(395	)
Gain on extinguishment		-			(24	)		-			(24	)
Exchange differences		17			1,101			-			1,118
Balance at December 31, 2025		309			23,070			-			23,379
Current portion of long-term debt and accrued interest		89			23,070			-			23,159
Long-term debt		220			-			-			220

Balance at January 1, 2026		309			23,070			-			23,379
Issuances		-			-			6,908			6,908
Accretion of issue costs		-			89			22			111
Accrued interest		12			396			135			543
Interest payments		(12	)		(690	)		(134	)		(836	)
Principal repayments		(43	)		(12,043	)		(300	)		(12,386	)
Exchange differences		(10	)		(451	)		(133	)		(594	)
Balance at June 30, 2026		256			10,371			6,498			17,125
Current portion of long-term debt and accrued interest		90			10,371			1,759			12,220
Long-term debt		166			-			4,739			4,905

Revolving Credit Facility

On February 12, 2021, the Company entered into a loan agreement governing a C$25.0 million senior secured revolving credit facility with the Royal Bank of Canada (“RBC”), as lender (the “RBC Facility”), as disclosed in our Annual Report on Form 10-K. The Company has extended the RBC Facility a number of times since 2023, including on November 4, 2025 (the “Fifth Extended RBC Facility”). The Fifth Extended RBC Facility matures on November 30, 2026 and is subject to the same borrowing base terms as the previous facility with the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. The Company would have been in default under the Fifth Extended RBC Facility if the January Debentures were not paid in full or refinanced on terms and conditions satisfactory to RBC by January 31, 2026. The January Debentures were paid in full on January 31, 2026.

On February 11, 2026 and in connection with the Loan (as defined herein), the Company amended the Fifth Extended RBC Facility (the “Seventh Amended RBC Facility”) and, together with its subsidiary, entered into priority agreements with RBC and BDC (collectively, the “Priority Agreement”). The Seventh Amended RBC Facility matures on November 30, 2026 and is subject to the same borrowing base terms as the previous facility. The Seventh Amended RBC Facility allows the Company to incur indebtedness to BDC of C$15 million under the Loan and incorporates permitting specific encumbrances to BDC and the Priority Agreement. The Seventh Amended RBC Facility also releases certain mortgage collateral held by RBC.

On March 11, 2026, the Company entered into the Waiver and Eighth Amendment to Loan Agreement (the “Eighth Amended RBC Facility”), which matures on November 30, 2026. The Eighth Amended RBC Facility is subject to the same borrowing base terms stated in the Seventh Amended RBC Facility. The Eighth Amended RBC Facility includes a customary “Restricted Payments” covenant that prohibits us from, among other things, repurchasing our common shares and paying dividends, unless we have satisfied certain conditions (the “Payment Conditions”). The Payment Conditions include conditions that, after giving effect to the relevant Restricted Payment, the Company has a net borrowing availability of at least C$5.0 million over the preceding 30-day period, and our fixed charge coverage ratio (“FCCR”) be at least 1.10 to 1.00 on a trailing 12-month basis. In February 2026, we and RBC determined that our purchases of our common shares under our NCIB in December 2025 did not comply with the Restricted Payments covenant because our FCCR was below 1.10 to 1.00. The Eighth Amended RBC Facility provided a waiver in connection with the foregoing.

At June 30, 2026, available borrowings under the Eighth Amended RBC Facility are C$9.6 million ($6.7 million) (December 31, 2025 – C$16.3 million ($11.8 million) of available borrowings), calculated in the same manner as the RBC Facility described above, of which no amounts have been drawn. Under the RBC Facility, if the “Net Borrowing Availability” (defined as the borrowing base less any loan advances and letters of credit or guarantee and if undrawn including unrestricted cash), was less than C$3.0 million for at least thirty consecutive calendar days, the Company is subject to a FCCR covenant of 1.10:1 on a trailing twelve-month basis. As at June 30, 2026, the Company is in compliance with its financial covenants.

Leasing Facilities

The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) of which C$4.4 million ($3.2 million) has been drawn and C$4.1 million ($3.0 million) has been repaid. The Canada Leasing Facility has a seven-year term and bears interest at 4.25%.

The Company did not make any draws on the Canada Leasing Facility during the three and six months ended June 30, 2026 (2025 – $nil). The associated financial liabilities are shown on the consolidated balance sheet in the current portion of long-term debt and accrued interest and long-term debt.

Convertible Debentures

On January 25, 2021, the Company completed a C$35.0 million ($27.5 million) bought-deal financing of convertible unsecured subordinated debentures (the “January Debentures”) with a syndicate of underwriters. On January 29, 2021, the Company issued a further C$5.25 million ($4.1 million) of the January Debentures under the terms of an overallotment option granted to the underwriters. The January Debentures matured and became repayable on January 31, 2026 (the “January Debentures Maturity Date”) and accrued interest at the rate of 6.00% per annum payable semi-annually in arrears on the last day of January and July of each year commencing on July 31, 2021 until the January Debentures Maturity Date. Interest and principal were payable in cash or shares at the option of the Company. The January Debentures were convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the January Debentures Maturity Date and the date specified by the Company for redemption of the January Debentures. Costs of the transaction were approximately C$2.7 million, including the underwriters’ commission. On November 21, 2023, the Company announced that the Board of Directors had approved a rights offering (the “Rights Offering”) to its common shareholders for aggregate gross proceeds of C$30.0 million ($22.4 million). As a result of the Rights Offering, the conversion price of the January Debentures was adjusted to C$4.03 per common share representing a conversion rate of 248.1390 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the issuer bid in which the Company repurchased for cancellation C$4.7 million ($3.5 million) of the principal balance of the January Debentures, and paid C$0.04 million ($0.03 million) of the interest payable on such January Debentures (“Issuer Bid”). On August 2, 2024, the Company repurchased for cancellation C$18.9 million ($14.0 million) principal amount of the January Debentures held by 22NW Fund, L.P. (“22NW”). On August 28, 2024, the Company commenced the Debentures normal course issuer bid (the “Debentures NCIB”) which expired on August 27, 2025. On August 26, 2025, the Company announced the renewal of the Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB (the “Renewed Debentures NCIB”) and is expected to terminate on August 27, 2026 for the December Debentures. The Renewed Debentures NCIB terminated on January 31, 2026, with respect to the January Debentures, concurrent with the January Debentures Maturity Date and repayment of the January Debentures. The Company made $nil repurchases under the Renewed Debentures NCIB of the January Debentures during the three and six months ended June 30, 2026 (C$0.02 million ($0.01 million) and C$0.05 million ($0.04 million)) for the three and six months ended June 30, 2025, respectively, as part of the Debentures NCIB).

On December 1, 2021, the Company completed a C$35.0 million ($27.4 million) bought-deal financing of convertible unsecured subordinated debentures (the “December Debentures”), and collectively with the January Debentures, the “Debentures” with a syndicate of underwriters. The December Debentures will mature and be repayable on December 31, 2026 (the “December Debentures Maturity Date”) and accrue interest at the rate of 6.25% per annum payable semi-annually in arrears on the last day of June and December of each year commencing on June 30, 2022 until the December Debentures Maturity Date. Interest and principal are payable in cash or shares at the option of the Company. The December Debentures will be convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the December Debentures Maturity Date and the date specified by the Company for redemption of the December Debentures. Costs

of the transaction were approximately C$2.3 million, including the underwriters’ commission. As a result of the Rights Offering, the conversion price of the December Debentures was adjusted to C$3.64 per common share representing a conversion rate of 274.7253 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$5.8 million ($4.3 million) of the principal balance of the December Debentures and paid C$0.08 million ($0.06 million) of the interest payable on such December Debentures. On August 2, 2024, the Company repurchased for cancellation C$13.6 million ($10.1 million) principal amount of December Debentures held by 22NW. On August 28, 2024, the Company commenced the Debentures NCIB which expired on August 27, 2025. On August 26, 2025, the Company announced the Renewed Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB. The Renewed Debentures NCIB is expected to terminate on August 27, 2026 with respect to the December Debentures. The Company did not repurchase any of the December Debentures during the three months ended June 30, 2026. During the six months ended June 30, 2026, the Company repurchased for cancellation C$0.03 million ($0.02 million) principal amount of the December Debentures, as part of the Renewed Debentures NCIB and (C$0.1 million ($0.1 million) and C$0.2 million ($0.1 million) for the three and six months ended June 30, 2025, respectively, as part of the Debentures NCIB). As at June 30, 2026, C$14.8 million ($10.4 million) principal amount of the December Debentures was outstanding.

BDC Loan

On December 11, 2025, the Company entered into a letter agreement (the “Letter”) with the Business Development Bank of Canada (“BDC”), pursuant to which BDC committed to lending the Company up to C$15.0 million (the “Loan”) subject to the satisfaction of certain conditions. The Letter was subsequently amended on January 30, 2026, February 9, 2026 and March 9, 2026 (the “Amended Letter”).

Following the satisfaction of the conditions precedent set forth in the Letter, the Company received an initial disbursement of C$5.5 million on February 13, 2026 and, following satisfaction of certain additional conditions, a second disbursement of C$4.5 million on March 11, 2026. Subject to certain conditions, it is expected that BDC will make a third disbursement of C$5.0 million in the second half of 2026. The Loan accrues interest at a rate equal to BDC’s floating base rate (6.55% per annum) minus 0.75%. Monthly principal repayments of the Loan commence in May 2026 and additional monthly interest payments are due on the last day of each month, beginning on March 31, 2026. The Loan matures on April 30, 2032. Costs of the transaction were approximately C$0.4 million ($0.3 million). As at June 30, 2026, the Company is in compliance with the Loan’s financial covenants.

The obligations of the Company under the Amended Letter are secured by: (a) general security agreements from the Company granting (i) a first-ranking security interest in specific equipment, and (ii) a second priority security interest in all other present and after acquired personal property (excluding consumer goods), subject to certain registered charges; (b) guarantees from DIRTT Environmental Solutions, Inc. for the full amount of the Loan, supported by general security agreements granting (i) a first ranking security interest in specific equipment and (ii) second priority security interest in all other present and after acquired personal property (excluding consumer goods), subject to certain registered charges; (c) various landlord’s waivers of distraint; (d) first mortgage in the principal amount of US$5.0 million on the land and buildings located at 325 North Wells Street, Chicago, IL, USA, and (e) a letter of credit for C$3.5 million for the third disbursement of C$5.0 million.

The proceeds of the Loan, together with cash on hand, were used to refinance the January Debentures.

The following table includes principal maturities of the BDC Loan at June 30, 2026:


	BDC Loan
2026		586
2027		1,173
2028		1,173
2029		1,173
2030		1,173
Thereafter		1,564
Total		6,842

8. STOCK-BASED COMPENSATION

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

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

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

Stock-based compensation expense


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
Equity-settled awards		773			739			1,691			1,478
Cash-settled awards		(49	)		(145	)		(92	)		(145	)
		724			594			1,599			1,333

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


	RSU Time-			RSU Performance-
	Based			Based			PSU			DSU
	Number of			Number of			Number of			Number of
	units			units			units			units
Outstanding at December 31, 2024		10,260,791			45,177			1,845,608			4,033,894
Granted		25,000			-			-			544,081
Vested or settled		(1,474,331	)		-			-			-
Withheld to settle employee tax obligations		(139,186	)		-			-			-
Forfeited or expired		(156,791	)		(45,177	)		-			-
Outstanding at June 30, 2025		8,515,483			-			1,845,608			4,577,975
Outstanding at December 31, 2025		8,181,585			-			2,597,608			3,464,988
Granted		150,000			-			-			560,883
Vested or settled		(2,298,528	)		-			-			-
Withheld to settle employee tax obligations		(1,837,695	)		-			-			-
Forfeited or expired		(324,376	)		-			(922,804	)		-
Outstanding at June 30, 2026		3,870,986			-			1,674,804			4,025,871

Restricted share units (time-based vesting)

Except as noted below, outstanding restricted share units (“RSUs”) that vest based on time have an aggregate time-based vesting period of three years and generally one-third of the RSUs vest every year over a three-year period from the date of grant. The RSUs will be settled following vesting by way of the provision of cash or shares to employees (or a combination thereof), at the discretion of the Company. The weighted average fair value of the RSUs granted in the six months ended June 30, 2025 was C$0.82. During the second quarter of 2026, the Executive Chairman of the Board was granted 150,000 RSUs with a weighted average fair value of C$0.77, which was determined using the closing price of the Company’s common shares on the respective grant date. These RSUs vested on July 2, 2026.

Restricted share units (performance-based vesting)

During 2022 and 2021, RSUs were granted to executives with service and performance-based conditions for vesting based on the Company’s share price performance (the “PRSUs”). Based on share price performance since the date of grant, 66.7% of the 2021 PRSUs vested on March 1, 2024, but none of the 2022 PRSUs vested upon completion of the three-year service period. All PRSUs were expired as of March 31, 2025.

Performance share units

During the second quarter of 2023, certain executives were issued a strategic equity grant through performance share units (“PSUs”). The performance period of the PSUs is from January 1, 2023, to December 31, 2026, with a cliff vesting term for December 31, 2026. An aggregate of 2,584,161 PSUs were granted and depending on the level of performance, the PSUs will vest 100%, 160% or 190% up to a maximum of 4,909,907 PSUs. Settlement will be made in the form of shares issued from treasury. The performance measures are a combination of Revenue and Earnings Before Interest, Taxes, Depreciation and Amortization and both targets have to be achieved. As of June 30, 2026, the fair value of these PSUs have been deemed to be $nil based on the likelihood of achieving the targets compared to current results. During the third quarter of 2023 and the first quarter of 2026, 738,553 PSUs and 922,804 PSUs, respectively, with a $nil value were forfeited as a result of executive departures and 922,804 PSUs with a $nil value are outstanding at June 30, 2026.

During the fourth quarter of 2025, the Company granted 752,000 PSUs to its chief transformation officer. The performance period is from November 26, 2025 to June 30, 2026. The performance measures relate to success of cost savings targets tied to transformation efforts by the Company. The achievement of the performance criteria will be determined by the Board of Directors in the third quarter of 2026. As of June 30, 2026, the PSUs were deemed to have a value of $0.6 million (December 31, 2025 – $0.6 million).

Deferred share units

Granted under the DSU Plan

The fair value of the DSU liability and the corresponding expense is charged to profit or loss at the grant date. Subsequently, at each reporting date between the grant date and settlement date, the fair value of the liability is remeasured with any changes in fair value recognized in profit or loss for the period. DSUs outstanding at June 30, 2026 had a fair value of $0.4 million which is included in other liabilities on the balance sheet (December 31, 2025 – $0.5 million).

Granted under the LTIP

DSUs granted after May 30, 2023 (the “New DSUs”) will be settled by way of the provision of cash or shares (or a combination thereof) to the directors, at the discretion of the Company. The Company intends to settle these DSUs through issuances of common shares. The weighted average fair value of the DSUs granted in the first six months of 2026 and 2025 was C$0.74 ($0.52) and C$0.92 ($0.66), respectively, which was determined using the closing price of the Company’s common shares on the grant date. New DSUs outstanding at June 30, 2026 had a fair value of $1.7 million which is included in other liabilities on the balance sheet (December 31, 2025 – $1.4 million).

Dilutive Instruments

For the three months ended June 30, 2026, 0.9 million PSUs and 20.6 million common shares which would have been issued if the principal amounts of the December Debentures were settled in common shares at the quarter-end price were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net income per share. 0.7 million RSUs and 3.0 million New DSUs were included in the diluted weighted average number of common shares. See Note 10 for the dilutive impact on net income per share.

For the six months ended June 30, 2026, 0.9 million PSUs, 2.1 million RSUs, 2.9 million New DSUs, and 20.6 million common shares which would have been issued if the principal amounts of the December Debentures were settled in common shares at the quarter-end price were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net loss per share.

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

9. SHARE REPURCHASES

On December 18, 2024, the Company announced a normal course issuer bid for common shares (the “Shares NCIB”), which commenced on December 20, 2024 and terminated on December 19, 2025, and permitted DIRTT to acquire up to 7,515,233 common shares. 730,148 and 1,248,411 common shares were acquired and cancelled during the three and six months ended June 30, 2025, respectively. All repurchases under the Shares NCIB were made on the open market through the facilities of the Toronto Stock Exchange (the “TSX”) at the market price of common shares at the time of acquisition. Any common shares acquired through the Shares NCIB were immediately cancelled.

On December 18, 2025, the Company announced the renewal of the Shares NCIB which commenced on December 22, 2025 and will terminate on December 21, 2026 (the “Renewed Shares NCIB”). The Renewed Shares NCIB permits DIRTT to acquire up to 9,593,878 of its common shares. All purchases will be made on the open market through the facilities of the TSX at the market price of common shares at the time of the acquisition. Any common shares acquired through the Renewed Shares NCIB will be immediately cancelled.

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

Under the Renewed Shares NCIB, DIRTT acquired and cancelled nil common shares during the three months ended June 30, 2026 and 208,006 common shares during the six months ended June 30, 2026.

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


Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced programs		Maximum number of shares that may yet be purchased under the program
January 1, 2026 - January 31, 2026		116,253	$	0.64		116,253		9,477,625
February 1, 2026 - February 28, 2026		53,085	$	0.65		53,085		9,424,540
March 1, 2026 - March 31, 2026		38,668	$	0.69		38,668		9,385,872
April 1, 2026 - April 30, 2026		-	NA			-		9,385,872
May 1, 2026 - May 31, 2026		-	NA			-		9,385,872
June 1, 2026 - June 30, 2026		-	NA			-		9,385,872
Total		208,006				208,006		9,385,872

10. EARNINGS (LOSS) PER SHARE


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2026		2025			2026			2025
Net income (loss) per share – basic
Net income (loss) (thousands of U.S. dollars)	$	1,059	$	(6,602	)	$	(2,214	)	$	(7,263	)
Weighted average number of shares outstanding (thousands of shares)		193,789		190,537			193,081			190,597
Net income (loss) per share (U.S. dollars) − basic (as on the Consolidated Statement of Operations)	$	0.01	$	(0.03	)	$	(0.01	)	$	(0.04	)

Net income (loss) per share − diluted
Net income (loss) (thousands of U.S. dollars)	$	1,059	$	(6,602	)	$	(2,214	)	$	(7,263	)
Weighted average number of shares outstanding (thousands of shares)		193,789		190,537			193,081			190,597
Dilutive RSUs (thousands of shares) (1)		654		-			-			-
Dilutive New DSUs (thousands of shares) (1)		3,029		-			-			-
Weighted average number of shares outstanding (thousands of shares)		197,472		190,537			193,081			190,597
Net income (loss) per share (U.S .dollars) − diluted (as on the Consolidated Statement of Operations)	$	0.01	$	(0.03	)	$	(0.01	)	$	(0.04	)

(1) For the three months ended June 30, 2026, the Net income per share − diluted includes the effect of 0.6 million RSUs, and 3.0 million New DSUs, as they would have the potential to dilute basic income per share. Refer to Note 8 for the anti-dilutive impact on the three and six months ended June 30, 2026 and the three and six months ended June 30, 2025.

11. REVENUE

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


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2026		2025		2026		2025
Product		34,466		33,475		70,772		69,699
Transportation		4,229		4,091		8,521		8,029
License fees from Construction Partners		196		175		414		359
Total product revenue		38,891		37,741		79,707		78,087
Installation and other services		1,419		1,181		3,035		2,130
		40,310		38,922		82,742		80,217

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


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2026		2025		2026		2025
At a point in time		38,695		37,566		79,293		77,728
Over time		1,615		1,356		3,449		2,489
		40,310		38,922		82,742		80,217

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

Contract Liabilities


	As at
	June 30, 2026		December 31, 2025		December 31, 2024
Customer deposits		2,211		3,474		4,028
Deferred revenue		382		33		-
Contract liabilities		2,593		3,507		4,028

Contract liabilities primarily relate to deposits received from customers and maintenance revenue from license subscriptions. The balance of contract liabilities was lower as at June 30, 2026 compared to December 31, 2025 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2025 and 2024 totaling $3.5 million and $4.0 million, respectively, were recognized as revenue in the six months ended June 30, 2026 and 2025, respectively.

Sales by Industry

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


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2026		2025		2026		2025
Commercial		26,837		20,808		51,472		48,906
Healthcare		5,373		9,165		17,374		16,369
Government		3,142		3,007		5,766		5,656
Education		3,343		4,586		4,681		6,797
License fees from Construction Partners		196		175		414		359
Total product and transportation revenue		38,891		37,741		79,707		78,087
Installation and other services		1,419		1,181		3,035		2,130
		40,310		38,922		82,742		80,217

12. SEGMENT REPORTING

The Company has one reportable and operating segment and operates in two principal geographic locations – Canada and the United States. Revenue continues to be derived almost exclusively from projects in North America and predominantly from the United States. The Company’s revenue from operations from external customers, based on location of operations, and information about its non-current assets, is detailed below.

Revenue from external customers


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2026		2025		2026		2025
Canada		5,162		4,044		10,970		10,922
U.S.		35,148		34,878		71,772		69,295
		40,310		38,922		82,742		80,217

Non-current assets


	As at June 30,		As at December 31,
	2026		2025
Canada		23,313		26,013
U.S.		12,527		14,104
		35,840		40,117

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

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

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

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

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


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
	($ in thousands)						($ in thousands)
Revenue		40,310			38,922			82,742			80,217
Operating expenses (1)		12,683			15,156			28,948			30,020
Operating income (loss)		1,301			(4,338	)		(1,963	)		(4,660	)
Other (expenses)/income and (losses)/gains (2)		(242	)		(2,264	)		(251	)		(2,603	)
Net income (loss) after tax		1,059			(6,602	)		(2,214	)		(7,263	)

Reconciliation of profit or loss
Adjustments and reconciling items		-			-			-			-
Net income (loss) after tax		1,059			(6,602	)		(2,214	)		(7,263	)

(1) Includes Sales and marketing, General and administrative, Operations support, Technology and development, Stock-based compensation, and Reorganization costs.

(2) Includes Tax expenses, non-recurring gains and losses, foreign exchange gains (losses), interest income and interest expenses.

13. INCOME TAXES

As at June 30, 2026, the Company had a valuation allowance of $30.5 million against deferred tax assets as the Company has experienced cumulative losses in recent years (December 31, 2025 – $30.9 million).

14. COMMITMENTS AND CONTINGENCIES

As at June 30, 2026, the Company had outstanding purchase obligations of approximately $2.6 million related to service commitments, inventory, and property, plant and equipment purchases (December 31, 2025 – $4.0 million). As at June 30, 2026, the Company had undiscounted operating lease liabilities of $24.5 million (December 31, 2025 – $27.8 million).

As previously disclosed, DIRTT Environmental Solutions Inc. received a subpoena for records in relation to an ongoing inquiry by the U.S. Department of Justice into certain projects and services provided by a third party and DIRTT dating back to 2014. The Company is complying with the subpoena and cooperating with the Department of Justice. There have been ongoing discussions regarding the possible resolution of these matters with the Department of Justice without admitting or denying liability. Based on the discussions to date, the Company provided $2.0 million as at December 31, 2025 for the cost of a potential settlement of these matters with the Department of Justice.

15. RELATED PARTY TRANSACTIONS

On August 2, 2024, DIRTT entered into a support and standstill agreement (the “2024 Support Agreement”) with 22NW and WWT Opportunity #1 LLC (“WWT”), DIRTT’s second largest shareholder at the time, which replaced the support and standstill agreement entered into with 22NW on March 22, 2024. Under the 2024 Support Agreement, both 22NW and WWT agreed to certain voting and standstill obligations, including voting in favor of the management director nominees at each of DIRTT’s next two annual general meetings and voting in favor of the ratification of the Company’s amended and restated shareholder rights plan. Additionally, each of 22NW and WWT had the right to designate a director nominee at each of DIRTT’s next two annual general meetings, and is subject to certain restrictions with respect to commencing a take-over bid for the Company. The 2024 Support Agreement also permits WWT to acquire up to 4,067,235 additional shares through market purchases (representing approximately 2% of the then issued and outstanding shares), which provides WWT with an opportunity to own the same number of shares as 22NW (being 57,447,988 shares, or approximately 29.8% of the issued and outstanding shares as of the date of the 2024 Support Agreement). The 2024 Support Agreement otherwise prohibits each of 22NW and WWT from acquiring any additional shares. As a result of the share sale by WWT to the 726 Entities on February 13, 2026 as described below, WWT is no longer entitled to its nomination right under the 2024 Support Agreement. Except as amended by the 2026 Support Agreement described below, the 2024 Support Agreement otherwise remains in force.

On February 17, 2026, the Company entered into a support and standstill agreement (the “2026 Support Agreement”) with 22NW, and 726 BF LLC and 726 BC LLC (collectively, the “726 Entities”), which amends the 2024 Support Agreement in respect of certain matters. The 2026 Support Agreement was entered into in connection with the acquisition by the 726 Entities of certain common shares from WWT, as a result of which the 726 Entities own collectively approximately 15.0% of the Company’s outstanding common shares. Under the 2026 Support Agreement, each of 22NW and the 726 Entities had the right to designate a director nominee at the Company’s annual general meeting that was held on May 7, 2026 (the “2026 Meeting”), so long as they respectively owned at least the lesser of (i) 10% of the then outstanding common shares, or (ii) 19,174,445 common shares. Under the 2026 Support Agreement, both 22NW and the 726 Entities are subject to certain voting and standstill obligations, including voting in favor of the management director nominees at the 2026 Meeting. Additionally, 22NW and the 726 Entities are each subject to certain restrictions with respect to commencing a take-over bid for the Company. The 2026 Support Agreement otherwise prohibits each of 22NW and the 726 Entities from acquiring any additional common shares and terminates on the date which is 90 days following the 2026 Meeting. Pursuant to the terms of the 2026 Support Agreement, the Company appointed Jeremy Gold, Managing Director, Briger Family Office, to the Board effective February 13, 2026. Mr. Gold is the nominee director for the 726 Entities under the 2026 Support Agreement.

Other related party transactions for the three and six months ended June 30, 2026, relate to the sale of DIRTT products and services to the Fortress Investment Group, a related party to the 726 Entities, for $0.1 million. The sale to the Fortress Investment Group was based on price lists in force and terms that are available to all employees. There were no related party transactions for the three months ended June 30, 2025.

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

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim condensed consolidated financial statements and related notes and other financial information appearing in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 (this “Quarterly Report”). This discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Quarterly Report.

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, DIRTT Design Editor also known as the ICE® software and technology platform (“Design Editor”, “ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to our Construction Partners and certain third parties, including Armstrong World Industries, Inc. (“AWI”) which owns a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE software that is used by AWI.

Key Second Quarter Highlights and Other Recent Developments

•

Revenue for the quarter ended June 30, 2026 was $40.3 million, an increase of $1.4 million or 4%, from $38.9 million for the same period of 2025.

•

Gross profit and gross profit margin for the quarter ended June 30, 2026 were $14.0 million or 34.7% of revenue compared to $10.8 million or 27.8% of revenue for the quarter ended June 30, 2025. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended June 30, 2026 was $14.9 million, an increase from $11.8 million Adjusted Gross Profit for the second quarter of 2025. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) was 37.0% in the second quarter of 2026, an increase from 30.4% in the comparative period of 2025. Gross profit and Adjusted Gross Profit for the quarter ended June 30, 2026 improved from prior periods primarily due to lower tariff and tariff mitigation costs, which was partially offset by lower margins on installation projects. A 1% aluminum price surcharge was put in place on orders placed after March 18, 2026 to help mitigate the impact of rising aluminum prices. We incurred $0.3 million of tariff and tariff mitigation costs in the second quarter of 2026 compared to $2.0 million tariff and tariff mitigation costs in the second quarter of 2025.

•

During the first six months of 2025, various tariffs were levied by the U.S. and Canadian governments. The Company was most significantly impacted by the 50% tariff levied on Canadian aluminum exports to the U.S. which increased from 25% in June 2025. Following tariff revisions announced by the U.S. Government on April 6, 2026 and June 8, 2026, the Company believes that the import of DIRTT product into the U.S. is no longer subject to certain tariffs under Section 232 of the Trade Expansion Act of 1962 (“Section 232 tariffs”) on steel and aluminum. We incurred $0.3 million (0.7% of total revenue) in tariffs and costs related to tariff mitigation actions for the three months ended June 30, 2026 compared to $2.0 million tariff and tariff mitigation costs incurred in the three months ended June 30, 2025.

•

Reorganization expenses related to the deployment of the Transformation Office (as defined herein) for the three months ended June 30, 2026 included $1.1 million primarily related to termination benefits.

•

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

•

Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the second quarter of 2026 was $4.7 million, or 11.8% of revenue, an increase of $6.8 million from $(2.0) million, or (5.2%) of revenue, for the second quarter of 2025. Higher Adjusted EBITDA was mainly driven by a $3.1 million increase in Adjusted Gross Profit, offset by the decrease in other operating expenses discussed above.

•

Cash on hand decreased by $0.2 million in the second quarter of 2026 to $14.8 million, compared to a $5.3 million decrease in cash in the second quarter of 2025. The decrease in cash in the second quarter of 2026 was driven by $0.9 million of net cash flows provided by operating activities, offset by $0.5 million in investment activities, and $0.3 million in repayment of long term debt.

•

On February 2, 2026, the Company’s 10-week trial against Falkbuilt Ltd. (“Falkbuilt”), Messrs. Smed and Loberg and several other former DIRTT employees alleging breaches of restrictive covenants, fiduciary duties, employment duties and confidentiality (the “Falkbuilt Litigation”) commenced. DIRTT is pursuing damages and losses it suffered in Canada, the U.S., and abroad in the Court of King’s Bench of Alberta. An additional three weeks of trial began July 20, 2026.

•

On June 30, 2026, the Company amended the employment agreements for Scott Robinson and Adrian Zarate to extend their respective terms as Executive Chairman of the Board and Chief Transformation Officer through December 31, 2026.

Pipeline

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

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


	As at
	July 1, 2026		January 1, 2026		% Change			July 1, 2025		% Change
Twelve-Month Forward Pipeline ($ 000s)
Commercial		161,209		183,323		(12	)		169,698		(5	)
Healthcare		67,393		65,962		2			71,957		(6	)
Government		53,500		52,796		1			48,930		9
Education		27,895		30,763		(9	)		20,342		37
		309,997		332,844		(7	)		310,927		(0	)
Leads (#)		1,445		1,457		(1	)		1,362		6

Pipeline decreased from January 1, 2026, reflecting the continued execution of our operating strategy, with a focus on improving pipeline quality and forecasting reliability through enhanced qualification processes and increased emphasis on higher-value, higher-margin opportunities.

Price Increases and Impact of Tariffs

Throughout 2025 and into 2026, the U.S. Government proposed and enacted various tariffs as disclosed in our Annual Report on Form 10-K.

Conflict in the Middle East, including Iran, has resulted in rising oil and aluminum prices which are compressing our gross margin. In response, we implemented an 8% freight and 1% aluminum price surcharge earlier in 2026.

As of the date of this report, tariff revisions were announced effective April 6, 2026 and subsequently updated effective June 8, 2026, specific to steel and aluminum tariffs. Based on our review of the proclamations, we believe that the import of DIRTT products into the U.S. is no longer subject to Section 232 tariffs on steel and aluminum.

Further, the Canada-United States-Mexico Agreement (“ CUSMA”), the free trade agreement among Canada, the U.S., and Mexico, is undergoing a joint review in 2026. If the U.S. were to withdraw from or materially modify the CUSMA or impose significant tariffs or taxes on goods imported into the U.S., the cost of our products could significantly increase or no longer be priced competitively for U.S. customers, and our business, financial condition, and results of operations could be materially and adversely affected. We continue to evaluate these developments.

We continue to monitor and mitigate the impact of tariffs and raw material costs through pricing actions, surcharges, and other operational strategies. Although aluminum is our most significant raw material, we are seeing double digit price increases in some of our other raw materials due to rising oil prices. Based on the above developments, we continue to maintain our 3.5% tariff surcharge and the additional 1% aluminum price surcharge announced earlier in the year. Through our business transformation, we are aiming to absorb other raw material price increases by finding business efficiencies through DIRTT’s new operating model.

On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act. As a result of this ruling, we may be eligible for a refund of certain tariffs previously paid on imported goods. As of June 30, 2026, the U.S. Customs and Borders Protection has confirmed that we are eligible to a refund of $0.3 million under Phase 1 of the program including $0.02 million of interest. These amounts have been recorded in our financial statements. We may be eligible for additional refunds in the future under Phase 2 and Phase 3. However, no adjustments have been recorded in the accompanying interim condensed consolidated financial statements for these two phases as the recoverability and timing of any such refund remains uncertain and we cannot reasonably predict or estimate the financial impact.

Outlook

As we progress through the back-half of 2026, DIRTT continues to build on the operational and commercial improvements achieved over the past eighteen months. While customer decision-making timelines remain measured in certain markets, we are seeing increased consistency in project qualification, stronger alignment between commercial activity and forecasted revenue opportunities, and improved visibility into the timing of potential project awards. We believe these trends reflect the progress achieved through our transformation initiatives and provide a stronger foundation for disciplined execution.

Our commercial activity continues to support confidence in the business. While our twelve-month forward opportunity set has moderated from the beginning of the year, this reflects deliberate efforts to improve qualification standards, strengthen forecasting discipline, and prioritize opportunities that align with our strategic and financial objectives. We believe these actions have improved the overall quality of opportunities being pursued and enhanced visibility into future demand.

Construction Services continues to evolve as an important component of our commercial strategy and remains a meaningful contributor to business development activity. Compared to traditional product-led opportunities, Construction Services engagements are generally supported by contractual arrangements that provide greater visibility once awarded and can contribute to more predictable revenue realization. As this channel matures, we expect it to further strengthen market coverage and anticipate changes to our project execution practices to improve margin and broaden our ability to serve customers.

We continue to execute our transformation initiatives, including process standardization, cost optimization, partner enablement, and enhancements to our commercial organization. Targeted investments in leadership,

organizational capability, and go-to-market effectiveness are strengthening commercial execution and supporting more efficient conversion of opportunities into revenue. Collectively, these efforts are enhancing organizational effectiveness and positioning the Company to drive sustainable, profitable growth.

With a strong liquidity position, improving commercial discipline, and a streamlined operating model, DIRTT remains focused on disciplined execution and long-term value creation for shareholders, partners, and employees.

Non-GAAP Financial Measures

Note Regarding Use of Non-GAAP Financial Measures

Our interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These GAAP financial statements include non-cash charges and other charges and benefits that we believe are unusual or infrequent in nature or that we believe may make comparisons to our prior or future performance difficult.

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

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

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


Adjusted Gross Profit	Gross profit before deductions for depreciation and amortization

Adjusted Gross Profit Margin	Adjusted Gross Profit divided by revenue

EBITDA	Net income before interest, taxes, depreciation, and amortization

Adjusted EBITDA	EBITDA adjusted to remove foreign exchange gains or losses; reorganization expenses; stock-based compensation expense; unusual or infrequent charges (such as gain on extinguishment of debt); and any other non-core gains or losses

Adjusted EBITDA Margin	Adjusted EBITDA divided by revenue

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

Results of Operations

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


	For the Three Months Ended June 30,									For the Six Months Ended June 30,
	2026			2025			% Change			2026			2025			% Change
	($ in thousands)									($ in thousands)
Revenue		40,310			38,922			4			82,742			80,217			3
Gross Profit		13,984			10,818			29			26,985			25,360			6
Gross Profit Margin		34.7	%		27.8	%					32.6	%		31.6	%
Operating expenses
Sales and marketing		4,216			5,293			(20	)		9,247			10,470			(12	)
General and administrative		4,548			5,743			(21	)		9,984			11,223			(11	)
Operations support		1,237			1,872			(34	)		2,852			3,902			(27	)
Technology and development		902			1,480			(39	)		1,843			2,708			(32	)
Stock-based compensation		724			594			22			1,599			1,333			20
Reorganization		1,056			174			507			3,423			384			791
Total operating expenses		12,683			15,156			(16	)		28,948			30,020			(4	)
Operating income (loss)		1,301			(4,338	)		130			(1,963	)		(4,660	)		58
Operating margin		3.2	%		(11.1	)%					(2.4	)%		(5.8	)%
Interest income		105			232			(55	)		187			494			(62	)
Gain on extinguishment of convertible debentures		-			7			(100	)		-			14			(100	)
Foreign exchange gain (loss)		46			(1,912	)		102			385			(2,024	)		119
Interest expense		(354	)		(485	)		(27	)		(704	)		(936	)		(25	)
		(203	)		(2,158	)		91			(132	)		(2,452	)		95
Net income (loss) before tax		1,098			(6,496	)		117			(2,095	)		(7,112	)		71
Current and deferred income tax expense		39			106			(63	)		119			151			(21	)
Net income (loss) after tax		1,059			(6,602	)		116			(2,214	)		(7,263	)		70

Revenue

Revenue mainly reflects sales to our construction partners (“Construction Partners”) for resale to their clients and, in some circumstances, our direct sales to clients. Our revenue is generally affected by the timing of order execution, particularly large orders, which can add variability to our financial results and shift revenue between quarters.

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


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026		2025		% Change		2026		2025		% Change
	($ in thousands)						($ in thousands)
Product		34,466		33,475		3		70,772		69,699		2
Transportation		4,229		4,091		3		8,521		8,029		6
License fees from Construction Partners		196		175		12		414		359		15
Total product revenue		38,891		37,741		3		79,707		78,087		2
Installation and other services		1,419		1,181		20		3,035		2,130		42
		40,310		38,922		4		82,742		80,217		3

Revenue for the three months ended June 30, 2026 was $40.3 million, an increase of $1.4 million compared to $38.9 million in the comparative period of 2025. The second quarter was relatively flat compared to the second quarter of 2025. Revenue for the six months ended June 30, 2026 was $82.7 million, an increase of $2.5 million from $80.2 million in the comparative period of 2025 due to pricing increases issued in response to tariffs. See “Price Increases and Impact of Tariffs.”

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

Our success is partly dependent on our ability to profitably develop our Construction Partner network to expand our market penetration and ensure best practices are shared across local markets. At June 30, 2026, we had 59 Construction Partners (June 30, 2025: 70; December 31, 2025: 66) servicing multiple locations. We continue to both develop our Construction Services team and partner with our Construction Partner network to drive increased revenue for DIRTT.

The following tables present our product and transportation revenue by vertical market:


	For the Three Months Ended June 30,							For the Six Months Ended June 30,
	2026		2025		% Change			2026		2025		% Change
	($ in thousands)							($ in thousands)
Commercial		26,837		20,808		29			51,472		48,906		5
Healthcare		5,373		9,165		(41	)		17,374		16,369		6
Government		3,142		3,007		4			5,766		5,656		2
Education		3,343		4,586		(27	)		4,681		6,797		(31	)
License fees from Construction Partners		196		175		12			414		359		15
Total product revenue		38,891		37,741		3			79,707		78,087		2
Service revenue		1,419		1,181		20			3,035		2,130		42
		40,310		38,922		4			82,742		80,217		3


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2026		2025		2026		2025
	(in %)				(in %)
Commercial		69		56		65		63
Healthcare		14		24		22		21
Government		8		8		7		7
Education		9		12		6		9
Total Product Revenue(1)		100		100		100		100

(1) Excludes license fees from Construction Partners.

We experienced a modest increase in revenue year-over-year. We continue to pursue opportunities across all market sectors, including healthcare, where projects typically exhibit longer sales cycles and implementation timelines.

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


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026		2025		% Change		2026		2025		% Change
	($ in thousands)
Canada		5,162		4,044		28		10,970		10,922		0
U.S.		35,148		34,878		1		71,772		69,295		4
		40,310		38,922		4		82,742		80,217		3

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

Sales and marketing expenses

Sales and marketing expenses decreased by $1.1 million to $4.2 million for the three months ended June 30, 2026, compared to $5.3 million for the three months ended June 30, 2025. The decrease is primarily due to a $0.7 million decrease in salaries and benefits costs and a $0.2 million decrease in commissions.

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

General and administrative expenses

General and administrative expenses decreased by $1.2 million to $4.5 million for the three months ended June 30, 2026, compared to $5.7 million for the three months ended June 30, 2025. The decrease is primarily related to a $0.9 million decrease in professional services costs and a $0.3 million decrease in salaries and benefits costs.

General and administrative expenses decreased by $1.2 million to $10.0 million for the six months ended June 30, 2026, compared to $11.2 million for the six months ended June 30, 2025. The decrease is primarily related to a $0.6 million decrease in professional services costs and a $0.4 million decrease in salaries and benefits costs.

Operations support expenses

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

Operations support expenses decreased by $1.1 million to $2.9 million for the six months ended June 30, 2026, compared to $3.9 million for the six months ended June 30, 2025 primarily due to a $0.9 million decrease in salaries and benefits costs.

Technology and development expenses

Technology and development expenses relate to non-capitalizable costs associated with our product and software development teams, and are primarily comprised of salaries and benefits of technical staff. Technology and development expenses decreased $0.6 million to $0.9 million for the three months ended June 30, 2026 compared to $1.5 million for the three months ended June 30, 2025. The decrease is primarily related to a $0.3 million decrease in salaries and benefits costs.

Technology and development expenses decreased by $0.9 million to $1.8 million for the six months ended June 30, 2026 compared to $2.7 million for the six months ended June 30, 2025. The decrease is primarily related to a $0.5 million decrease in salaries and benefits costs, and a $0.3 million decrease in professional services costs.

Stock-based compensation

Stock-based compensation expense is dependent on share price in a period for fair value adjustments made on cash-settled deferred share units (“DSUs”) awards and grants, exercises, expirations or forfeitures made on other awards.

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

Stock-based compensation expense for the six months ended June 30, 2026 was $1.6 million compared to $1.3 million in the same period of 2025. The increase in expense was largely due to an increase in PSUs expense, slightly offset by a decrease in DSU expense and RSU expense in the second quarter of 2026, compared to the second quarter of 2025.

Reorganization

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

Interest income

Interest income for the three and six months ended June 30, 2026 was $0.1 million and $0.2 million, respectively, compared to $0.2 million and $0.5 million for the comparative periods of 2025. The decreased interest income is due to declining prime rates on the Company’s lower cash equivalents during the six months ended June 30, 2026 compared to the same period of 2025.

Foreign exchange gain (loss)

Foreign exchange gain (loss) increased from losses of $1.9 million and $2.0 million for the three and six months ended June 30, 2025 to gains of $0.05 million and $0.4 million for the same periods of 2026. The increase is primarily related to the weakening of the Canadian dollar over the three and six months ended June 30, 2026.

Interest expense

Interest expense decreased by $0.1 million and $0.2 million from $0.5 million and $0.9 million in the three and six months ended June 30, 2025, respectively, to $0.4 million and $0.7 million for the three and six months ended June 30, 2026, respectively. This decrease is largely due to repayment of the 6.00% convertible unsecured subordinated debentures on January 31, 2026 (the “January Debentures”). The Business Development Bank of Canada (“BDC”) loan of C$10 million was advanced during February and March 2026 and bears an interest rate of 5.8% .

Income tax

Income tax expense for the three and six months ended June 30, 2026 decreased to $0.04 million and $0.1 million from $0.1 million and $0.2 million in the three and six months ended June 30, 2025. The current tax expense represents the income tax provision after the utilization of non-capital loss carry forwards against current period taxable income. The provision for income taxes comprises U.S. and Canadian federal, state and provincial taxes based on pre-tax income. Despite positive indications of future profitability, including the strength of our pipeline, the Company has determined that it is unlikely that a deferred tax asset will be recognized. Given the history of losses, the Company plans to maintain a valuation allowance against the deferred tax asset. As at June 30, 2026, the Company had a valuation allowance of $30.5 million (December 31, 2025: $30.9 million) against deferred tax assets. The Company plans to continue to evaluate indicators on whether a valuation allowance continues to be needed. As at June 30, 2026, we had C$112.4 million of non-capital loss carry-forwards in Canada and $41.2 million of non-capital loss carry-forwards in the United States. These loss carry-forwards will begin to expire in 2037.

Net income (loss) after tax

Net income after tax was $1.1 million or $0.01 net income per common share, basic and diluted, in the three months ended June 30, 2026, an increase of $7.7 million from net loss after tax of $6.6 million or $0.03 net loss per common share, basic and diluted, for the three months ended June 30, 2025. The increase in net income is primarily the result of a $3.5 million decrease in operating expenses (excluding stock-based compensation and reorganization expenses), a $3.2 million increase in gross profit, and a $2.0 million increase in foreign exchange gain, offset by a $0.9 million increase in reorganization expenses.

Net loss after tax was $2.2 million or $0.01 net loss per common share, basic and diluted, in the six months ended June 30, 2026, a decrease of $5.0 million from net loss after tax of $7.3 million or $0.04 net loss per common share, basic and diluted, for the six months ended June 30, 2025. The decrease in net loss is primarily the result of a $4.4 million decrease in operating expenses (excluding stock-based compensation and reorganization expenses), a $2.4 million increase in foreign exchange gain, and a $1.6 million increase in gross profit, offset by a $3.0 million increase in reorganization expenses.

Adjusted Gross Profit and Adjusted Gross Profit Margin for the Three and Six months ended June 30, 2026 and 2025

The following table presents a reconciliation for the three and six months ended June 30, 2026 and 2025 of Adjusted Gross Profit to our gross profit and Adjusted Gross Profit Margin to gross profit margin, which are the most directly comparable GAAP measures for the periods presented:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
	($ in thousands)						($ in thousands)
Gross profit		13,984			10,818			26,985			25,360
Gross profit margin		34.7	%		27.8	%		32.6	%		31.6	%
Add: Depreciation and amortization expense		936			1,007			1,882			1,964
Adjusted Gross Profit		14,920			11,825			28,867			27,324
Adjusted Gross Profit Margin		37.0	%		30.4	%		34.9	%		34.1	%

For the quarter ended June 30, 2026, gross profit margin increased to 34.7% compared to 27.8% for the same period of 2025. Adjusted Gross Profit Margin was 37.0% for the second quarter of 2026, an increase from 30.4% in the comparative period of 2025. The increase in Adjusted Gross Profit Margin was mainly attributable to lower tariff costs and partially offset by lower margins on installation projects. With respect to higher aluminum prices, we have put in place a 1% aluminum price surcharge on orders placed after March 18, 2026 to help mitigate the impact of rising aluminum prices.

EBITDA and Adjusted EBITDA for the Three and Six months ended June 30, 2026 and 2025

The following table presents a reconciliation for the results for the three and six months ended June 30, 2026 and 2025 of EBITDA and Adjusted EBITDA to our net income (loss) after tax, and of Adjusted EBITDA Margin to net income (loss) margin, which are the most directly comparable GAAP measures for the periods presented:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
	($ in thousands)						($ in thousands)
Net income (loss) after tax for the period		1,059			(6,602	)		(2,214	)		(7,263	)
Add back (deduct):
Interest income		(105	)		(232	)		(187	)		(494	)
Interest expense		354			485			704			936
Income tax expense		39			106			119			151
Depreciation and amortization		1,406			1,547			2,833			3,027
EBITDA		2,753			(4,696	)		1,255			(3,643	)
Stock-based compensation		724			594			1,599			1,333
Reorganization expense(2)		1,056			174			3,423			384
Foreign exchange (gain) loss		(46	)		1,912			(385	)		2,024
Gain on extinguishment of convertible debentures(2)		-			(7	)		-			(14	)
Legal provision(2)		250			-			250			-
Adjusted EBITDA		4,737			(2,023	)		6,142			84
Net income (loss) Margin(1)		2.6	%		(17.0	)%		(2.7	)%		(9.1	)%
Adjusted EBITDA Margin		11.8	%		(5.2	)%		7.4	%		0.1	%

(1) Net income (loss) after tax divided by revenue.

(2) Reorganization expenses (refer to Note 4 of the interim condensed consolidated financial statements), the legal provision, and the gain on extinguishment of convertible debentures are not core to our business and are therefore excluded from the Adjusted EBITDA calculation.

For the three months ended June 30, 2026, Adjusted EBITDA increased by $6.8 million to $4.7 million from $(2.0) million and Adjusted EBITDA Margin increased to 11.8% from (5.2%) for the same period of 2025. This increase is attributed to the $3.1 million increase in Adjusted Gross Profit (explained above) and a decrease in operating expenses (excluding reorganization expense and stock-based compensation) of $3.5 million.

Liquidity and Capital Resources

As at June 30, 2026, the Company had $14.8 million of cash on hand and C$9.6 million ($6.7 million) of available borrowings, compared to $20.3 million of cash on hand and C$16.3 million ($11.8 million) of available borrowings as at December 31, 2025. Through the first six months of 2026, the Company used $5.5 million of cash primarily for $12.4 million repayment of long-term debt ($12.1 million relating to repayment of outstanding January Debentures), $1.3 million for capital expenditures, $0.4 million for tax payments on vesting RSUs, $0.1 million to repurchase common shares and debentures under the Renewed Shares NCIB and Renewed Debentures NCIB (as defined herein), offset by $6.9 million net proceeds received from the BDC loan and $2.1 million of net cash flows provided by operating activities.

We have assessed the Company’s liquidity as at June 30, 2026, taking into account our sales outlook for the next twelve months, our budget, forecast and expected cash outflows, our existing cash balances and available credit facilities. Based upon this analysis, we believe the Company has sufficient liquidity to remain a going concern for at least the next twelve months. We note that the outstanding principal balance of the December Debentures (as defined herein) amounting to C$14.8 million ($10.4 million) as of June 30, 2026 are due on December 31, 2026 and have therefore been classified as current on our balance sheet. We are evaluating whether we will settle or refinance this debt.

On December 11, 2025, the Company entered into a letter agreement (the “Letter”) with BDC, pursuant to which BDC committed to lending the Company up to C$15.0 million (the “Loan”) subject to the satisfaction of certain conditions. The Letter was subsequently amended on January 30, 2026, February 9, 2026 and March 9, 2026. Following the satisfaction of the conditions precedent set forth in the Letter, the Company received an initial disbursement of C$5.5 million on February 13, 2026 and, following satisfaction of certain additional conditions, a secondary disbursement of C$4.5 million on March 11, 2026. Subject to certain conditions, it is expected that BDC will make a third disbursement of C$5.0 million in the second half of 2026.

On November 4, 2025, the Company entered into the Fifth Extended RBC Facility (as defined herein), which matures on November 30, 2026. The Fifth Extended RBC Facility is subject to the same borrowing base terms as the previous facility; with the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points.

On February 11, 2026 and in connection with the Loan, the Company entered into the Seventh Amended RBC Facility and the Priority Agreement (each as defined herein). The Seventh Amended RBC Facility matures on November 30, 2026 and is subject to the same borrowing base terms as the previous facility. The Seventh Amended RBC Facility allows the Company to incur indebtedness to BDC of C$15 million under the Loan and incorporates permitting specific encumbrances to BDC and the Priority Agreement. The Seventh Amended RBC Facility releases certain mortgage collateral held by RBC.

On March 11, 2026, the Company entered into the Eighth Amended RBC Facility (as defined herein), which matures on November 30, 2026. The Eighth Amended RBC Facility is subject to the same borrowing base terms stated in the Seventh Amended RBC Facility. The Eighth Amended RBC Facility includes a customary “Restricted Payments” covenant that prohibits us from, among other things, repurchasing our common shares and paying dividends, unless we have satisfied certain conditions (the “Payment Conditions”). The Payment Conditions include conditions that, after giving effect to the relevant Restricted Payment, the Company has a net borrowing availability of at least C$5.0 million over the preceding 30-day period, and our fixed charge coverage ratio (“FCCR”) be at least 1.10 to 1.00 on a trailing 12-month basis. In February 2026, we and RBC determined that our purchases of our common shares under our NCIB in December 2025 did not comply with the Restricted Payments covenant because our FCCR was below 1.10 to 1.00. The Eighth Amended RBC Facility provided a waiver in connection with the foregoing.

To the extent that existing cash and cash equivalents and available facilities are not sufficient to fund future activities, we may seek to raise additional funds through equity or debt financings. If additional funds are raised through the incurrence of indebtedness, such indebtedness may have rights that are senior to holders of our Debentures (as defined herein) and our equity securities or contain instruments that may be dilutive to our existing shareholders. Any additional equity or debt financing may be dilutive to our existing shareholders. While we believe we can access capital markets when needed or under acceptable terms, there can be no assurance that we will be able to do so, particularly in light of recent market conditions.

We note that as of the date of this report, the imposition of trade barriers, including tariffs, quotas, embargoes, safeguards, and customs restrictions between Canada and the U.S. as well as the current conflict in the Middle East, including Iran, may increase the cost or reduce the supply of materials and products available to us, increase shipping times, affect our customers’ construction needs or budgets, affect the demand for our products or our product mix or require us to modify our supply chain organization, manufacturing facilities, or other current business practices, any of which could harm our business, financial condition, and results of operations.

Equity and Debt Issuances and Buyback Programs

During 2025, we continued to execute on various debt and share buyback programs. The Debenture Repurchase, Debentures NCIB, Renewed Debentures NCIB, Shares NCIB, Renewed Shares NCIB, and the Share Repurchase (each as defined herein) were initiated after careful consideration of cash flow, and the Company continues to evaluate uses of cash on hand. As discussed in the “Part II, Item 1A. Risk Factors” section and elsewhere of this Quarterly Report, proposed and implemented tariffs on Canadian exports into the U.S., and vice versa, may have a material impact on future cash flows and liquidity, which the Company will continue to monitor.

In January 2021, we issued the January Debentures for net proceeds after costs of C$37.6 million ($29.5 million). The January Debentures accrued interest at a rate of 6.00% per annum and were convertible into common shares of DIRTT at an exercise price of C$4.65 per common share, or if not converted would mature and be repayable on January 31, 2026. The Company repaid the outstanding principal and interest on the January Debentures on January 31, 2026.

On December 1, 2021, we issued C$35.0 million of convertible unsecured subordinated debentures (the “December Debentures”, and collectively with the January Debentures, the “Debentures”) for net proceeds after costs of C$32.7 million ($25.6 million). The December Debentures accrue interest at a rate of 6.25% per annum and are convertible into common shares of DIRTT at an exercise price of C$4.20 per common share, or if not converted, will mature and be repayable on December 31, 2026. Interest and principal are payable in cash or shares at the option of the Company.

On August 2, 2024, the Company repurchased for cancellation C$13,638,000 and principal amount of December Debentures and C$18,915,000 principal amount of the January Debentures held by 22NW Fund, L.P. (the “Debenture Repurchase”).

On August 28, 2024, the Company commenced the Debentures normal course issuer bid (the “Debentures NCIB”) which expired on August 27, 2025. Under the Debentures NCIB, DIRTT was permitted to acquire up to C$1,664,200 principal amount of the January Debentures and C$1,558,700 principal amount of the December Debentures. For the three months ended June 30, 2025, C$0.1 million ($0.1 million) and C$0.02 million ($0.01 million) principal amounts of the December Debentures and January Debentures, respectively, had been acquired through the Debentures NCIB. On August 26, 2025, the Company announced the renewal of the Debentures NCIB which commenced August 28, 2025 and is expected to terminate on August 27, 2026 for the December Debentures and terminated on January 31, 2026 for the January Debentures, concurrent with the maturity date of the January Debentures (the “Renewed Debentures NCIB”). Under the Renewed Debentures NCIB, DIRTT was permitted to acquire up to C$1,656,900 principal amount of the January Debentures and is permitted to acquire C$1,493,500 principal amount of the December Debentures. For the six months ended June 30, 2026, C$0.03 million ($0.02 million) principal amounts of the December Debentures had been acquired through the Renewed Debentures NCIB. As at June 30, 2026, C$14.8 million ($10.4 million) principal amount of the December Debentures are outstanding.

On December 20, 2024, the Company commenced a normal course issuer bid for common shares (the “Shares NCIB”) which terminated on December 19, 2025. Under the Shares NCIB, DIRTT was permitted to acquire up to

7,515,233 common shares. All purchases were made on the open market at the market price of common shares at the time of acquisition. Any common shares acquired through the Shares NCIB were immediately cancelled. On December 18, 2025, the Company announced the renewal of the Shares NCIB which commenced on December 22, 2025, and is expected to terminate on December 21, 2026 (the “Renewed Shares NCIB”). Under the Renewed Shares NCIB, DIRTT is permitted to acquire up to 9,593,878 common shares. All purchases will be made on the open market at the market price of common shares at the time of acquisition. Any common shares acquired through the Shares NCIB will be immediately cancelled.

On February 13, 2025, the Company entered a share repurchase agreement with NGEN III, LP (“NGEN”) to purchase for cancellation 3,920,844 common shares held by NGEN (the “NGEN Shares”) at a purchase price of $0.80 per NGEN Share (the “Share Repurchase”). Following the Share Repurchase, there were 189,643,903 common shares outstanding. The NGEN Shares repurchased under the Share Repurchase were counted against the maximum number of shares that may be repurchased pursuant to the Shares NCIB being 7,515,233 shares. As at June 30, 2026, 6,047,480 common shares had been repurchased and cancelled for proceeds of C$6.5 million ($4.6 million) through the Shares NCIB, Renewed Shares NCIB, and the Share Repurchase.

As explained above, initiating the debt and share buybacks was done after careful consideration of cash flow and with consideration to the risk of proposed and implemented tariffs.

Facilities

On February 12, 2021, the Company entered into a loan agreement governing a C$25.0 million senior secured revolving credit facility with the Royal Bank of Canada (“RBC”), as lender (the “RBC Facility”), as disclosed in our Annual Report on Form 10-K. The Company has extended the RBC Facility a number of times since 2023, including on November 4, 2025 (the “Fifth Extended RBC Facility”). The Fifth Extended RBC Facility expires November 30, 2026 and is subject to the same borrowing base terms as the previous facility, with the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. At June 30, 2026, available borrowings were C$9.6 million ($6.7 million) (December 31, 2025 – C$16.3 million ($11.8 million) of available borrowings), calculated in the same manner as the RBC Facility described above, of which no amounts have been drawn.

On February 11, 2026 and in connection with the Loan, the Company amended the Fifth Extended RBC Facility (the “Seventh Amended RBC Facility”) and entered into a priority agreement with RBC and BDC (the “Priority Agreement”). The Seventh Amended RBC Facility matures on November 30, 2026 and is subject to the same borrowing base terms as the previous facility. The Seventh Amended RBC Facility allows the Company to incur indebtedness to BDC of C$15 million under the Loan and incorporates permitting specific encumbrances to BDC and the Priority Agreement. The Seventh Amended RBC Facility also releases certain mortgage collateral held by RBC.

On March 11, 2026, the Company entered into the Waiver and Eighth Amendment to Loan Agreement (the “Eighth Amended RBC Facility”), which matures on November 30, 2026. The Eighth Amended RBC Facility is subject to the same borrowing base terms stated in the Seventh Amended RBC Facility. The Eighth Amended RBC Facility includes a customary “Restricted Payments” covenant that prohibits us from, among other things, repurchasing our common shares and paying dividends, unless we have satisfied certain conditions (the “Payment Conditions”). The Payment Conditions include conditions that, after giving effect to the relevant Restricted Payment, the Company has a net borrowing availability of at least C$5.0 million over the preceding 30-day period, and our FCCR be at least 1.10 to 1.00 on a trailing 12-month basis. In February 2026, we and RBC determined that our purchases of our common shares under our NCIB in December 2025 did not comply with the Restricted Payments covenant because our FCCR was below 1.10 to 1.00. The Eighth Amended RBC Facility provided a waiver in connection with the foregoing.

The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) of which, as of June 30, 2026, C$4.4 million ($3.2 million) has been drawn and C$4.1 million ($3.0 million) has been repaid. The Canada Leasing Facility has a seven-year term and bears interest at 4.25%. The Company did not make any draws on the Canada Leasing Facility during the six months ended June 30, 2026 and 2025.

The Eighth Amended RBC Facility is currently secured by substantially all of our real and personal property located in Canada and the United States. The Seventh Amended RBC Facility released certain mortgage collateral held by RBC.

Analysis of Cash Flow Changes During the Three and Six Months Ended June 30, 2026 and 2025

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


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2026			2025			2026			2025
	($ in thousands)						($ in thousands)
Net cash flows provided by (used in) operating activities		941			(3,922	)		2,148			(238	)
Net cash flows (used in) investing activities		(538	)		(979	)		(1,269	)		(1,708	)
Net cash flows (used in) financing activities		(324	)		(642	)		(6,020	)		(4,243	)
Effect of foreign exchange on cash, cash equivalents and restricted cash		(252	)		200			(359	)		1
Net decrease in cash, cash equivalents and restricted cash		(173	)		(5,343	)		(5,500	)		(6,188	)
Cash, cash equivalents and restricted cash, beginning of period		15,248			28,686			20,575			29,531
Cash, cash equivalents and restricted cash, end of period		15,075			23,343			15,075			23,343

Operating Activities

For the three months ended June 30, 2026, net cash flows provided by operating activities were $0.9 million compared to $3.9 million used in operating activities in the same period of 2025. The increase in cash flows provided by operations in the second quarter of 2026 is largely due to the $6.8 million increase in Adjusted EBITDA.

For the six months ended June 30, 2026, net cash flows provided by operating activities were $2.1 million compared to $0.2 million used in the same period of 2025. The increase in cash flows provided by operations was largely driven by a $6.1 million increase in Adjusted EBITDA.

Investing Activities

We invested $0.6 million and 1.3 million in capital expenditures for the three and six months ended June 30, 2026, compared to $1.0 million and $1.8 million for the three and six months ended June 30, 2025. The capital expenditures for the three and six months ended June 30, 2026 primarily consisted of $0.2 million and $0.5 million on capitalized software, $0.1 million and $0.3 million on manufacturing upgrades, $0.2 million and $0.3 million on office furniture and leasehold improvements, respectively.

The capital expenditures for the three and six months ended June 30, 2025 primarily consisted of $0.4 million and $0.9 million on capitalized software, $0.2 million and $0.3 million on manufacturing upgrades, $0.1 million and $0.2 million on marketing, $0.03 million and $0.2 million on leasehold improvements, respectively.

Financing Activities

We used $0.3 million of cash in financing activities for the three months ended June 30, 2026 compared to $0.6 million used in the three months ended June 30, 2025. The decrease in net cash flows used in financing activities is related to more common shares repurchased under the Shares NCIB in the three months ended June 30, 2025, offset by an increase in repayment of long-term debt in the three months ended June 30, 2026 as repayments towards the BDC loan commenced during the quarter.

Cash used in the six months ended June 30, 2026 was mainly driven by the full repayment of the outstanding January Debentures of $12.1 million and $0.4 million for employee tax payments on vesting RSUs offset by $6.9 million in net proceeds received from the BDC loan. Cash used in the six months ended June 30, 2025 consisted of $4.0 million spent in repurchases of common shares through the Shares NCIB and the Share Repurchase, and $0.2 million as repayment on convertible debt through the Debentures NCIB.


Alberta, Canada (State or other jurisdiction of incorporation or organization)		N/A (IRS Employer Identification No.)

7303 30th Street S.E. Calgary, Alberta, Canada (Address of principal executive offices)		T2C 1N6 (Zip code)


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐


Exhibit No.		Description

3.1		Restated Articles of Amalgamation of DIRTT Environmental Solutions Ltd. (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form 10, File No. 001-39061, filed on September 20, 2019).
3.2		Amended and Restated Bylaw No. 1 of DIRTT Environmental Solutions Ltd. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on May 22, 2020).
4.1		Base Indenture, dated January 25, 2021, by and among DIRTT Environmental Solutions Ltd., Computershare Trust Company of Canada and Computershare Trust Company, National Association as Trustees (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on January 29, 2021).
4.2		Supplemental Indenture, dated January 25, 2021, by and among the Company, Computershare Trust Company of Canada and Computershare Trust Company, National Association as Trustees (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on January 29, 2021).
4.3		Second Supplemental Indenture, dated December 1, 2021, by and among the Company, Computershare Trust Company of Canada and Computershare Trust Company, National Association as Trustees (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on December 1, 2021).
31.1*		Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of the Principal Executive Officer required by 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of the Principal Financial Officer required by 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*		Filed herewith
**		Furnished herewith


	DIRTT ENVIRONMENTAL SOLUTIONS LTD.

	By:	/s/ Fareeha Khan
		Fareeha Khan
		Chief Financial Officer (Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)

Date: July 29, 2026


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


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


		Page
Cautionary Statement Regarding Forward-Looking Statements		ii
PART I – FINANCIAL INFORMATION		4
Item 1. Financial Statements (Unaudited)		4
Interim Condensed Consolidated Balance Sheet		4
Interim Condensed Consolidated Statement of Operations and Comprehensive Loss		5
Interim Condensed Consolidated Statement of Changes in Shareholders’ Equity		7
Interim Condensed Consolidated Statement of Cash Flows		8
Notes to the Unaudited Interim Condensed Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3. Quantitative and Qualitative Disclosures About Market Risk		40
Item 4. Controls and Procedures		40

PART II – OTHER INFORMATION		42
Item 1. Legal Proceedings		42
Item 1A. Risk Factors		42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		42
Item 3. Defaults Upon Senior Securities		43
Item 4. Mine Safety Disclosures		43
Item 5. Other Information		43
Item 6. Exhibits		44

Cautionary Statement Regarding Forward-Looking Statements

PART I – FINANCIAL INFORMATION

PART II – OTHER INFORMATION