10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

or

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

For the transition period from to

Commission file number 001-39061

DIRTT ENVIRONMENTAL SOLUTIONS LTD.

(Exact name of registrant as specified in its charter)

Alberta, Canada (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)

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

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Shares, without par value	DRTT	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The registrant had 88,714,941 common shares outstanding as of November 1, 2022.

DIRTT ENVIRONMENTAL SOLUTIONS LTD.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

	Page
Cautionary Statement Regarding Forward-Looking Statements	ii
PART I – FINANCIAL INFORMATION	4
Item 1. Financial Statements (Unaudited)	4
Interim Condensed Consolidated Balance Sheets	4
Interim Condensed Consolidated Statement of Operations and Comprehensive Loss	5
Interim Condensed Consolidated Statement of Changes in Shareholders’ Equity	6
Interim Condensed Consolidated Statement of Cash Flows	7
Notes to the Unaudited Interim Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	36
PART II – OTHER INFORMATION	37
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	39
Item 5. Other Information	39
Item 6. Exhibits	40

i

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (this “Quarterly Report”) are “forward-looking statements” within the meaning of “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “forward-looking information” within the meaning of applicable Canadian securities laws. All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project,” “outlook,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Forward-looking statements are based on certain estimates, beliefs, expectations and assumptions made in light of management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that may be appropriate.

Forward-looking statements necessarily involve unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed or implied in such statements. Due to the risks, uncertainties and assumptions inherent in forward-looking information, you should not place undue reliance on forward-looking statements. Factors that could have an adverse effect on our business, financial condition, results of operations and growth prospects include, but are not limited to, the severity and duration of the coronavirus (“COVID-19”) pandemic and related economic repercussions and other risks described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) and applicable securities commissions or similar regulatory authorities in Canada on February 23, 2022 (the “Annual Report on Form 10-K”) as supplemented by our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022 filed with the SEC and applicable securities commissions or similar regulatory authorities in Canada on May 4, 2022 and July 27, 2022 respectively and in this Quarterly Report under “Part II, Item 1A. Risk Factors.” These factors include, but are not limited to, the following:

•the impact of the COVID-19 pandemic and any strain variants or resurgences thereof on our business;

•our ability to implement our strategic plan, including realizing on certain cost-optimization initiatives undertaken in 2022;

•the effect of the cost saving initiatives the Company announced in February and July 2022;

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

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

•the ability of our reconstituted board of directors ("Board of Directors") to successfully implement its transformation plan;

•our ability to attract, train and retain qualified hourly labor on a timely basis to increase overall productive capacity in our manufacturing facilities to enable us to capture rising demand as the construction industry recovers from the COVID-19 pandemic;

•our ability to achieve and manage growth effectively;

•competition in the interior construction industry;

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

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

•our reliance on our network of construction partners ("Construction Partners"), which we have previously referred to as our Distribution Partners, for sales, marketing and installation of our solutions;

•our ability to introduce new designs, solutions and technology and gain client and market acceptance;

•defects in our designing and manufacturing software and warranty and product liability claims brought against us;

ii

•inflation and material fluctuations of commodity prices, including raw materials and our ability to set prices for our products that satisfactorily adjust for inflation and fluctuations in commodity prices;

•the effectiveness of our manufacturing processes and our success in implementing improvements to those processes;

•the effectiveness of certain elements of our administrative systems and the need for investment in those systems;

•shortages of supplies of certain key components and materials or disruption in supplies due to global events, including the COVID-19 pandemic;

•global economic, political and social conditions and financial markets;

•our exposure to currency exchange rates, tax rates and other fluctuations, including those resulting from changes in laws or administrative practice;

•legal and regulatory proceedings brought against us;

•infringement on our patents and other intellectual property;

•cyber-attacks and other security breaches of our information and technology systems;

•damage to our information technology and software systems;

•our requirements to comply with applicable environmental, health and safety laws, including those relating to the COVID-19 pandemic;

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

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

•volatility of our share price;

•our ability to maintain our listing on Nasdaq;

•the effect of being governed by the corporate laws of a foreign country, including the difficulty of enforcing civil liabilities against directors and officers residing in a foreign country;

•the availability and treatment of government subsidies (including any current or future requirements to repay or return such subsidies); and

•future mergers, acquisitions, agreements, consolidations or other corporate transactions we may engage in.

These risks are not exhaustive. Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in the forward-looking statements in this Quarterly Report. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the effects of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Our past results of operations are not necessarily indicative of our future results. You should not place undue reliance on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under applicable securities laws. We qualify all of our forward-looking statements by these cautionary statements.

iii

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DIRTT Environmental Solutions Ltd.

Interim Condensed Consolidated Balance Sheets

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

	As at September 30,			As at December 31,
	2022			2021
ASSETS
Current Assets
Cash and cash equivalents		6,818			60,313
Restricted cash		3,611			3,095
Trade and accrued receivables, net of expected credit losses of    $0.1 million at September 30, 2022 and at December 31, 2021		19,553			14,063
Other receivables		8,009			3,477
Inventory		23,295			18,457
Prepaids and other current assets		5,389			4,399
Total Current Assets		66,675			103,804
Property, plant and equipment, net		43,450			51,697
Capitalized software, net		4,634			7,395
Operating lease right-of-use assets, net		31,965			30,880
Other assets		5,192			5,663
Total Assets		151,916			199,439
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities		26,104			22,751
Other liabilities		1,787			2,379
Customer deposits and deferred revenue		3,027			2,420
Current portion of long-term debt and accrued interest		3,221			3,323
Current portion of lease liabilities		5,626			6,214
Total Current Liabilities		39,765			37,087
Long-term debt		61,997			67,319
Long-term lease liabilities		29,141			27,267
Total Liabilities		130,903			131,673
SHAREHOLDERS’ EQUITY
Common shares, unlimited authorized without par value, 88,266,915 issued    and outstanding at September 30, 2022 and 85,345,433 at December 31, 2021		187,930			181,782
Additional paid-in capital		9,592			13,200
Accumulated other comprehensive loss		(16,143	)		(15,916	)
Accumulated deficit		(160,366	)		(111,300	)
Total Shareholders’ Equity		21,013			67,766
Total Liabilities and Shareholders’ Equity		151,916			199,439

The accompanying notes are an integral part of these interim condensed consolidated financial statements. The prior year comparatives have been revised in line with current year presentation - refer to Note 7.

4

DIRTT Environmental Solutions Ltd.

Interim Condensed Consolidated Statement of Operations

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Product revenue		44,307			33,054			124,849			101,683
Service revenue		2,440			1,044			4,885			2,982
Total revenue		46,747			34,098			129,734			104,665
Product cost of sales		37,965			30,717			109,757			85,359
Costs of under-utilized capacity		-			-			-			1,756
Service cost of sales		1,774			931			3,406			2,506
Total cost of sales		39,739			31,648			113,163			89,621
Gross profit		7,008			2,450			16,571			15,044
Expenses
Sales and marketing		6,089			7,536			21,094			21,770
General and administrative		6,542			7,546			21,412			22,567
Operations support		2,321			2,374			7,347			6,884
Technology and development		1,695			2,146			5,714			6,005
Stock-based compensation		918			837			3,546			3,792
Reorganization		3,426			-			12,281			-
Total operating expenses		20,991			20,439			71,394			61,018
Operating loss		(13,983	)		(17,989	)		(54,823	)		(45,974	)
Government subsidies		7,141			2,935			7,765			10,434
Foreign exchange gain		1,356			526			1,870			286
Interest income		19			20			50			62
Interest expense		(1,276	)		(823	)		(3,935	)		(2,117	)
		7,240			2,658			5,750			8,665
Loss before tax		(6,743	)		(15,331	)		(49,073	)		(37,309	)
Income taxes
Current tax expense (recovery)		(16	)		-			(16	)		210
Deferred tax expense		-			88			-			137
		(16	)		88			(16	)		347
Net loss		(6,727	)		(15,419	)		(49,057	)		(37,656	)
Loss per share
Basic and diluted loss per share		(0.08	)		(0.18	)		(0.57	)		(0.44	)
Weighted average number of shares outstanding (in      thousands)
Basic and Diluted		87,446			85,325			86,299			84,922

Interim Condensed Consolidated Statement of Comprehensive Loss

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Loss for the period		(6,727	)		(15,419	)		(49,057	)		(37,656	)
Exchange differences on translation of foreign operations		(66	)		(855	)		(227	)		466
Comprehensive loss for the period		(6,793	)		(16,274	)		(49,284	)		(37,190	)

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

5

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, 2020		84,681,364		180,639		10,175			(17,018	)		(57,265	)		116,531
Stock-based compensation		-		-		796			-			-			796
Foreign currency translation adjustment		-		-		-			605			-			605
Net loss for the period		-		-		-			-			(12,499	)		(12,499	)
As at March 31, 2021		84,681,364		180,639		10,971			(16,413	)		(69,764	)		105,433
Stock-based compensation		-		-		1,285			-			-			1,285
Issued on vesting of RSUs		630,211		1,074		(1,074	)		-			-			-
RSUs and Share Awards withheld to settle employee tax obligations		-		-		(252	)		-			(342	)		(594	)
Foreign currency translation adjustment		-		-		-			716			-			716
Net loss for the period		-		-		-			-			(9,738	)		(9,738	)
As at June 30, 2021		85,311,575		181,713		10,930			(15,697	)		(79,844	)		97,102
Stock-based compensation		-		-		1,177			-			-			1,177
Issued on vesting of RSUs		22,980		49		(49	)		-			-			-
RSUs and Share Awards withheld to settle employee tax obligations		-		-		(35	)		-			(28	)		(63	)
Foreign currency translation adjustment		-		-		-			(855	)		-			(855	)
Net loss for the period		-		-		-			-			(15,419	)		(15,419	)
As at September 30, 2021		85,334,555		181,762		12,023			(16,552	)		(95,291	)		81,942
As at December 31, 2021		85,345,433		181,782		13,200			(15,916	)		(111,300	)		67,766
Stock-based compensation		-		-		1,339			-			-			1,339
Issued on vesting of RSUs and Share Awards		487,544		1,203		(1,203	)		-			-			-
RSUs and Share Awards withheld to settle employee tax obligations		-		-		(189	)		-			(9	)		(198	)
Foreign currency translation adjustment		-		-		-			433			-			433
Net loss for the period		-		-		-			-			(23,042	)		(23,042	)
As at March 31, 2022		85,832,977		182,985		13,147			(15,483	)		(134,351	)		46,298
Stock-based compensation		-		-		1,286			-			-			1,286
Issued on vesting of RSUs and Share Awards		1,155,851		3,268		(3,268	)		-			-			-
RSUs and Share Awards withheld to settle employee tax obligations		-		-		(536	)		-			-			(536	)
Foreign currency translation adjustment		-		-		-			(594	)		-			(594	)
Net loss for the period		-		-		-			-			(19,288	)		(19,288	)
As at June 30, 2022		86,988,828		186,253		10,629			(16,077	)		(153,639	)		27,166
Stock-based compensation		-		-		846			-			-			846
Issued on vesting of RSUs and Share Awards		874,266		1,587		(1,587	)		-			-			-
Issued for employee share purchase plan		403,821		90		-			-			-			90
RSUs and Share Awards withheld to settle employee tax obligations		-		-		(296	)		-			-			(296	)
Foreign currency translation adjustment		-		-		-			(66	)		-			(66	)
Net loss for the period		-		-		-			-			(6,727	)		(6,727	)
As at September 30, 2022		88,266,915		187,930		9,592			(16,143	)		(160,366	)		21,013

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

6

DIRTT Environmental Solutions Ltd.

Interim Condensed Consolidated Statement of Cash Flows

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Cash flows from operating activities:
Net loss for the period		(6,727	)		(15,419	)		(49,057	)		(37,656	)
Adjustments:
Depreciation and amortization		4,236			3,815			12,202			10,638
Stock-based compensation, net of settlements		888			837			2,596			3,580
Foreign exchange gain		(1,365	)		(735	)		(2,147	)		(495	)
Accretion of convertible debentures		163			89			505			236
Loss (gain) on disposal of equipment		44			15			(121	)		15
Deferred income tax expense		-			88			-			137
Changes in operating assets and liabilities:
Trade and accrued receivables		(819	)		2,488			(5,814	)		(479	)
Other receivables		(7,419	)		1,616			(4,566	)		1,752
Inventory		1,052			(944	)		(6,052	)		(1,444	)
Prepaid and other assets, current and long term		(254	)		(1,858	)		(1,421	)		(1,709	)
Accounts payable and accrued liabilities		2,748			(2,330	)		5,921			(3,587	)
Other liabilities		(70	)		(1,581	)		(109	)		186
Customer deposits and deferred revenue		(3,078	)		1,112			641			2,429
Current portion of long-term debt and accrued interest		(44	)		601			(186	)		1,607
Lease liabilities		(22	)		15			99			918
Net cash flows used in operating activities		(10,667	)		(12,191	)		(47,509	)		(23,872	)
Cash flows from investing activities:
Purchase of property, plant and equipment, net of accounts     payable changes		(360	)		(1,755	)		(2,247	)		(10,462	)
Capitalized software development expenditures		(385	)		(516	)		(1,286	)		(1,852	)
Other asset expenditures		(86	)		(60	)		(367	)		(387	)
Proceeds on sales of equipment		141			-			214			-
Recovery of software development expenditures		46			121			91			145
Net cash flows used in investing activities		(644	)		(2,210	)		(3,595	)		(12,556	)
Cash flows from financing activities:
Proceeds received on long-term debt		-			-			647			37,952
Repayment of long-term debt		(616	)		(457	)		(1,852	)		(1,217	)
Employee tax payments on vesting of RSUs		(296	)		(63	)		(597	)		(652	)
Net cash flows (used in) provided by financing activities		(912	)		(520	)		(1,802	)		36,083
Effect of foreign exchange on cash, cash equivalents and     restricted cash		(293	)		(130	)		(73	)		581
Net (decrease) increase in cash, cash equivalents and     restricted cash		(12,516	)		(15,051	)		(52,979	)		236
Cash, cash equivalents and restricted cash, beginning of period		22,945			61,133			63,408			45,846
Cash, cash equivalents and restricted cash, end of period		10,429			46,082			10,429			46,082
Supplemental disclosure of cash flow information:
Interest paid		(1,108	)		(1,231	)		(3,439	)		(1,360	)
Income taxes received		-			369			3,207			321
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets.
							For the Nine Months Ended September 30,
							2022			2021
Cash and cash equivalents								6,818			43,288
Restricted cash								3,611			2,794
Total cash, cash equivalents and restricted cash								10,429			46,082

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

7

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 global leader in industrialized construction. DIRTT's system of physical products and digital tools empowers organizations, together with construction and design leaders, to build high-performing, adaptable, interior environments. Operating in the workplace, healthcare, education, and public sector markets, DIRTT’s system provides total design freedom, and greater certainty in cost, schedule, and outcomes.

DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to unrelated companies and Construction Partners of the Company.

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 Nasdaq Global Select Market (“Nasdaq”) under the symbol “DRTT”.

2. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the Financial Statements contain all adjustments necessary, consisting of only normal recurring adjustments, for a fair statement of its financial position as of September 30, 2022, and its results of operations and cash flows for the three and nine months ended September 30, 2022 and 2021. The condensed balance sheet at December 31, 2021, 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, 2021 and 2020 and for each of the three years in the period ended December 31, 2021 included in the Annual Report on Form 10-K of the Company as filed with the SEC and applicable securities commission or similar regulatory authorities in Canada. As described in Note 6, the Company adopted ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance effective January 1, 2022. There was no impact of this standard on our disclosures or accounting for government assistance.

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 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 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.

8

Seasonality

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

3. LIQUIDITY

The Company has been negatively impacted by the effect of COVID-19 on the non-residential construction industry, costs incurred associated with the Company’s contested director elections, reorganization costs to reconstitute the executive team and align the Company’s cost structure with current sales activity, and significant inflation on raw materials costs, which have resulted in a significant usage of cash in recent periods which has been funded through Convertible Debentures and Leasing Facilities entered into in the prior year (refer to Note 9). As at September 30, 2022, the Company had $6.8 million of cash on hand and $9.0 million of available borrowings (December 31, 2021 - $60.3 million and $10.4 million of available borrowings).

We have implemented a number of restructuring initiatives to create a reduced cost structure moving forward (refer to Note 5) and have implemented multiple price increases during the year to mitigate the impact of inflation on raw material costs. While these actions, combined with an increasing project pipeline is promising, we continue to see unpredictability in our pace of orders. As a result, the Company has initiated certain strategic actions to improve our balance sheet in the short term. First, historically we have licensed the use of ICE software to certain strategic partners for use in their business, and DIRTT has provided licensing and developer software support for these counterparties. We are in the process of evaluating multiple initiatives related to the further use of ICE software by third parties. Second, we have certain properties that are currently owned that we are evaluating for potential sale and lease back arrangements. We do not intend to vacate these premises as they still serve a valuable aspect of our value proposition, but this type of arrangement would provide us with a one-time cash payment in the near term, in exchange for future rent payments. We expect these strategic initiatives to result in positive cash inflows in 2023. As these transactions are awaiting finalization, we are undertaking a Private Placement (defined in Note 15) of common shares, supported by significant shareholders and directors and officers of the Company to bridge any cash requirements between now and the completion and closing of the noted strategic transactions (refer to Note 15).

We have assessed the Company’s liquidity position as at September 30, 2022, using multiple scenarios taking into account our sales outlook for the next year, our existing cash balances and available credit facilities and the probability of executing the strategic transactions noted above. Based on this analysis we believe the Company has sufficient liquidity to support ongoing operations for the next twelve months. However, should anticipated profitable growth and increased labor headcount and manufacturing capacity not occur or should there be a delayed recovery of the North American construction activities from the pandemic, a sustained economic depression and its adverse impacts on customer demand or significant inflationary pressure on raw materials and transportation cost that we are unable to recover through price increases, the Company will need to identify alternative sources of financing, further reduce its cost structure, delay capital expenditures, evaluate potential asset sales and potentially curtail or cease certain operations. While the Company is confident that it will be able to raise additional capital when needed or under acceptable terms, there can be no absolute assurance it will be able to do so.

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4. COVID-19

The impact of the COVID-19 pandemic on our future consolidated results of operations remains uncertain. The extent to which COVID-19 impacts our employees, operations, customers, suppliers and financial results depends on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic (and whether there is a resurgence or multiple resurgences in the future, including the impact of new variants); government actions taken in response to the pandemic, including required shutdowns or vaccine or testing mandates; the availability, acceptance, distribution and continued effectiveness of vaccines; the impact on construction activity, including the effect on our customers’ demand for our ceiling and wall systems; supply chain disruptions; rising inflation; labor shortages; sustained remote or hybrid work models; our ability to manufacture and sell our products; and the ability of our customers to pay for our products. While many of our products support life-sustaining activities and essential construction, we and certain of our customers or suppliers may be impacted by national, federal, state and provincial actions, orders and policies regarding the COVID-19 pandemic, including: temporary closures of non-life-sustaining businesses, shelter-in-place orders, and travel, social distancing and quarantine policies, the implementation and enforcement of which vary in each of the jurisdictions in which we operate. We did not record any asset impairments, inventory charges or material bad debt reserves related to COVID-19 during the three and nine months ended September 30, 2022 and 2021, but future events may require such charges which could have a material adverse effect on our financial condition, liquidity or results of operations.

Government subsidies

In the United States, the Employee Retention Credit ("ERC") was established by Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") to provide an incentive for employers to keep their employees on their payroll during COVID-19 closures. The ERC is a refundable payroll tax credit based on qualified wages paid by an eligible employer between March 12, 2020, and October 1, 2021 for companies experiencing a significant decline in gross receipts during a calendar quarter or having operations fully or partially suspended during the quarter due to COVID-19. During the third quarter of 2022, the Company determined it was eligible for the ERC for the first three quarters of 2021 and has filed a claim for $7.3 million in payroll tax credits ($7.1 million net of expenses). As of September 30, 2022 these credits have not been received and are included in other receivables in the balance sheet.

As part of the Canadian federal government’s COVID-19 Economic Response Plan, the Canadian government established the Canadian Emergency Wage Subsidy (“CEWS”). The CEWS provided the Company with a taxable subsidy in respect of a specific portion of wages paid to Canadian employees during qualifying periods extending from March 15, 2020 to October 23, 2021 based on the percentage decline of certain of the Company’s Canadian sourced revenues during each qualifying period. The Company’s eligibility for the CEWS was subject to change for each qualifying period and was reviewed by the Company for each qualifying period, with amounts being received by the Company for various, but not each, qualifying period. Pursuant to amendments enacted as part of the 2021 Canadian federal budget, the Company is required to repay a portion of the CEWS amounts received for any qualifying period commencing after June 5, 2021 where the aggregate compensation for “specified executives” (within the meaning of the CEWS) during the 2021 calendar year exceeds the aggregate compensation for “specified executives” during the 2019 calendar year. Upon finalization of 2021 compensation to specified executives, approximately C$0.5 million ($0.4 million) of subsidies was repaid to the Canadian authorities in the second quarter of 2022. The repayment amount was fully provided for in the third quarter of 2021 in accounts payable and accrued liabilities and in the first quarter of 2022 the Company reversed a $0.6 million incremental provision related to this that is no longer necessary.

On November 19, 2020, the Canadian government also implemented the Canada Emergency Rent Subsidy (“CERS”). The CERS provided a taxable subsidy to cover eligible expenses for qualifying properties, subject to certain maximums, for qualifying periods extending from September 27, 2020 to October 23, 2021, with the amount of the subsidy available to the Company being based on the percentage decline of certain of the Company’s Canadian-sourced revenues in each qualifying period. The Company’s eligibility for the CERS was subject to change for each qualifying period and was reviewed by the Company for each qualifying period.

The last claim period under the CEWS and CERS programs ended on October 23, 2021. The Company is not eligible and did not receive any new Canadian government subsidies in the three or nine months ended September 30, 2022.

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5. REORGANIZATION

During the nine month period ended September 30, 2022, the Company undertook a number of reorganization initiatives:

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

On February 22, 2022, we commenced the process of closing our Phoenix Facility, shifting related manufacturing to both our Savannah and Calgary aluminum manufacturing facilities. The closure of the Phoenix Facility was substantially completed in the second quarter of 2022. The Company entered into a sublease arrangement during the second quarter of 2022, commencing July 1, 2022, which exceeds the contractual lease commitments under the Right of Use assets.

Workforce Reductions, Board and Management Changes

In February and July of 2022, we announced our intention to eliminate a portion of our salaried workforce including manufacturing and office positions along with other cost reduction initiatives. The Company’s Board of Directors was reconstituted following a contested proxy contest in April 2022 which was deemed a change of control under the Company’s insurance policy resulting in additional insurance expenditures. Further, the Company made changes to several executive officer roles during the nine months ended September 30, 2022, which resulted in incurring certain termination benefits and recruitment costs.

Temporary Suspension of Operations at Rock Hill, South Carolina (the "Rock Hill Facility")

On August 23, 2022, we announced the temporary suspension of operations at our Rock Hill Facility, shifting related manufacturing to our Calgary manufacturing facility.

Reorganization costs incurred:

	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
Termination benefits		2,843			6,870
Insurance costs on change of control		-			3,676
Phoenix Facility closure		-			853
Rock Hill temporary suspension of operations		144			144
Other costs		439			738
Total reorganization costs		3,426			12,281
	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
Opening reorganization costs in accounts payable and accrued liabilities		1,555			-
Reorganization expense		3,426			12,281
Reorganization costs paid		(3,228	)		(10,528	)
Reorganization costs in accounts payable and accrued liabilities at September 30, 2022		1,753			1,753

Of the $1.8 million payable, $1.5 million relates to termination benefits and $0.3 million relates to other reorganization costs.

Discontinuation of Reflect Product Line and Other Charges Incurred

In August 2022, the Company discontinued the Reflect and other product lines, resulting in a one time inventory write-down of $1.0 million, and an acceleration of amortization expense associated with ICE development for Reflect of $1.0 million in cost of sales.

Additionally, the Company accelerated the depreciation of certain items of property, plant and equipment associated with the closure of the Phoenix Facility resulting in an additional $1.1 million of depreciation and amortization incurred in the first quarter of 2022.

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These costs were included in cost of sales:

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2022		September 30, 2022
Accelerated depreciation and amortization associated with closure of the Phoenix Facility		-		1,054
Accelerated amortization associated with product line discontinuation		1,019		1,019
Provision for inventory of discontinued product lines		1,035		1,035
Incremental cost of sales		2,054		3,108

6. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

In 2021, the Financial Accounting Standards Board issued Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The ASU provides guidance on required disclosures with respect to government assistance in a company’s notes to the annual financial statements. The amendments in the ASU are effective for periods beginning after December 15, 2021. The Company has adopted this standard effective January 1, 2022 and notes there is no significant impact of this standard on our accounting or disclosures for government assistance.

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

7. TRADE AND ACCRUED RECEIVABLES AND OTHER RECEIVABLES

Accounts receivable are recorded at the invoiced amount, do not require collateral and 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 statement of operations.

In order to manage and assess our risk, management maintains credit policies that include regular review of credit limits of individual receivables and systematic monitoring of aging of trade receivables and the financial wellbeing of our customers. In addition, we acquired trade credit insurance effective April 1, 2020. At September 30, 2022, approximately 83% of our trade accounts receivable are insured, relating to accounts receivables from counterparties deemed creditworthy by the insurer and excluding accounts receivable from government entities, which have arisen since April 1, 2020 when the trade credit insurance became effective.

Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the three months ended September 30, 2022 and 2021, no Construction Partner accounted for greater than 10% of revenue. No Construction Partner accounted for greater than 10% of revenue for the nine months ended September 30, 2022 and one Construction Partner accounted for $13.5 million of revenue for the nine months ended September 30, 2021, which is greater than 10% of total revenue. In addition, and where possible, we collect a 50% deposit on sales, excluding government and certain other clients.

The Company’s aged receivables were as follows:

	As at
	September 30,			December 31,
	2022			2021
Current		17,021			13,572
Overdue		2,658			621
		19,679			14,193
Less: expected credit losses		(126	)		(130	)
		19,553			14,063

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No adjustment to our expected credit losses of $0.1 million was required for the nine months ended September 30, 2022. 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.

For the period ended September 30, 2022, the Company classified Other Receivables separately from Trade and Accrued Receivables on the balance sheet, as reconciled below:

	As at,
	September 30,			December 31,
	2022			2021
Trade and accrued receivables		19,679			14,193
Allowance for doubtful accounts		(126	)		(130	)
Accounts receivable		19,553			14,063
Sales tax receivable		289			196
Income taxes receivable		2			3,194
Government subsidies		7,141			-
Other receivables		577			87
Other receivables (reclassified on the balance sheet)		8,009			3,477
Total Trade and other receivables, as previously presented		27,562			17,540

8. OTHER LIABILITIES

	As at,
	September 30, 2022		December 31, 2021
Warranty provisions(1)		1,275		1,451
DSU liability		329		785
Sublease deposits		138		-
Other provisions		45		143
Other liabilities		1,787		2,379

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

	September 30, 2022			December 31, 2021
As at January 1		1,451			1,763
Adjustments to timber provision		-			(500	)
Additions to warranty provision		726			1,019
Payments related to warranties		(902	)		(831	)
		1,275			1,451

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9. LONG-TERM DEBT

	Revolving Credit Facility		Leasing Facilities			Convertible Debentures			Total Debt
Balance on December 31, 2020		-		5,967			-			5,967
Issuances		-		9,805			55,107			64,912
Accretion of issue costs		-		-			352			352
Accrued interest		-		556			1,935			2,491
Interest payments		-		(556	)		(987	)		(1,543	)
Principal repayments		-		(1,808	)		-			(1,808	)
Exchange differences		-		(55	)		326			271
Balance at December 31, 2021		-		13,909			56,733			70,642
Current portion of long-term debt and accrued interest		-		2,386			937			3,323
Long-term debt		-		11,523			55,796			67,319
Balance on December 31, 2021		-		13,909			56,733			70,642
Issuances		-		647			-			647
Accretion of issue costs		-		-			505			505
Accrued interest		-		562			2,691			3,253
Interest payments		-		(562	)		(2,877	)		(3,439	)
Principal repayments		-		(1,852	)		-			(1,852	)
Exchange differences		-		(267	)		(4,271	)		(4,538	)
Balance at September 30, 2022		-		12,437			52,781			65,218
Current portion of long-term debt and accrued interest		-		2,520			701			3,221
Long-term debt		-		9,917			52,080			61,997

Revolving Credit Facility

On February 12, 2021, the Company entered into a loan agreement governing a C$25.0 million senior secured revolving credit facility with the Royal Bank of Canada (“RBC”), as lender (the “RBC Facility”). Under the RBC Facility, the Company is able to borrow up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of (i) 75% of the book value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims (the “Borrowing Base”). At September 30, 2022, available borrowings are C$12.4 million ($9.0 million), of which no amounts have been drawn. Interest is calculated at the Canadian or U.S. prime rate plus 30 basis points or at the Canadian Dollar Offered Rate or LIBOR plus 155 basis points. Under the RBC Facility, if the “Aggregate Excess Availability”, defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash, is less than C$5.0 million, the Company is subject to a fixed charge coverage ratio (“FCCR”) covenant of 1.10:1 on a trailing twelve-month basis until such time the borrowing availability net of unrestricted cash exceeds C$5.0 million for at least thirty consecutive calendar days. Additionally, if the FCCR has been below 1.10:1 for the three immediately preceding months, the Company is required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Leasing Facilities (defined below). The Company did not meet the three-month FCCR requirement during the third quarter of 2022 which resulted in requiring the restriction of $3.6 million of cash. Should an event of default occur or the Aggregate Excess Availability be less than C$6.25 million for five consecutive business days, the Company would enter a cash dominion period whereby the Company’s bank accounts would be blocked by RBC and daily balances will set-off any borrowings and any remaining amounts made available to the Company.

Leasing Facilities

The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) and a $14.0 million equipment leasing facility in the United States (the “U.S. Leasing Facility” and, together with the Canada Leasing Facility, the “Leasing Facilities”) with RBC, and one of its affiliates, which are available for equipment expenditures and certain equipment expenditures already incurred. The Leasing Facilities, respectively, have seven and five-year terms and bear interest at 4.25% and 5.59%. The U.S. Leasing Facility is amortized over a six-year term and extendible at the Company’s option for an additional year.

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During the three and nine months ended September 30, 2022, the Company received $nil (twelve months ended December 31, 2021: $9.8 million) of cash consideration under the U.S. Leasing Facility. The associated financial liabilities are shown on the consolidated balance sheet in current other liabilities and long-term debt. In April 2022 the Company received C$0.9 million ($0.7 million) under the Canada Leasing Facility.

Convertible Debentures

On January 25, 2021, the Company completed a C$35.0 million ($27.5 million) bought-deal financing of convertible unsecured subordinated debentures with a syndicate of underwriters (the “January Debentures”). On January 29, 2021, the Company issued a further C$5.25 million ($4.1 million) of the January Debentures under the terms of an overallotment option granted to the underwriters. The January Debentures will mature and be repayable on January 31, 2026 (the “January Debentures Maturity Date”) and will accrue interest at the rate of 6.00% per annum payable semi-annually in arrears on the last day of January and July of each year commencing on July 31, 2021 until the January Debentures Maturity Date. Interest and principal are payable in cash or shares at the option of the Company. The January Debentures will be convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the January Debentures Maturity Date and the date specified by the Company for redemption of the January Debentures at a conversion price of C$4.65 per common share, being a ratio of approximately 215.0538 common shares per C$1,000 principal amount of the January Debentures. Costs of the transaction were approximately C$2.7 million, including the underwriters’ commission.

On December 1, 2021, the Company completed a C$35.0 million ($27.4 million) bought-deal financing of convertible unsecured subordinated debentures with a syndicate of underwriters (the “December Debentures” and, together with the January Debentures, the “Debentures”). These December Debentures will mature and be repayable on December 31, 2026 (the “December Debentures Maturity Date”) and will accrue interest at the rate of 6.25% per annum payable semi-annually in arrears on the last day of June and December of each year commencing on 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 at a conversion price of C$4.20 per common share, being a ratio of approximately 238.0952 common shares per C$1,000 principal amount of the December Debentures. Costs of the transaction were approximately C$2.3 million, including the underwriters’ commission.

10. STOCK-BASED COMPENSATION

In May 2020, shareholders approved the DIRTT Environmental Solutions Ltd. Long-Term Incentive Plan (the “2020 LTIP”) at the annual and special meeting of shareholders. The 2020 LTIP gives the Company the ability to award options, share appreciation rights, restricted share units, restricted shares, dividend equivalent rights granted in connection with restricted share units, vested Share Awards (as defined below), 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 2020 LTIP, the sum of (i) 5,850,000 common shares plus (ii) the number of common shares subject to stock options previously granted under the Company’s Amended and Restated Incentive Stock Option Plan (the “Stock Option Plan”) that, following May 22, 2020, expire or are cancelled or terminated without having been exercised in full have been reserved for issuance under the 2020 LTIP. Upon vesting of certain LTIP awards, the Company may withhold and sell shares as a means of meeting DIRTT’s tax withholding requirements in respect of the withholding tax remittances required in respect of award holders. To the extent the fair value of the withheld shares upon vesting exceeds the grant date fair value of the instrument, the excess amount is credited to retained earnings or deficit.

Under the terms of the 2020 LTIP, the change of 100% of the Board of Directors combined with the prior Board declining to endorse the incoming board constituted a change of a control as of April 26, 2022. As a result, all outstanding and unvested LTIP awards granted under the 2020 LTIP plan for any holder terminated without cause within one year of the change of control vest immediately upon termination.

The Company also maintains the DIRTT Environmental Solutions Ltd. Deferred Share Unit Plan for Non-Employee Directors pursuant to which deferred share units (“DSUs”) are granted to the Company’s non-employee directors. DSUs are settled solely in cash.

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Prior to the approval of the 2020 LTIP, the Company granted awards of options under the Stock Option Plan and awards of performance share units (“PSUs”) under the DIRTT Environmental Solutions Ltd. Performance Share Unit Plan (the “PSU Plan”). Following the approval of the 2020 LTIP, no further awards were made under either the Stock Option Plan or the PSU Plan, but both remain in place to govern the terms of any awards that were granted pursuant to such plans and remain outstanding.

Stock-based compensation expense

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2022		2021			2022		2021
Equity-settled awards		846		1,177			3,471		3,258
Cash-settled awards		72		(340	)		75		534
		918		837			3,546		3,792

The following summarizes RSUs (as defined below), Share Awards, PSUs, and DSUs activity during the periods:

	RSU Time-			RSU Performance-			Share
	Based			Based			Awards			PSU			DSU
	Number of			Number of			Number of			Number of			Number of
	units			units			units			units			units
Outstanding at December 31, 2020		2,414,066			200,000			-			197,471			363,664
Granted		1,919,102			878,601			-			-			88,880
Vested		(650,898	)		(2,294	)		-			(34,635	)		(55,802	)
Withheld to settle employee tax obligations		(174,103	)		(1,960	)		-			-			-
Forfeited		(237,910	)		(42,314	)		-			(5,636	)		-
Outstanding at September 30, 2021		3,270,257			1,032,033			-			157,200			396,742
Outstanding at December 31, 2021		3,216,536			1,021,739			-			157,200			361,577
Granted		2,303,287			863,279			162,682			-			890,832
Vested or settled		(2,019,550	)		(566,352	)		(94,528	)		-			(501,916	)
Withheld to settle employee tax obligations		(526,259	)		(242,460	)		(68,154	)		-			-
Forfeited		(734,855	)		(502,628	)		-			(157,200	)		-
Outstanding at September 30, 2022		2,239,159			573,578			-			-			750,493

Restricted share units (time-based vesting)

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. At the end of a three-year term, the RSUs will be settled by way of the provision of cash or shares to employees (or a combination thereof), at the discretion of the Company. The weighted average fair value of the RSUs granted was C$2.49 (2021 – C$3.14) which was determined using the closing price of the Company’s common shares on their respective grant dates.

Restricted share units (performance-based vesting)

During 2022 and 2021, restricted share units were granted to executives with service and performance-based conditions for vesting (the “PRSUs”). If the Company’s share price increases to certain values for 20 consecutive trading days, as outlined below, a percentage of the PRSUs will vest at the end of the three-year service period. PRSUs awarded in 2020 were forfeited in January 2022 upon the departure of an executive from the Company.

The grant date fair value of the 2022 and 2021 PRSUs were valued using the Monte Carlo valuation method and determined to have a weighted average grant date fair value of C$1.87 and C$3.27, respectively.

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Based on share price performance since the date of grant, none of the 2022 PRSUs and 66.7% of the 2021 PRSUs will vest upon completion of the three-year service period.

	% of PRSUs Vesting
			33.3	%		66.7	%		100.0	%		150.0	%
2022 and 2021 PRSUs		$	3.00		$	4.00		$	5.00		$	7.00

Share awards

During the first quarter of 2022, certain executives were issued share awards in lieu of cash paid variable incentive compensation (“Share Awards”). These Share Awards vested upon grant. The fair value of the Share Awards granted was C$2.40 ($1.88), which was determined using the closing price of the Company’s common shares on the grant date.

During the third quarter of 2022, certain executives were provided a variable compensation plan for the achievement of certain financial targets payable partially in cash and partially in share awards. Based on the Company's performance to date relative to the financial targets, no share based awards have been recorded under this compensation plan for the quarter ended September 30, 2022. Under the plan, 1.2 million shares could have been awarded if the maximum targets were achieved based on the Company's share price at September 30, 2022.

Deferred share units

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 year. DSUs outstanding at September 30, 2022 had a fair value of $0.3 million which is included in other liabilities on the balance sheet (December 31, 2021 – $0.8 million).

Options

The following summarizes options granted, exercised, forfeited and expired during the periods:

	Number of			Weighted average
	options			exercise price C$
Outstanding at December 31, 2020		4,774,328			6.52
Forfeited		(39,094	)		7.07
Outstanding at September 30, 2021		4,735,234			6.51
Outstanding at December 31, 2021		4,064,489			6.64
Forfeited		(2,530,120	)		6.40
Outstanding at September 30, 2022		1,534,369			7.03
Exercisable at September 30, 2022		1,534,369			7.03

Range of exercise prices outstanding at September 30, 2022:

	Options outstanding						Options exercisable
			Weighted		Weighted				Weighted		Weighted
			average		average				average		average
	Number		remaining		exercise		Number		remaining		exercise
Range of exercise prices	outstanding		life		price C$		exercisable		life		price C$
C$4.01 – C$5.00		15,025		2.14		4.12		15,025		2.14		4.12
C$6.01 – C$7.00		784,367		1.31		6.33		784,367		1.31		6.33
C$7.01 – C$8.00		734,977		1.63		7.84		734,977		1.63		7.84
Total		1,534,369						1,534,369

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Dilutive Instruments

For the three and nine months ended September 30, 2022, 1.5 million options (2021 – 4.7 million), 2.8 million RSUs and PRSUs (2021 – 4.4 million) and 127.5 million shares, which would be issued if the principal amount of the Debentures were settled in our common shares at the quarter end share price (2021 – 10.3 million), were excluded from the diluted weighted average number of common shares calculation as their effect would have been anti-dilutive to the net loss per share.

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 September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Product		39,092		29,569		110,383		91,867
Transportation		5,022		3,294		13,878		9,277
License fees from Construction Partners		193		191		588		539
Total product revenue		44,307		33,054		124,849		101,683
Installation and other services		2,440		1,044		4,885		2,982
		46,747		34,098		129,734		104,665

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 is based upon agreed contractual terms with the customer and is not subject to variability.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
At a point in time		44,114		32,863		124,261		101,144
Over time		2,633		1,235		5,473		3,521
		46,747		34,098		129,734		104,665

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

Contract Liabilities

	As at
	September 30, 2022		December 31, 2021		December 31, 2020
Customer deposits		2,598		1,959		1,292
Deferred revenue		429		461		527
Contract liabilities		3,027		2,420		1,819

Contract liabilities primarily relate to deposits received from customers and deferred revenue from license subscriptions. The balance of contract liabilities was higher as at September 30, 2022 compared to December 31, 2021 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2021 and 2020 totaling $2.4 million and $1.7 million, respectively, were recognized as revenue during the nine months ended September 30, 2022 and 2021, respectively.

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Sales by Industry

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Commercial		31,796		20,805		85,458		55,981
Healthcare		3,638		5,017		15,693		25,680
Government		3,358		3,149		11,680		11,579
Education		5,322		3,892		11,430		7,904
License fees from Construction Partners		193		191		588		539
Total product and transportation revenue		44,307		33,054		124,849		101,683
Installation and other services		2,440		1,044		4,885		2,982
		46,747		34,098		129,734		104,665

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, with periodic international projects from North American Construction Partners. 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 September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Canada		7,191		4,405		19,859		11,860
U.S.		39,556		29,693		109,875		92,805
		46,747		34,098		129,734		104,665

Non-current assets (1)

	As at
	September 30, 2022		December 31, 2021
Canada		29,931		34,912
U.S.		55,310		60,723
		85,241		95,635

(1)Amounts include property, plant and equipment, capitalized software, operating lease right-of-use assets, and other assets.

13. INCOME TAXES

As at September 30, 2022, the Company had a valuation allowance of $28.1 million against deferred tax assets as the Company has experienced cumulative losses in recent years (December 31, 2021 – $17.3 million).

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14. COMMITMENTS

As at September 30, 2022, the Company had outstanding purchase obligations of approximately $2.1 million related to inventory and property, plant and equipment purchases (December 31, 2021 – $3.7 million). As at September 30, 2022, the Company had undiscounted operating lease liabilities of $53.1 million (December 31, 2021 – $49.7 million).

15. SUBSEQUENT EVENTS

On November 14, 2022, the Company entered into irrevocable subscription agreements with its two largest shareholders, 22 NW Fund, LP (“22NW”) and 726 BC LLC and 726 BF LLC (together “726”) and all the directors and officers of the Company to issue up to 8.8 million shares for gross proceeds of approximately $3.0 million, based on the higher of the Nasdaq closing price on November 14, 2022, and the volume weighted average trading price of the common shares on the Toronto Stock Exchange for the 5 days following the announcement (the “Private Placement”). In addition, in connection with the Private Placement, the two shareholders, or their principals, have irrevocably committed to backstopping any rights offering occurring by the Company in the next twelve months in the aggregate amount of $2.0 million and the shortfall, if any, between the maximum anticipated gross proceeds under the Private Placement, being $3.0 million, and the actual gross proceeds received by the Company.

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

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

Summary of Financial Results

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

DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to unrelated companies and Construction Partners of the Company.

Key Third Quarter 2022 Highlights

•Revenues were $46.7 million, an increase of $12.6 million or 37% from $34.1 million for the same period in 2021, and a $2.0 million or 5% increase from the second quarter of 2022.

•In July 2022, the Company announced, and successfully implemented, a price increase of approximately 10% across most product lines. This price increase, along with the increases announced in November 2021 and June 2022, were made in response to rapid and continued inflationary pressures impacting nearly all of our material and labor input costs. Our third quarter product sales reflected approximately half of the price increases previously announced. We expect the price increases to be further realized in the fourth quarter of 2022.

•Gross profit and gross profit margin for the third quarter of 2022 was $7.0 million or 15.0% of revenue, an increase of $0.7 million or 12% from $6.3 million in the second quarter of 2022, an increase of $4.6 million or 186% from $2.5 million or 7.2% of revenue for the same period of 2021. Cost of sales includes $1.0 million of accelerated amortization on software associated with the Reflect and other discontinued product lines, which were discontinued during the third quarter of 2022.

•Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the third quarter of 2022 was $10.1 million. This represents a $1.6 million (19.8%) increase over the second quarter of 2022 and a $5.4 million (112.5%) increase over the third quarter of 2021. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) for the third quarter of 2022 was 21.7%, a 280 bps improvement over the second quarter 2022 and a 770 bps improvement over the third quarter 2021. Third quarter results include certain inventory write-downs of $1.0 million (2.1%, as a percent of total revenue), primarily related to the discontinuance of the Reflect and other product lines. The improved Adjusted Gross Profit and Adjusted Gross Profit Margin have been driven by a combination of improved demand for our products and commercial discipline. The Company benefited from a weakening Canadian dollar with an approximate benefit of $0.6 million on Canadian Dollar denominated manufacturing costs compared to the third quarter of 2021.

•During the third quarter of 2022, we have continued to align our manufacturing footprint and salaried workforce with our current activity levels. In July 2022, we announced a further reduction of salaried positions and in August 2022, we announced the temporary closure of our Rock Hill Facility as the Calgary manufacturing facility has sufficient capacity to absorb production and meet expected demand for the near term. These changes are expected to result in approximately $5.0 million in annualized savings. One-time costs associated with the reorganization activities in the third quarter were $3.4 million but added back to Adjusted EBITDA.

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•Net loss for the third quarter of 2022 was $6.7 million compared to $15.4 million for the same period of 2021. The lower net loss is primarily the result of the higher gross profit margin explained above of $4.6 million, a $4.2 million increase in government subsidies, a $0.8 million increase in foreign exchange gain and a $2.9 million reduction in operating expenses offset by a $0.5 million increase in interest expense and $3.4 million of reorganization costs.

•Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the third quarter of 2022 was a $5.4 million loss or (11.6)%, an improvement of $7.9 million from a $13.3 million loss or (39.1)% for the third quarter of 2021 and an improvement of $4.0 million from a $9.4 million loss or (21.1)% for the second quarter of 2022.

•The Company used approximately $12.5 million of cash in the third quarter compared to $21.3 million and $19.1 million in the first and second quarter 2022, respectively. This included approximately $3.4 million in the quarter ($15.1 million year to date) of reorganization costs. Excluding these amounts, net of working capital, cash used would have been $9.1 million in the third quarter of 2022 compared to $16.2 million and $12.6 million in the first and second quarter of 2022, respectively.

•On November 14, 2022, the Company entered into a Private Placement of 8.8 million shares to the two largest shareholders and all our directors and officers with expected proceeds of approximately $3.0 million, subject to certain pricing mechanisms, with an additional minimum aggregated value of $2.0 million committed to backstopping any rights offering occurring in the next twelve months.

•The Company continues to evaluate certain non-dilutive, strategic cash initiatives expected to generate additional cash flows by early 2023.

Outlook

Third quarter 2022 revenues were in line with expectations and grew sequentially over the second quarter and the same period last year. As of October 1, 2022, our 12-month forward pipeline, which represents known projects and leads at various stages of maturation which our sales teams are working to convert into orders, increased by 10% to $395 million from $359 million at July 1, 2022. The increase is a function of the impact of our price increases, discussed above, and additional leads added to the pipeline. The pipeline comprises 63% commercial, 22% healthcare, 6% education and 9% government verticals The relative split between verticals remains consistent with pre-pandemic actual percentage results.

Overall, volumes have remained relatively consistent between the second and third quarters of 2022. While the increase in our sales pipeline is a positive indicator of the Company’s future revenue potential, we have been experiencing uneven demand flow in both lead and order conversion. Further, we have experienced higher than usual push out rates on orders, a trend that many other construction and product companies are seeing as well. We believe the primary factor has been jobsite readiness. Further, rising material input costs have forced many contractors to re-evaluate pricing and project profitability. These factors have all served to stretch construction schedules, and by extension, the timing at which our products are ordered. We believe these trends will normalize over time.

The Company’s current and immediate focus continues to be unlocking manufacturing capacity, improving revenues and profitability and accelerating the Company’s near-term progress towards cashflow breakeven and beyond, and managing liquidity. Under new leadership, the following actions have been, or are in the process of being, completed, and are discussed in more detail below:

•Creating a more comprehensive, focused Project Enablement Team to provide first class support to our partners from quote to delivery.

•Reestablishing bi-weekly communications and close collaboration with our Partner Advisory Council and monthly discussions with our entire partner network.

•Identifying and taking steps to unlock manufacturing capacity through additions to our hourly workforce and implementation of manufacturing improvements.

•Offering a suite of newly implemented incentives, including certain rebate and quick pay discount programs to our Construction Partners that are in good standing.

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•Evaluating several supply chain optimization projects that aim to improve Sales and Operational Planning and reduce slow moving and/or obsolete inventory items.

•Tightly managing discretionary spend and overtime during periods of order volatility.

As a part of managing our working capital, we are working on managing our inventory levels, which built up during the year (primarily in aluminum extrusions). The increase in our inventory levels primarily reflects our difficulty in increasing order, and, therefore, actual production relative to expectations as previously described, but also reflects the increased cost of raw materials. As communicated in the second quarter, we have taken steps to moderate such supply and saw a drawdown of inventory by $2.0 million in the third quarter of 2022. As a result of the steps mentioned, we are to approaching monthly cashflow breakeven (see “–Liquidity and Capital Resources").

As revenues improve, including the effect of the price increases above, and the cost reduction initiatives take hold, we expect to continue to progress toward an improvement in net loss and Adjusted EBITDA breakeven in the fourth quarter of 2022. Unrestricted cash and net working capital at September 30, 2022 was $6.8 million and $26.9 million, compared to $19.7 million and $31.6 million at June 30, 2022, respectively, and $60.3 million and $66.7 million at December 31, 2021, respectively. The Company’s asset backed credit facility, which is based upon a percentage of accounts receivable and inventory, remains undrawn at September 30, 2022 with approximately C$12.4 million ($9.0 million) available. The Company continues to focus on revenue growth and cost initiatives to positively affect DIRTT’s balance sheet, cash flow and profitability and expects to see a trend of increasing monthly working capital by year end.

Non-GAAP Financial Measures

Note Regarding Use of Non-GAAP Financial Measures

Our condensed consolidated interim financial statements are prepared in accordance with GAAP. These GAAP financial statements include non-cash charges and other charges and benefits that we believe are unusual or infrequent in nature or that we believe may make comparisons to our prior or future performance difficult.

As a result, we also provide financial information in this Quarterly Report that is not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. Management uses these non-GAAP financial measures in its review and evaluation of the financial performance of the Company. We believe that these non-GAAP financial measures also provide additional insight to investors and securities analysts as supplemental information to our GAAP results and as a basis to compare our financial performance period-over-period and to compare our financial performance with that of other companies. We believe that these non-GAAP financial measures facilitate comparisons of our core operating results from period to period and to other companies by removing the effects of our capital structure (net interest income on cash deposits, interest expense on outstanding debt and debt facilities, or foreign exchange movements), asset base (depreciation and amortization), the impact of under-utilized capacity on gross profit, tax consequences, reorganization expense and stock-based compensation. We remove the impact of all foreign exchange from Adjusted EBITDA. Foreign exchange gains and losses can vary significantly period-to-period due to the impact of changes in the U.S. and Canadian dollar exchange rates on foreign currency denominated monetary items on the balance sheet and are not reflective of the underlying operations of the Company. We remove the impact of under-utilized capacity from gross profit, and fixed production overheads are allocated to inventory on the basis of normal capacity of the production facilities. In periods where production levels are abnormally low, unallocated overheads are recognized as an expense in the period in which they are incurred. In addition, management bases certain forward-looking estimates and budgets on non-GAAP financial measures, primarily Adjusted EBITDA.

Government subsidies, depreciation and amortization, stock-based compensation expense, reorganization expense, foreign exchange gains and losses and impairment expenses 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.

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

Adjusted Gross Profit	Gross profit before deductions for costs of under-utilized capacity, depreciation and amortization
Adjusted Gross Profit Margin	Adjusted Gross Profit divided by revenue
EBITDA	Net income before interest, taxes, depreciation and amortization
Adjusted EBITDA	EBITDA adjusted to remove foreign exchange gains or losses; impairment expenses; reorganization expenses, stock-based compensation expense; government subsidies, 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 Nine Months Ended September 30, 2022, Compared to Three and Nine Months Ended September 30, 2021

	For the Three Months Ended September 30,									For the Nine Months Ended September 30,
	2022			2021			% Change			2022			2021			% Change
	($ in thousands)									($ in thousands)
Revenue		46,747			34,098			37			129,734			104,665			24
Gross Profit(1)		7,008			2,450			186			16,571			15,044			10
Gross Profit Margin		15.0	%		7.2	%					12.8	%		14.4	%
Operating Expenses
Sales and Marketing		6,089			7,536			(19	)		21,094			21,770			(3	)
General and Administrative		6,542			7,546			(13	)		21,412			22,567			(5	)
Operations Support		2,321			2,374			(2	)		7,347			6,884			7
Technology and Development		1,695			2,146			(21	)		5,714			6,005			(5	)
Stock-Based Compensation		918			837			10			3,546			3,792			(6	)
Reorganization		3,426			-			100			12,281			-			100
Total Operating Expenses		20,991			20,439			3			71,394			61,018			17
Operating Loss		(13,983	)		(17,989	)		(22	)		(54,823	)		(45,974	)		19
Operating Margin		(29.9	)%		(52.8	)%					(42.3	)%		(43.9	)%
(1) Gross Profit for the three and nine month periods ended September 30, 2022 includes $1.0 million primarily related to the write off of inventory of discontinued product lines, and $1.0 million and $2.1 million, respectively of accelerated depreciation and amortization on software associated with discontinued product lines and the closure of the Phoenix Facility

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Revenue

Revenue reflects sales to our Construction Partners for resale to their clients and, in limited circumstances, our direct sales to clients. Our revenue is generally affected by the timing of when orders are executed, particularly large orders, which can add variability to our financial results and shift revenue between quarters.

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022		2021		% Change		2022		2021		% Change
	($ in thousands)						($ in thousands)
Product		39,092		29,569		32		110,383		91,867		20
Transportation		5,022		3,294		52		13,878		9,277		50
License fees from Construction Partners		193		191		1		588		539		9
Total product revenue		44,307		33,054		34		124,849		101,683		23
Installation and other services		2,440		1,044		134		4,885		2,982		64
		46,747		34,098		37		129,734		104,665		24

During the quarter ended September 30, 2022, revenue was $46.7 million, an increase of $12.6 million or 37% from the same period in 2021. This also reflects a $2.0 million or 5% increase in revenues from the second quarter of 2022. Revenue for the nine months ended September 30, 2022 was $129.7 million, an increase of $25.1 million or 24% from the nine months ended September 30, 2021. The first quarter of 2022 marked the transition of the COVID-19 pandemic to an endemic with the broad easing of health restrictions, including work-from-home mandates, across North America. While the resurgence in COVID-19 infections due to the Omicron variant at the beginning of the year temporarily sent many employees back to their home offices and delayed return dates, the Company and our Construction Partners experienced an uptick in planning activity and opportunity growth in our commercial vertical which began to translate into orders in March 2022 that has continued into the third quarter.

In response to significant increases in the costs of raw materials, shipping materials, labor and freight, effective November 16, 2021, DIRTT increased product and transportation prices on new projects by approximately 6.5%, with the benefits largely expected to be realized in 2022. On February 17, 2022, we implemented a further price increase of 5% that came into effect June 1, 2022. On June 21, 2022 an additional price increase of 10% was announced effective July 21, 2022. Our third quarter product sales reflected approximately 40% and 15% of these June and July price increases, respectively. We expect the price increases to be further realized in the fourth quarter of 2022. During the third quarter, DIRTT also terminated the 20% pilot price reduction program on its Reflect and Inspire product lines that it announced in February 2022 as a result of the combination of increased aluminum prices and the unanticipated impact that the increased demand placed on our productive capacity due to the immaturity of production processes related to these product lines. In August 2022, with consideration to the production process and profitability, we discontinued the Reflect product line.

Installation and other services revenue was $2.4 million and $4.9 million for the three and nine months ended September 30, 2022 respectively, compared to $1.0 million and $3.0 million in the same period of 2021. This revenue primarily reflects services performed by our ICE and design teams for third parties. Except in limited circumstances, our Construction Partners, rather than the Company, perform installation services, and accordingly, we are not anticipating significant growth in this revenue stream.

Our success is partly dependent on our ability to profitably develop our Construction Partner network to expand our market penetration and ensure best practices are shared across local markets. At September 30, 2022, we had 69 (December 31, 2021: 69) Construction Partners servicing multiple locations. During 2021 and the first quarter of 2022, we made several changes and upgrades to our Construction Partner network, expanding our relationships with new and existing partners and ending our relationships with others. In February 2022, we announced the establishment of a Partner Advisory Council to provide a greater link with Construction Partners and end clients who they service. The Partner Advisory Council will offer advice on sales and marketing effectiveness, product issues and new market needs, market conditions, competitive landscape, marketing support and other related areas of mutual interest.

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We periodically analyze our revenue growth by vertical markets in the defined markets of commercial, healthcare, government and education. The following table presents our product and transportation revenue by vertical market:

	For the Three Months Ended September 30,							For the Nine Months Ended September 30,
	2022		2021		% Change			2022		2021		% Change
	($ in thousands)							($ in thousands)
Commercial		31,796		20,805		53			85,458		55,981		53
Healthcare		3,638		5,017		(27	)		15,693		25,680		(39	)
Government		3,358		3,149		7			11,680		11,579		1
Education		5,322		3,892		37			11,430		7,904		45
License fees from Construction Partners		193		191		1			588		539		9
Total product revenue		44,307		33,054		34			124,849		101,683		23
Service revenue		2,440		1,044		134			4,885		2,982		64
		46,747		34,098		37			129,734		104,665		24

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(in %)				(in %)
Commercial		72		63		69		56
Healthcare		8		15		13		25
Government		8		10		9		11
Education		12		12		9		8
Total Product Revenue(1)		100		100		100		100

(1)Excludes license fees from Construction Partners.

Commercial revenues increased by 53% in the three and nine month periods ended September 30, 2022 from the same prior year periods, reflecting improving market conditions as health restrictions and work-from-home requirements ease and include one large customer in the technology sector with revenue of $2.4 million and $7.9 million for the respective periods. Healthcare decreased by 27% and 39% in the three and nine months ended September 30, 2022, respectively, from the same periods in 2021. Such sales tend to be larger individual projects and are subject to timing due to a typically longer sales cycle, resulting in variability in sales levels. In 2021, we had one large healthcare project with revenue of $6.9 million which did not recur in 2022.

Education sales in the three and nine months ended September 30, 2022 increased by 37% and 45%, respectively, over the prior periods. At the beginning of the pandemic, education spending effectively paused with many institutions suspending in-person classes. There were no individually significant education projects and the increases represent higher volumes of projects due to the easing of health restrictions and many students returning to in-person learning. Government revenues in the three and nine months ended September 30, 2022 increased by 7% and 1%, respectively, over the prior year periods.

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022		2021		% Change		2022		2021		% Change
	($ in thousands)						($ in thousands)
Canada		7,191		4,405		63		19,859		11,860		67
U.S.		39,556		29,693		33		109,875		92,805		18
		46,747		34,098		37		129,734		104,665		24

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Historically, approximately 15-25% and 75-85% of revenues are derived from sales to Canada and the United States, respectively. In the quarter ended September 30, 2020, revenues from Canada fell to 9% of total sales while sales to the United States increased to 91%. The geographical split for the first three quarters of 2022 began to return to historical averages and reflects the easing of health restrictions in Canada which occurred later than in the United States.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $1.4 million and $0.7 million to $6.1 million and $21.1 million for the three and nine months ended September 30, 2022, from $7.5 million and $21.8 million for the three and nine months ended September 30, 2021 respectively. The decrease was largely related to a decrease of $1.3 million and $2.2 million for the three and nine months ended September 30, 2022, respectively, in salaries and benefits costs. The decrease in the nine months ended September 30, 2022 was offset by a $1.5 million increase in travel, meals and entertainment expenses as business activity has increased and restrictions on travel have eased.

General and Administrative Expenses

General and administrative expenses decreased $1.0 million and $1.2 million to $6.5 million and $21.4 million for the three and nine months ended September 30, 2022 from $7.5 million and $22.6 million for the three and nine months ended September 30, 2021. The decrease in the three months ended September 30, 2022 was related to lower salaries and benefits costs associated with the planned headcount reductions as part of our cost savings initiatives and lower professional services costs. For the nine month period ended September 30, 2022, approximately $1.8 million of incremental professional fees associated with the contested election of directors was offset by lower salaries and benefits cost.

Operations Support Expenses

Operations support is comprised primarily of project managers, order entry and other professionals that facilitate the integration of our Construction Partner project execution and our manufacturing operations. Operations support expenses decreased by $0.1 million from $2.4 million to $2.3 million in the three months ended September 30, 2022 from the same period of 2021. The decrease was due to reduced travel costs in the quarter.

Operations support expenses increased $0.5 million from $6.9 million for the nine months ended September 30, 2021 to $7.3 million for the nine months ended September 30, 2022. The increase was due to a decrease in salaries and benefits capitalized to internal projects of $0.4 million with the completion of the Rock Hill Facility and the DIRTT Experience Centre ("DXC") in Dallas and an increase in salaries and benefits of $0.1 million for the nine month period ended September 30, 2022 compared to the previous year same period.

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 for the three and nine month period ended September 30, 2022 decreased by $0.5 million and $0.3 million, respectively, from the prior period costs to $1.7 million and $5.7 million. The decrease was related to reductions in salaries and benefits offset by lower capitalized costs due to fewer internal projects. For the nine months ended September 30, 2022, professional service fees also decreased by $0.2 million compared to the prior year period.

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Stock-Based Compensation

Stock-based compensation expense for the three and nine months ended September 30, 2022 was $0.9 million and $3.5 million compared to $0.8 million and $3.8 million for the same periods in 2021. The movement in this expense was largely the impact of grants of RSUs to the Company's employees, including those in lieu of cash compensation to the Company’s former interim Chief Executive Officer in January 2022 and DSUs granted to the Board of Directors, lowered by the impact of fair value adjustments on cash settled awards as a result of our share price decreasing during the quarter and nine months ended September 30, 2022. The Board of Directors receives 100% of their remuneration in DSUs.

Reorganization

For the three and nine months ended September 30, 2022, we incurred $3.4 million and $12.3 million in reorganization costs, respectively. Reorganization costs for the quarter include termination benefits, and costs associated with the temporary suspension of the Rock Hill Facility. For the nine month period ended September 30, 2022, reorganization costs also include insurance costs incurred on change of control of the board, and costs associated with the closure of the Phoenix Facility.

We have undertaken several initiatives to align our manufacturing footprint with our current activity levels. This included the closure of the Phoenix Facility which was substantially completed in the second quarter of 2022, with related manufacturing to be undertaken by both our Savannah and Calgary aluminum facilities. Of the initial estimate of cost savings of approximately $2.4 million from this closure, we expect to realize annualized savings of approximately $1.0 million as $1.4 million of work force reductions were offset by additions in Calgary and Savannah due to increased demand. On August 23, 2022, we announced the temporary closure of our Rock Hill Facility, as the Calgary manufacturing facility has sufficient capacity to absorb production and meet expected demand for the near term.

Additionally, in February 2022, we announced a reduction of our salaried workforce including manufacturing and office positions which, along with other cost reduction initiatives, were expected to yield annualized savings of approximately $13.0 million. The reductions were followed by a further reduction of salaried positions, as announced in July 2022, and the temporary closure of our Rock Hill Facility, announced in August 2022, which are expected to result in approximately $5.0 million in annualized savings. Of these cost reduction initiatives, $14.0 million was implemented during the first three quarters of 2022, $3.0 million is expected to be implemented in the fourth quarter of 2022, and $1.0 million, comprised of certain manufacturing positions, has been deferred as we work to increase manufacturing headcount in light of increased demand.

Government Subsidies

During the quarter ended September 30, 2022, the Company determined it was eligible for the ERC in the United States established by Section 2301 of the CARES Act and has a filed a claim for $7.3 million payroll tax credits ($7.1 million net of expenses). The Company received subsidies of $3.4 and $7.5 million during the three and nine months ended September 30, 2021 under Canadian government programs CEWS and CERS. Upon finalization of 2021 compensation to specified executives, approximately C$0.5 million ($0.4 million) of previously-received subsidies were repaid to the Canadian authorities in the second quarter of 2022. The amount was fully provided for in the third quarter of 2021 and the Company reversed a $0.6 million incremental provision related to this that was no longer necessary in the first quarter of 2022. The last claim period under the CEWS and CERS programs expired on October 23, 2021.

Interest expense

Interest expense increased by $0.5 million from $0.8 million for the three months ended September 30, 2022 to $1.3 million compared to September 30, 2021 and by $1.8 million from $2.1 million in the nine months ended September 30, 2022 to $3.9 million compared to September 30, 2021. The increased interest expense is a result of the issuance of C$35.0 million ($27.4 million) of Debentures in December 2021 and draws on the Leasing Facilities.

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Income Tax

The provision for income taxes comprises U.S. and Canadian federal, state and provincial taxes based on pre-tax income. The Company incurred a minimal income tax recovery during the three and nine months ended September 30, 2022, compared to a $0.1 million and $0.3 million expense for the same period of 2021. As at September 30, 2022 the Company had a valuation allowance of $28.1 million (December 31, 2021 $17.3 million) against deferred tax assets due to ongoing near term uncertainties on the business caused by the COVID-19 pandemic and the related decline in business activity which impacted our ability to generate sufficient taxable income in Canada and the United States to fully deduct historical losses. As at September 30, 2022, we had C$107.2 million of non-capital loss carry-forwards in Canada and $49.5 million in the United States. These loss carry-forwards will begin to expire in 2032.

Net Loss

Net loss decreased to $6.7 million or $0.08 net loss per share in the three months ended September 30, 2022 from a net loss of $15.4 million or $0.18 net loss per share for the quarter ended September 30, 2021. The decreased loss is primarily the result of a $4.6 million increase in gross profit, a $4.2 million increase in government subsidies and a $0.8 million increase in foreign exchange gain. These were offset by a $0.6 million increase in operating expenses (which includes $3.4 million of reorganization expenses), and a $0.5 million increase in interest expense.

Net loss increased to $49.1 million or $0.56 net loss per share for the nine months ended September 30, 2022 from a net loss of $37.7 million or $0.44 net loss per share for the nine months ended September 30, 2021. The increased loss is primarily the result of a $10.4 million increase in operating expenses (which includes $12.3 million of reorganization expenses and $1.8 million of incremental professional fees as described previously), a $1.8 million increase in interest expense and a $2.7 million decrease in government subsidies offset by an increase in gross margin of $1.5 million and an increase in foreign exchange gain of $1.6 million.

EBITDA and Adjusted EBITDA for the Three and Nine Months Ended September 30, 2022 and 2021

The following table presents a reconciliation for the third quarter and year to date results of 2022 and 2021 of EBITDA and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure for the periods presented:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
	($ in thousands)						($ in thousands)
Net loss for the period		(6,727	)		(15,419	)		(49,057	)		(37,656	)
Add back (deduct):
Interest Expense		1,276			823			3,935			2,117
Interest Income		(19	)		(20	)		(50	)		(62	)
Income Tax expense (recovery)		(16	)		88			(16	)		347
Depreciation and Amortization		4,236			3,815			12,202			10,638
EBITDA		(1,250	)		(10,713	)		(32,986	)		(24,616	)
Foreign Exchange Gains		(1,356	)		(526	)		(1,870	)		(286	)
Stock-Based Compensation		918			837			3,546			3,792
Government Subsidies		(7,141	)		(2,935	)		(7,765	)		(10,434	)
Reorganization Expense		3,426			-			12,281			-
Adjusted EBITDA		(5,403	)		(13,337	)		(26,794	)		(31,544	)
Net Loss Margin(1)		(14.4	)%		(45.2	)%		(37.8	)%		(36.0	)%
Adjusted EBITDA Margin		(11.6	)%		(39.1	)%		(20.7	)%		(30.1	)%

(1)Net loss divided by revenue.

For the three months ended September 30, 2022, Adjusted EBITDA and Adjusted EBITDA Margin increased by $7.9 million to a $5.4 million loss or (11.6)% from $13.3 million loss or (39.1)% in the same period of 2021. This primarily reflects a $5.4 million increase in Adjusted Gross Profit, $2.1 million decrease in salaries and benefits costs due to headcount reductions, $0.5 million reduction of professional fees and other cost reductions.

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For the nine months ended September 30, 2022, Adjusted EBITDA and Adjusted EBITDA Margin increased by $4.8 million to a $26.8 million loss or (20.7)% from $31.5 million loss or (30.1)% in the same period of 2021. This primarily reflects a $2.2 million increase in Adjusted Gross Profit, a $5.1 million reduction in salaries and benefits costs due to headcount reductions (offset by a reduction in capitalized salaries of $1.1 million due to fewer internal projects), $1.8 million of costs of underutilized capacity in the first quarter of 2021 that did not recur in 2022, offset by $1.8 million of incremental professional fees as described previously and $1.5 million increase in travel and entertainment costs due to increased business activity and easing of travel restrictions.

Adjusted Gross Profit and Adjusted Gross Profit Margin for the Three and Nine Months Ended September 30, 2022 and 2021

The following table presents a reconciliation for the three and nine months ended September 30, 2022 and 2021 of Adjusted Gross Profit to our gross profit, which is the most directly comparable GAAP measure for the periods presented:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
	($ in thousands)						($ in thousands)
Gross profit		7,008			2,450			16,571			15,044
Gross profit margin		15.0	%		7.2	%		12.8	%		14.4	%
Add: Depreciation and amortization expense		3,132			2,321			8,792			6,383
Add: Costs of under-utilized capacity		-			-			-			1,756
Adjusted Gross Profit		10,140			4,771			25,363			23,183
Adjusted Gross Profit Margin		21.7	%		14.0	%		19.6	%		22.1	%

There have been significant and industry wide inflationary increases in the realized cost of materials, transportation, labor and packaging which have impacted DIRTT since the second half of 2021. In addition, in the second quarter and in response to a sustained increase in demand that began in the first quarter of 2022, the Company began efforts to increase its manufacturing labor headcount but experienced the ongoing effects of a tight labor market. This has made it more difficult than expected to attract and retain skilled labor, particularly at our Savannah manufacturing facility, and as a result the Company increased hourly rates by 6% on average to increase its overall competitiveness. To address these cost increases, the Company implemented a series of price increases starting with a 6.5% increase effective November 1, 2021, an additional 5% price increase effective June 1, 2022 and a further 10% price increase effective July 21, 2022 and continues to monitor raw material, labor and other costs to determine whether further action is necessary.

Gross profit and gross profit margin increased to $7.0 million or 15.0% for the three months ended September 30, 2022, from $2.5 million or 7.2% for the three months ended September 30, 2021. Adjusted Gross Profit and Adjusted Gross Profit Margin increased to $10.1 million or 21.7% for the three months ended September 30, 2022, from $4.8 million or 14.0% for the three months ended September 30, 2021. The 7.7% increase in Adjusted Gross Profit Margin was a result of improved labor efficiency which benefited gross profit by 4.9%, and the benefit of higher revenues on fixed costs which improved gross profit by 5.1%, offset by a $1.0 million charge, or 2.1% of gross profit, due to the write down of inventory related to Reflect and other discontinued product lines. Materials, transportation and other variable costs reduced gross profit by 0.6% as our price increases realized to date did not fully offset cost increases. We expect a higher realization of enacted price increases from the fourth quarter. Gross profit was impacted by a $1.0 million increase in depreciation and amortization in the quarter on account of accelerated depreciation on software associated with discontinued product lines. Gross profit for the third quarter benefited by approximately $0.6 million from the impact of the weakening Canadian dollar on U.S. dollar reported results, which is included in the above variances.

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For the nine month period ended September 30, 2022, gross profit and gross profit margin increased to $16.6 million or 12.8% from $15.0 million or 14.4% for the nine month period ended September 30, 2021. Adjusted Gross Profit and Adjusted Gross Profit Margin decreased to $25.4 million or 19.6% for the nine months ended September 30, 2022, from $23.2 million or 22.1% for the nine months ended September 30, 2021. The 2.6% decrease in Adjusted Gross Profit was a result of higher materials, transportation, packaging and other variable costs which reduced gross profit by 4.4%. As previously discussed, price increases that were put in place over the last twelve months lagged cost increases. We expect the price increases to be further realized in the fourth quarter which will reduce variable costs as a percentage of revenues closer to historical levels. As a result of higher sales activities, gross profit benefited by 1.6% and 2.6% on utilization of labor and fixed costs, respectively. Labor costs increased $2.3 million for the year-to-date period as we incurred incremental costs during the second quarter associated with moving production to Calgary and Savannah on closure of the Phoenix Facility, rate increases, and adding capacity following an improvement in demand. Fixed costs increased $1.6 million due to cost inflations and the impact of adding the Rock Hill Facility in 2021 to the fixed cost base. In the current year we incurred a $0.8 million charge, or 0.6% of gross profit, due to the write down of inventory related to Reflect and other discontinued product lines. Prior year Adjusted Gross Profit benefited from the removal of $1.8 million, or 1.7% Adjusted Gross Profit impact, on under-utilized capacity not captured in product costs. Gross profit was impacted by $2.1 million of incremental depreciation and amortization on the acceleration of useful lives associated with discontinued product lines and the Phoenix Facility. Gross profit for the year to date benefited by approximately $0.9 million from the impact of the weakening Canadian dollar on U.S. dollar reported results, which is included in the above variances.

During the fourth quarter of 2019, we determined that we were carrying abnormal excess capacity in our manufacturing facilities as a result of the slowdown in sales and determined certain production overheads should be directly expensed in cost of sales, representing production overheads that were not attributable to production. In the first quarter of 2021, we experienced the full impact of the slowdown in non-residential construction activity on our business. In anticipation of a recovery in demand for our products and services and to preserve our skilled workforce, we deliberately maintained manufacturing headcount, while implementing selective furlough days, in the first quarter of 2021 despite the shortfall in revenues relative to capacity. As a result, in the first quarter of 2021 we separately classified $1.8 million as costs related to our under-utilized capacity (1.2% of 2021 first quarter gross profit margin) in cost of sales. For the remaining quarters of 2021 and 2022, we did not have abnormal excess capacity as our workforce was better aligned with current production volumes.

Liquidity and Capital Resources

Cash and cash equivalents at September 30, 2022 totaled $6.8 million, a decrease of $53.5 million from December 31, 2021. The decrease in cash over the nine month period primarily reflects the impact of $47.5 million cash used in operations, of which $1.8 million related to one-time costs associated with the contested director election and $12.3 million of reorganization costs. In addition, capital expenditures totaled $3.6 million and scheduled Leasing Facilities repayments totaled $1.9 million. These outflows were offset by a C$0.9 million ($0.7 million) draw under the Canada Leasing Facility received in April 2022.

The impact of COVID-19 on the Company’s sales and operations has been severe, including a contraction of demand since the beginning of the pandemic and more recently, significant inflation on raw material costs. This has resulted in a significant usage of cash which we have financed through existing cash on hand and financings as described further below. Furthermore, we have implemented multiple initiatives to reduce our overall fixed cost base, including the closure of our Phoenix Facility in the second quarter of 2022, reduction in our hourly headcount in 2021 and salaried headcount reductions and other cost savings initiatives in February 2022 and July 2022. In August 2022 we announced the temporary suspension of operations at the Rock Hill Facility as we have sufficient capacity at our other facilities to manage current demand. This suspension of operations will reduce costs in the interim.

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We have also implemented three price increases to mitigate the inflationary effect, comprised of 6.5% effective November 1, 2021, 5% effective June 1, 2022 and a further 10% effective July 21, 2022. We continue to monitor the cost of our raw materials and labor to determine whether further price increases are warranted. Since March 2022, however, the Company and its Construction Partners have experienced an increase in demand, particularly within its commercial and education verticals, with the broad lifting of health restrictions across North America. In response the Company began efforts to increase manufacturing headcount within its Calgary and Savannah facilities to enable it to meet both near-term demand and anticipated sustained increases. We have increased wage rates in both Canada and the United States to increase our competitiveness in what is proving to be a tight labor market, particularly in Savannah. We are also taking steps to decongest our manufacturing processes to return productivity to pre-pandemic levels. We have started to realize the benefits of the price increases, manufacturing headcount additions, training and debottlenecking in the latter part of the third quarter and expect to see further benefits in the fourth quarter.

The cost reductions and price increases discussed above positively benefited our third quarter results, and have reduced our rate of cash usage. We expect a greater impact of these actions to be realized in the fourth quarter and thereafter. While these actions, combined with an increasing project pipeline is promising, we continue to see unpredictability in our pace of orders.

Accordingly, we are taking several strategic actions to improve our balance sheet in the short term. First, we have determined our eligibility for the ERC for the first three quarters of 2021 and have filed a claim for $7.3 million in payroll tax credits ($7.1 million net of expenses). Second, we have certain properties that are currently owned that we are evaluating for sale and leasing back. We do not intend to vacate these premises as they still serve a valuable aspect of our value proposition, but we expect to receive a one-time cash payment, in exchange for future rent payments. Third, historically we have licensed the use of ICE software to certain strategic partners for use in their business, and DIRTT has provided licensing and developer software support for these counterparties. We are in the process of evaluating multiple initiatives related to the further use of ICE software by third parties. We expect these strategic initiatives to result in positive cash inflows in 2023.

To bridge any cash requirements between now and the completion and closing of these strategic transactions, the Company entered into irrevocable subscription agreements with its two largest shareholders, 22NW and 726 and all the directors and officers of the Company on November 14, 2022 to issue up to 8.8 million shares for gross proceeds of approximately $3.0 million, based on the higher of the Nasdaq closing price on November 14, 2022, and the volume weighted average trading price of the common shares on the Toronto Stock Exchange for the 5 days following the announcement. In addition, in connection with the Private Placement, the two shareholders, or their principals, have irrevocably committed to backstopping any rights offering occurring by the Company in the next twelve months in the aggregate amount of $2.0 million and the shortfall, if any, between the maximum anticipated gross proceeds under the Private Placement, being $3.0 million, and the actual gross proceeds received by the Company.

We believe completion of these strategic transactions and the Private Placement will improve our balance sheet and accordingly confidence in our business, benefiting our pipeline conversion which will enable us to cross the threshold of activity which will get us to cashflow breakeven.

We have assessed the Company’s liquidity using multiple downside and upside scenarios, taking into account these circumstances, our sales outlook for the next twelve months and actions in combination with existing cash balances, available credit facilities, the strategic transactions and Private Placement discussed previously, and potential equity or debt financing. Based upon this analysis, we believe the Company has sufficient liquidity to remain a going concern for at least the next 12 months. However, a number of factors, including our ability to satisfy the expected growth in pipeline demand and those discussed below, could adversely impact our liquidity over such period.

To the extent that existing cash and cash equivalents, available facilities and increased liquidity from the aforementioned strategic actions are not sufficient to fund future activities, we may seek to raise additional funds through equity or debt financings. If additional funds are raised through the incurrence of indebtedness, such indebtedness may have rights that are senior to holders of our Debentures and our equity securities or contain instruments that may be dilutive to our existing shareholders. Any additional equity or debt financing may be dilutive to our existing shareholders. While we are confident in our ability to access capital markets when needed or under acceptable terms, there can be no absolute assurance we will be able to do so.

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During 2021, we completed financings to increase our liquidity in light of the highly uncertain economic conditions caused by the pandemic. In January 2021, we issued C$40.3 million of the January Debentures for net proceeds after costs of C$37.6 million ($29.5 million). The January Debentures accrue interest at a rate of 6.00% per annum and are convertible into common shares of DIRTT at an exercise price of C$4.65 per common share, or if not converted will mature and be repayable on the January Debenture Maturity Date. Interest and principal are payable in cash or shares at the option of the Company.

In February 2021, we entered into the RBC Facility, a C$25.0 million senior secured revolving credit facility with RBC. Under the RBC Facility, the “Borrowing Base” is a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of 75% of the book value of eligible inventory and 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims. Available borrowings under the RBC Facility at September 30, 2022 were C$12.4 million ($9.0 million).

In December 2021, we issued C$35.0 million of the December Debentures for net proceeds after costs of C$32.7 million ($25.6 million). The December Debentures accrue interest at a rate of 6.25% per annum and are convertible into common shares of DIRTT at an exercise price of C$4.20 per common share, or if not converted will mature and be repayable on the December Debenture Maturity Date. Interest and principal are payable in cash or shares at the option of the Company.

The Company has a C$5.0 million Canada Leasing Facility of which C$4.5 million ($3.4 million) has been drawn, and a $14.0 million U.S. Leasing Facility of which $13.3 million has been drawn with RBC and one of its affiliates. The Leasing Facilities are available for equipment expenditures and certain equipment expenditures already incurred.

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
	($ in thousands)						($ in thousands)
Net cash flows (used in) provided by operating activities		(10,667	)		(12,191	)		(47,509	)		(23,872	)
Net cash flows used in investing activities		(644	)		(2,210	)		(3,595	)		(12,556	)
Net cash flows (used in) provided by financing activities		(912	)		(520	)		(1,802	)		36,083
Effect of foreign exchange on cash, cash equivalents and restricted cash		(293	)		(130	)		(73	)		581
Net (decrease) increase in cash, cash equivalents and restricted cash		(12,516	)		(15,051	)		(52,979	)		236
Cash, cash equivalents and restricted cash, beginning of period		22,945			61,133			63,408			45,846
Cash, cash equivalents and restricted cash, end of period		10,429			46,082			10,429			46,082

Operating Activities

Net cash flows used in operating activities were $10.7 million for the three months ended September 30, 2022 compared to $12.2 million in the three months ended September 30, 2021. Included in the $10.7 million used in operating activities in the third quarter of 2022 are $3.4 million of reorganization costs. Excluding these amounts, cashflows used in operations would have been $7.3 million in the third quarter of 2022 compared to $12.2 million cash provided by operations in the same period of 2021, with the decrease reflecting an increase of $5.4 million of Adjusted Gross Profit offset by working capital timing. Apart from the above noted items, working capital changes primarily reflect increased accounts payable due to higher activity and timing of payments, a decrease in inventory as we use the inventory built up in the first half of the year discussed below, and reduced deposits on orders from customers offset by the receivable related to the government subsidies.

Net cash flows used in operating activities were $47.5 million for the nine months ended September 30, 2022 compared to $23.9 million in the nine months ended September 30, 2021. Included in the $47.5 million used in operating activities in the nine months ended September 30, 2022 are $12.3 million of reorganization costs, $1.8 million of professional fees associated with the contested director election, and $6.1 million of increased inventory

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where the Company took on incremental inventory from suppliers to mitigate against potential supply chain disruption, offset by the receipt of a $3.2 million income tax refund related to 2020. We have since taken steps to adjust our aluminum supply and expect to begin drawing down such inventory in the third and fourth quarter. Excluding these amounts, cashflow used in operations would have been $30.6 million in the nine months ended September 30, 2022 compared to $24.3 million cash used in operations in the same period of 2021, with the increase in cash used reflecting a decrease of government subsidies received and working capital timing. Apart from the above noted items, working capital changes primarily reflect government subsidies receivable offset by higher accounts payable due to higher activity and timing of payments.

Investing Activities

We invested $0.4 million and $2.2 million in property, plant and equipment during the three and nine months ended September 30, 2022, respectively, compared to $1.8 million and $10.5 million during the three and nine months ended September 30, 2021. The expenditure for the three months ended September 30, 2022 comprised of $0.1 million of manufacturing upgrades, $0.1 million of leasehold improvements and $0.1 million related to our website design. The expenditure for the nine months ended September 30, 2022 comprised of $1.0 million of working capital changes, $0.7 million of manufacturing upgrades, $0.2 million related to our website design and $0.3 million related to DXC refreshes and IT equipment. The decrease in investing activities is largely due to reduced spending as the Rock Hill Facility and Dallas DXC were completed in 2021.

We invested $0.4 million on capitalized software during the three months ended September 30, 2022, as compared to $0.5 million in the three months ended September 30, 2021 and $1.3 million for the nine months ended September 30, 2022 compared to $1.9 million for the comparative period.

Our 2022 capital expenditure program was comprised of approximately $2.5 million related to refreshes of DXCs, continued enhancement of our customer relationship management system and website redesign, approximately $2.5 million on software development and approximately $2.0 million on manufacturing and other capital upgrades of which actual expenditures have been less than budget.

Financing Activities

For the three and nine months ended September 30, 2022, $0.9 million and $1.8 million of cash was used in financing activities, comprising mainly of $0.6 million and $1.9 million of scheduled payments under the Leasing Facilities and $0.3 million and $0.6 million relating to taxes paid on RSU vestings for the three and nine month period ended September 30, 2022 respectively. During the second quarter, we received C$0.9 million ($0.7 million) under the Canada Leasing Facility. For the three and nine months ended September 30, 2021, $0.5 million of cash was used and $36.1 million of cash was provided by financing activities, respectively, mainly due to the proceeds received from the issuance of C$40.3 million of Debentures in January 2021 and the receipt of $8.4 million of cash consideration under the U.S. Leasing Facility.

We currently expect to fund anticipated future investments with available cash, including the proceeds from Debentures issued in 2021, and drawings on the RBC Facility. We also expect to pursue additional strategic actions to improve available cash, which includes filing an application for ERC for the first three quarters of 2021 for $7.1 million, net of expenses, evaluating properties we own for sale and lease back, evaluating multiple initiatives related to the use of our ICE software and the Private Placement of common shares. Refer to “–Liquidity and Capital Resources" for further details. We do not expect to make any further draws under the Leasing Facilities. Apart from cash flow from operations, issuing equity and debt has been our primary source of capital to date. Additional debt or equity financing may be pursued in the future as we deem appropriate. We may also use debt or pursue equity financing depending on the price of our common shares at the time, interest rates, and nature of the investment opportunity and economic climate. No assurance can be given that any of these actions will be successful, will be sufficient for our needs.

Credit Facility

On February 12, 2021, the Company entered into the RBC Facility. Under the RBC Facility, the Borrowing Base is up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of 75% of the book value of eligible inventory and 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims. At September 30, 2022, available borrowings

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are C$12.4 million ($9.0 million), of which no amounts have been drawn. Interest is calculated at the Canadian or U.S. prime rate plus 30 basis points or at the Canadian Dollar Offered Rate or LIBOR plus 155 basis points. Under the RBC Facility, if the Aggregate Excess Availability is less than C$5.0 million, the Company is subject to a FCCR covenant of 1.10:1 on a trailing twelve-month basis until such time the borrowing availability net of unrestricted cash exceeds C$5.0 million for at least thirty consecutive calendar days. Additionally, if the FCCR has been below 1.10:1 for the three immediately preceding months, the Company is required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Leasing Facilities. The Company did not meet the three-month FCCR requirement during the third quarter of 2022, which resulted in requiring the restriction of $3.6 million of cash. Should an event of default occur, or the Aggregate Excess Availability be less than C$6.25 million for five consecutive business days, the Company would enter a cash dominion period whereby the Company’s bank accounts would be blocked by RBC and daily balances will set-off any borrowings and any remaining amounts made available to the Company.

During 2020, the Company entered into the Leasing Facilities, consisting of the C$5.0 million Canada Leasing Facility and the $14.0 million U.S. Leasing Facility with RBC, which are available for equipment expenditures and certain equipment expenditures already incurred. The Leasing Facilities, respectively, have seven and five-year terms and bear interest at 4.25% and 5.59%. The U.S. Leasing Facility is amortized over a six-year term and is extendible at the Company’s option for an additional year.

The Company has drawn $13.3 million of cash consideration under the U.S. Leasing Facility and commenced the lease term in 2020 for the equipment at the Rock Hill Facility. The Company has drawn C$4.5 million ($3.4 million) of cash consideration under the Canada Leasing Facility and commenced the lease term for the Canadian equipment expenditures during 2020. C$0.9 million ($0.7 million) of the Canada Leasing Facility was drawn in the three months ended June 30, 2022.

We are restricted from paying dividends unless Payment Conditions (as defined in the RBC Facility) are met, including having a net borrowing availability of at least C$10 million over the proceeding 30-day period, and having a trailing twelve-month fixed charge coverage ratio above 1.10:1 and certain other conditions. The RBC Facility is currently secured by substantially all of our real property located in Canada and the United States.

Contractual Obligations

There have been no material changes in our contractual obligations during the three months ended September 30, 2022, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” in our Annual Report on Form 10-K, other than additional commitments related to the extension of our headquarters lease in Calgary. See Note 14, “Commitments” to our interim condensed consolidated financial statements in this Quarterly Report for additional information.

Significant Accounting Policies and Estimates

There have been no material changes in our significant accounting policies during the three months ended September 30, 2022, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Accounting Policies and Estimates” in our Annual Report on Form 10-K. For information regarding significant accounting policies and estimates, please refer to Item 7 and Item 8 in our Annual Report on Form 10-K. As disclosed in Note 6, “Adoption of New and Revised Accounting Standards” to our condensed consolidated interim financial statements appearing in this Quarterly Report, we adopted Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The ASU provides guidance on required disclosures with respect to government assistance in a company’s notes to the annual financial statements. The amendments in the ASU are effective for periods beginning after December 15, 2021. The Company has adopted this standard effective January 1, 2022 and notes there is no impact of this standard on our accounting or disclosures of government assistance.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, please refer to Note 6, “Adoption of New and Revised Accounting Standards” to our condensed consolidated interim financial statements and “–Significant Accounting Policies and Estimates” appearing in this Quarterly Report.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risk exposures since our disclosures in our Annual Report on Form 10-K. For information regarding our exposure to certain market risks, please refer to Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officers and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our principal executive officers and principal financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based upon their evaluation, our principal executive officers and principal financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are pursuing multiple lawsuits against our former founders, Mogens Smed and Barrie Loberg, their new company Falkbuilt Ltd., and other related individual and corporate defendants for violations of fiduciary duties and noncompetition and non-solicitation covenants contained in their executive employment agreements, and the misappropriation of our confidential and proprietary information in violation of numerous Canadian and U.S. state, and federal laws pertaining to the protection of our trade secrets and proprietary information and the prevention of false advertising and deceptive trade practices. There have been no material developments in the legal proceedings previously disclosed in our Annual Report on Form 10-K, as supplemented by our Quarterly Report on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022, filed with the SEC and applicable securities commissions or similar regulatory authorities in Canada on May 4, 2022 and July 27, 2022 respectively.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Annual Report on Form 10-K, as supplemented by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and June 30, 2022, filed with the SEC and applicable securities commissions or similar regulatory authorities in Canada on May 4, 2022 and July 27, 2022, which could materially affect our businesses, financial condition, or results of operations. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and results of operations.

Our share price has been and may continue to be volatile, which could cause the value of your investment to decline. If we fail to comply with the continuing listing standards of Nasdaq, our securities could be delisted.

Our common shares are currently listed on the Toronto Stock Exchange under the symbol “DRT” and on Nasdaq under the symbol “DRTT”. The price of our common shares has in the past fluctuated significantly, and may fluctuate significantly in the future, depending upon a number of factors, many of which are beyond our control and may adversely affect the market price of our common shares. These factors include: (i) variations in quarterly results of operations; (ii) deviations in our earnings from publicly disclosed forward-looking guidance; (iii) changes in earnings estimates by analysts; (iv) our announcements or our competitors’ announcements of significant contracts, acquisitions, strategic partnerships or joint ventures; (v) general conditions in the offsite construction and manufacturing industries; (vi) sales of our common shares by our significant shareholders; (vii) fluctuations in stock market price and volume; and (viii) other general economic conditions.

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

Further, if the closing bid price of our common shares is below the $1.00 Nasdaq minimum requirement for 30 consecutive business days, we may become subject to delisting proceedings. On September 7, 2022, we received a letter from Nasdaq that we have not been in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5450(a)(1) for a period of 30 consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we are provided a compliance period of 180 calendar days from the date of the notice to regain compliance with the minimum closing bid price requirement. If we do not regain compliance during the compliance period, we may be afforded a second 180 calendar day period to regain compliance if, among other things, we meet certain listing requirements of, and elect to transfer to, the Nasdaq Capital Market. We can achieve compliance with the minimum bid price requirement if, during either compliance period, the closing bid price per share of our common shares is at least $1.00 for a minimum of ten consecutive business days. We intend to monitor the closing bid price of our common shares and assess potential actions to regain compliance, but there is no assurance that we will be able to regain compliance, including under the specified timeframes.

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Any delisting of our securities could have an adverse effect on the market price of, and the efficiency of the trading market for, our securities, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and less coverage of us by securities analysts, if any. Also, if in the future we were to determine that we need to seek additional equity capital, having been delisted or being subject to delisting proceedings could have an adverse effect on our ability to raise capital in the public or private markets.

We are under the leadership of a reconstituted Board of Directors who plan to implement a variety of operational, organizational, cultural and other changes to our business, and we may not be able to achieve some or all of the anticipated benefits of this transformation plan. We are also undergoing changes at a senior management level, including the appointment of a new Chief Executive Officer in June 2022.

Our Board of Directors was entirely reconstituted at our annual and special meeting of shareholders held on April 26, 2022 and, following that meeting, Geoffrey Krause and Jeffrey Calkins were appointed Interim Co-Chief Executive Officers. In June 2022, Jeffrey Calkins and Jennifer Warawa departed the company and a new Chief Executive Officer, Benjamin Urban was appointed. Messrs. Urban and Noll were also appointed to our Board of Directors in June 2022. On July 27, 2022, the Company announced additional leadership changes, including the departures of Charles Kraus, Senior Vice President and General Counsel and Colin Blehm, Vice President Product Development, and the promotion of Trevor Didluck to Vice President Product Development. Nandini Somayaji has been promoted to Senior Vice President Talent, General Counsel & Corporate Secretary. On August 5, 2022, Mary Garden departed the Board of Directors. Geoffrey Krause, DIRTT’s former Chief Financial Officer retired from the Company, effective September 30, 2022 and Bradley Little was appointed as the incoming Chief Financial Officer effective August 23, 2022. On August 29, 2022, Richard Hunter was appointed as DIRTT's new Chief Operating Officer. On October 20, 2022, Jeff Dopheide as appointed as Chief Revenue Officer, effective November 15, 2022. As a result of these events, the timely integration of senior management will be critical in the successful implementation of the Board of Directors' plans. There can be no assurance that we will be able to successfully implement the plan or otherwise realize the anticipated benefits of the plan, and we may encounter short-term disruptions of certain aspects of our business as elements of the plan are implemented.

In addition to overseeing the changes to DIRTT’s leadership described above, since its election, the reconstituted Board of Directors has undertaken an extensive review of DIRTT’s operations, a process which is still ongoing (see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook”, above), and are in the process of implementing a variety of operational, organizational, cultural and other changes to our business, including plans to meet pipeline demand and expand revenues. We may not be successful in achieving some or all of the anticipated benefits of these plans, which may have an adverse effect on our results from operations and financial condition. Specifically, we are addressing the following issues:

•Ability to increase manufacturing capacity to service current pipeline:

As at October 1, 2022, DIRTT’s 12-month forward pipeline, which represents known projects and leads at various stages of maturation which our sales teams are working to convert into orders, increased by 10% to $395 million from $359 million as at July 1, 2022 and 24% from $318 million as at April 1, 2022. Servicing of this pipeline and capturing the underlying revenue growth is dependent upon the Company's ability to ramp up production capabilities on a timely basis. The Board of Directors and DIRTT’s management team have prioritized removing constraints in DIRTT’s manufacturing processes and are pursuing a number of initiatives including increased hourly labor, improved hourly labor retention and streamlined manufacturing processes. DIRTT may not be successful in implementing such initiatives and may be negatively impacted by the competitive nature of attracting personnel and other current market conditions. DIRTT may not be able meet such demand and capture the underlying revenue growth which could adversely affect the Company’s results of operations and financial condition.

•Discounting and raw material cost inflation impacts on profitability:

DIRTT's gross margins and resulting profitability have been negatively affected by the impacts of material cost inflation and the use of increased discounting to drive higher demand. DIRTT has taken steps to improve gross margin by reducing discounts and increasing prices, including a 5% price increase at June 1, 2022 and a further 10% price increase at July 21, 2022. If we are unable to realize the effects of reduced discounting or price increases, if inflationary increases continue without corresponding increases in our pricing or if such reduced discounting and price increases cause a material impact on demand, DIRTT’s results of operations and financial condition could be adversely impacted.

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•The effectiveness of certain elements of DIRTT’s administrative systems:

DIRTT has identified the need to upgrade its inventory management and cost accounting systems. Other information technology may require investment in the future. However, the success, in whole or in part, of this investment cannot be guaranteed.

We have negative cash flow from operating activities

We had negative cash flow from operating activities for the three and nine month period ended September 30, 2022. Continued negative operating cash flow may compromise our ability to make interest and principal payments on the convertible unsecured subordinated debentures issued on January 25, 2021 and December 1, 2021 (collectively, the “Debentures”) on a timely basis, or at all, our ability to execute our strategic plan and confidence in our business. Until we are able to generate positive cash flow from operating activities, our ability to finance our operations will be dependent on our cash reserves and available credit facilities and, if required, our ability to obtain additional external financing. Although we anticipate we will have positive cash flow from operating activities in future periods, we cannot guarantee that such future cash flow will be sufficient or that a prolonged recovery from the COVID-19 pandemic, or other changes to our circumstances, will not necessitate additional financial resources to fund our operating activities. In response to our negative cash flow from operations, we have undertaken several strategic actions and a Private Placement to improve our balance sheet in the short term, see “–Liquidity and Capital Resources". Although we anticipate these actions will strengthen our balance sheet and liquidity position, we cannot guarantee that such future cash flow will be sufficient or that a prolonged recovery from the COVID-19 pandemic, or other changes to our circumstances, will not necessitate additional financial resources to fund our operating activities.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Not Applicable.

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Item 6. Exhibits

EXHIBIT INDEX

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).
10.1	DIRTT Environmental Solutions Ltd. Employee Share Purchase Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q File No. 001-39061, filed on May 4, 2022).
10.2*+	Executive Employment Agreement, dated August 12, 2022, by and between DIRTT Environmental Solutions Inc. and Richard Hunter
10.3*+	Executive Employment Agreement, dated August 17, 2022, by and between DIRTT Environmental Solutions Inc. and Bradley Little
10.4*+	Executive Employment Agreement, dated December 24, 2019, by and between DIRTT Environmental Solutions Ltd and Nandini Somayaji
10.5*+	Executive Employment Agreement, dated October 19, 2022, by and between DIRTT Environmental Solutions Inc and Jeff Dopheide
10.6*	Indemnity Agreement, dated August 12, 2022, between DIRTT Environmental Solutions Ltd and Richard Hunter, together with a schedule identifying other substantially identical agreements between the Company and each of the other persons identified on the schedule
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

+ Compensatory plan or agreement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DIRTT ENVIRONMENTAL SOLUTIONS LTD.
	By:	/s/ Bradley S. Little
		Bradley S. Little
		Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)
Date: November 14, 2022

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EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is entered into on August 12, 2022

BETWEEN:

Dirtt Environmental Solutions, Inc.(the “Company”)

- and -

Richard J. Hunter
(the “Executive”)

RECITALS:

A. The Company wishes to employ the Executive pursuant to this Employment Agreement.

B. The Executive wishes to accept employment with the Company under this Agreement.

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

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Company and the Executive agree as follows:

1.Definitions

In this Agreement,

(a)“Accrued Entitlements” has the meaning set out in Section 9(a)(iv).

(b)“Affiliate” means any person or entity Controlling, Controlled by, or Under Common Control with the Company. The term “Control,” including the correlative terms “Controlling,” “Controlled By,” and “Under Common Control with” means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any Company or other ownership interest, by contract or otherwise) of a person or entity. For the purposes of the preceding sentence, Control shall be deemed to exist when a person or entity possesses, directly or indirectly, through one or more intermediaries (i) in the case of a company, more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership or joint venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); or (iii) in the case of any other person or entity, more than 50% of the economic or beneficial interest therein. For the avoidance of doubt, with respect to the Company, the term Affiliate includes the Parent.

(c)“Agreement” means this Employment Agreement, as may be amended or supplemented from time to time as provided for herein.

(d)“Board” means the Board of Directors of the Parent.

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

(f)“Business” means the business of designing, manufacturing and installing prefabricated interiors in commercial and residential buildings, and includes, for greater certainty and without limitation: (i) the following products which can be integrated with interior wall solutions: (A) pre-fabricated modular network data cable distribution, (B) pre-fabricated and

electrical power cable distribution, (C) pre-fabricated modular case goods, and (D) pre-fabricated low-profile flooring; (ii) the development and sale or license to third parties of 3D computer aided design software for the design, construction and maintenance of buildings and the design, construction, modification and furnishing of building interiors; and (iii) such other business as the Company or any of its Affiliates becomes engaged in during the Term that is related in a material way to the duties and responsibilities of the Executive.

(g)“Confidential Information” means all confidential or proprietary information, intellectual property (including trade secrets) and confidential facts relating to the business and affairs of the Company and its Affiliates, whether oral or in writing, or presented visually or electronically, and includes business and technical information, marketing and business plans, strategies, research and development materials and matters, databases, specifications, formulations, tooling, prototypes, sketches, models, drawings, specifications, procurement requirements, engineering information, samples, computer software (source and object codes), forecasts, identity of or details about actual or potential customers or projects, techniques, inventions, discoveries, know-how, and trade secrets. Notwithstanding the foregoing, Confidential Information does not include any information:

(i)that becomes publicly available through no fault or breach of this Agreement by the Executive; or

(ii)that the Executive possesses prior to the date on which the Executive first became employed or engaged by the Company or any of its Affiliates and that the Executive obtained from a source other than the Company or any of its Affiliates.

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

(i)“Good Reason” means:

(i)a material diminution in the Executive’s Salary or authority, duties and responsibilities with the Company, the Parent and any of the Parent’s other direct or indirect subsidiaries; provided, however, that if the Executive is serving as an officer or member of the board of directors (or similar governing body) of the Parent, the Company or any of their Affiliates, in no event shall the removal of the Executive as an officer or board member, regardless of the reason for such removal, constitute Good Reason;

(ii)a material breach by the Company of any of its obligations under this Agreement; or

(iii)subject to section 3(c), the relocation of the geographic location of the Executive’s principal place of employment by more than fifty (50) miles from the location of the Executive’s principal place of employment as of the Effective Date; provided, however, that travel in the course of Executive’s employment (including to other locations of the Company and Parent in the United States and Canada) shall not be considered to be a Good Reason event under this Section 1(i)(iii).

Notwithstanding the foregoing provisions of this Section 1(i) or any other provision of this Agreement to the contrary, any assertion by the Executive of a termination for Good Reason shall not be effective unless all of the following conditions are satisfied: (A) the condition described in Section 1(i)(i), (ii) or (iii) giving rise to the Executive’s termination of employment must have arisen without the Executive’s consent; (B) the Executive must provide written notice to the Board of the existence of such condition(s) within thirty (30) days after the initial occurrence of such condition(s); (C) the condition(s) specified in such

notice must remain uncorrected for thirty (30) days following the Board’s receipt of such written notice; and (D) the date of the Executive’s termination of employment must occur within sixty (60) days after the initial occurrence of the condition(s) specified in such notice.

(j)“Just Cause” means any gross negligence, willful misconduct or breach of fiduciary duty by the Executive in relation to the performance of the Executive’s duties under this Agreement, any material neglect by the Executive of her duties under this Agreement, or any of the following:

(i)fraud, misappropriation, embezzlement or malfeasance on the part of the Executive with respect to the property, interests or funds of the Company or its Affiliates;

(ii)any misfeasance or nonfeasance in office which is willfully or grossly negligent on the part of the Executive;

(iii)the breach by the Executive of any policy of the Company or its Affiliates or the breach by the Executive of any policy or law relating to non-discrimination, non-retaliation or anti-harassment (including sexual harassment);

(iv)the breach by the Executive of her obligations under any noncompetition, non-solicitation, confidentiality or company property covenants under this Agreement; or

(v)the Executive’s conviction for a felony or indictable offense or any other crime involving fraud or moral turpitude, or a plea of no contest with regard to any of the same.

(k)“Materials” has the meaning set out in Section 14(a).

(l)“Parent” means DIRTT Environmental Solutions Ltd.

(m)“Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation, with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted.

(n)“Restricted Period” means twelve (12) months from the Termination Date.

(o)“Restricted Territory” means: Canada, the United States of America and any other countries as the Company or any of its Affiliates develop business interests during the Term, and which the Company advises the Executive in writing within twenty (20) days following the Termination Date are part of the Restricted Territory.

(p)“Salary” has the meaning set out in Section 5(a).

(q)“Severance Period” means twelve (12)months from the Termination Date.

(r)“Term” has the meaning set out in Section 4.

(s)“Termination Date” has the meaning set out in Section 8(b).

2.Employment of the Executive and Position

Commencing on August 29, 2022 (the “Effective Date”), the Executive shall hold the position of Chief Operating Officer and shall report directly to the Chief Executive Officer. As Chief Operating Officer of the Company, the Executive shall perform those duties set forth in any applicable position description adopted and amended by the Company from time to time, and such other duties as the Executive shall reasonably be directed to perform by the Company from time to time in respect of the business and operations of the Company, the Parent and their Affiliates.

3.Performance of Duties

(a)During the Term, the Executive shall devote his full working time and attention to the performance of his duties on behalf of the Company and its Affiliates, shall faithfully, honestly and diligently serve the Company and its Affiliates and shall use his best efforts and skill to promote the best interests of the Company and its Affiliates at all times. Notwithstanding the foregoing, the Executive may devote a reasonable amount of time during non-business hours to charitable organizations and boards, provided that such participation does not adversely impact the performance of [his/her] duties hereunder or breach any of the other terms of this Agreement or any other obligation that the Executive owes the Company or any of its Affiliates.

(b)In performing his duties under this Agreement, the Executive shall comply with any written policies, procedures or rules established by the Company or Parent from time to time, as may be amendedby the Company or Parent at their discretion.

(c)The Executive’s principal place of employment as of the Effective Date shall be the Company’s offices in Plano, Texas; provided, however, the Executive will be required to relocate to the Company’s offices in Calgary, Alberta no later than October 1, 2022 and such relocation will not constitute a Good Reason event under Section 1(i)(iii). The Executive also acknowledges and agrees that business travel will be required in the course of performing his duties. Parent will assist the Executive with obtaining a Canadian work permit to enable Executive to relocate to the Company’s offices in Calgary, Alberta, and upon obtaining such work permit, the Executive and Parent will enter into an amended and restated Employment Agreement with such changes as are necessary to give effect to such relocation.

4.Employment Period

The Executive shall be employed by the Company hereunder commencing on the Effective Date, and the Executive’s employment hereunder will terminate upon the Termination Date (as defined below). The period that the Executive is employed hereunder is referred to as the “Term”.

5.Remuneration

(a)Base Salary. For the Executive’s services under this Agreement, during the Term, the Company shall pay the Executive an annualized base salary of three hundred fifty thousand dollars ($350,000), less required deductions and applicable withholdings (the “Salary”).

(b)Benefits. During the Term, the Executive shall be eligible to participate in the benefit plans made available by the Company to its similarly situated employees from time to time in accordance with, and subject to, the terms and conditions of such plans as may be amended by the Company at its discretion from time to time. The Company shall not, by reason of this Section 5(b), be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such plan, so long as such changes are similarly applicable to any similarly situated Company employees generally.

(c)Bonus. During the Term, the Executive will be eligible to participate in the Parent’s Variable Pay Plan (“VPP”), as amended from time to time and in accordance with and subject to the terms and conditions thereof and as set out therein. The Executive’s annual target bonus opportunity (the “Bonus”) will be as established by the Board from time to time. For the 2022 calendar year, Executive will not participate in the VPP, but instead will be eligible for (i) a bonus with a target payout of 300% of Executive’s prorated 2022 annual Salary payable in share awards issued under the Company’s 2020 Long Term Incentive Plan (“LTI Plan”), and (ii) a supplemental bonus with a target payout of 100,000 share awards issued under the LTI Plan (collectively, the “2022 Bonus Opportunity”). The amount of the Executive’s payment under either the VPP or the 2022 Bonus Opportunity, if any, in respect of a calendar year shall be dependent upon, calculated in reference to, and paid in accordance with, the achievement of applicable performance objectives as set out and evaluated by the Board in its sole discretion.

(d)Equity-Based Incentive Compensation. The Executive will be eligible to receive grants of equity-based incentives under the Company's LTI Plan, each as amended from time to time and in accordance with and subject to the terms thereof, provided, however, that Executive shall not be entitled to any equity-based incentives for the 2022 calendar year except as outlined in 5(c) above. The amount and type of the equity-based incentives for any year will be determined by the Board and may change from year to year.

6.Expenses

(a)General. The Company shall pay or reimburse the Executive for all reasonable travel and other out-of-pocket expenses incurred or paid by the Executive in the performance of his duties hereunder.

(b)Relocation Expenses. The Company shall pay or reimburse the Executive for all reasonable, standard and customary moving and relocation expenses incurred between the Effective Date and March 31, 2023. (the “Relocation Payment”). If any portion of the Relocation Payment provided to or for the benefit of the Executive results in taxable income to the Executive, the Company shall provide the Executive with an amount equal to any income and other taxes payable by the Executive upon the provision of such Relocation Payment (and an additional amount equal to any taxes imposed on such tax gross-up amount), such that the Executive shall not incur any tax costs with respect to such Relocation Payment.

(c)Tax Preparation Expenses. The Company shall reimburse the Executive for reasonable and necessary legal and/or accounting fees incurred in the preparation of the Executive’s income tax returns, up to a maximum of $5,000 per year.

The payment or reimbursement of expenses in this Section 6 shall be made upon the presentation of expense statements or other supporting documentation as the Company may reasonably require, in accordance with any expense reimburse policies implemented by the Company from time to time. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of such documentation (but in any event not later than the close of the Executive’s taxable year following the taxable year in which the expense is incurred by the Executive). In no event shall any reimbursement be made to the Executive for any expenses incurred after the date of the Executive’s termination of employment with the Company.

7.Vacation

As of the Effective Date, the Executive shall be eligible for vacation with pay of up to four (4) weeks per complete calendar year (pro-rated for partial calendar years) that the Executive is employed hereunder. Vacation eligibility will be increased by 1 (one) week per year for every five (5) completed years of the Executive’s service from the Effective Date, to a maximum of up to six (6) weeks per complete calendar

year. Vacation shall accrue and be taken in accordance with Company vacation policies as in effect from time to time. The Executive may carry forward a maximum of ten (10) vacation days from one year to the next. Any vacation carried over must be used in the first quarter of the following calendar year.

8.Termination

(a)Notice. The Executive’s employment hereunder:

(i)may be terminated by the Company at any time for Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 10 of this Agreement;

(ii)will terminate automatically upon the death of the Executive;

(iii)may be terminated by the Company at any time without Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 9 of this Agreement;

(iv)may be terminated by the Executive for Good Reason; or

(v)may be terminated by resignation of the Executive without Good Reason upon providing one (1) month’s prior written notice to the Company; provided, however, that if the Executive has provided notice to the Company of the Executive’s termination of employment without Good Reason, the Company may determine, in its sole discretion, that such termination shall be effective on any date prior to the effective date of termination provided in such notice (and, if such earlier date is so required, then it shall not change the basis for the Executive’s termination of employment nor be construed or interpreted as a termination of employment pursuant to Section 8(a)(iii)).

(b)Effective Date of Termination. The effective date on which the Executive’s employment hereunder is terminated (the “Termination Date”) shall be:

(i)in the case of termination under Section 8(a)(i) or Section 8(a)(iii), the day specified by the Company in writing;

(ii)in the case of termination under Section 8(a)(ii), the date of death; or

(iii)in the case of termination under Section 8(a)(iv), the last day of the applicable notice period referred to in Section 1(i); or

(iv)in the case of termination under Section 8(a)(v), the last day of the applicable notice period referred to therein (unless an earlier date is designated by the Company pursuant to Section 8(a)(v)).

(c)Return of Property, etc.On the Termination Date, the Executive shall (i) be deemed to have automatically resigned from all offices and directorships held by the Executive with the Company and its Affiliates and agrees to execute, immediately upon request, any such written resignations or other documentation as may be requested by the Company with respect thereto, (ii) deliver to the Company (and not retain any copies of) all Materials in the Executive’s possession or under the Executive’s control, and (iii) deliver to the Company any keys, access cards, business cards, credit and charge cards, computer, cell phone or other property or device issued or provided to him by or on behalf of the Company or any Affiliate.

9.Rights on Termination (without Just Cause or for Good Reason)

Upon termination of the Executive’s employment by the Company without Just Cause or by the Executive for Good Reason, the following provisions shall apply:

(a)the Executive shall receive from the Company:

(i)payment of the Executive’s accrued but unpaid Salary up to the Termination Date;

(ii)reimbursement of all expenses incurred in accordance with Section 6 up to the Termination Date;

(iii)provision of all benefits up to the Termination Date in accordance with Section 5(b);

(iv)payment of the Executive’s accrued but unused vacation entitlement existing as of the Termination Date (subsections (i) through (iv) are hereinafter referred to as the “Accrued Entitlements”);

(v)subject to the final sentence of Section 5(c), and Section 9(b), payment of the Bonus earned (if any) for the year in which the termination occurs, pro-rata from the start of that Bonus year to the Termination Date, based on actual performance during the entire Bonus year, as determined by the Company following the Bonus year and payable to the Executive in accordance with Section 5(c) following completion of the Bonus year (the “Accrued Bonus Payment”);

(vi)subject to Sections 9(b) and (c), the continued payment of Salary during the Severance Period (such payment, the “Severance Payment”), in accordance with the Company’s ordinary payroll practices;

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

(viii)subject to Section 9(b), for the portion, if any, of the Severance Period that the Executive elects to continue coverage for the Executive and the Executive’s spouse and eligible dependents, if any, under the Company’s group health plans pursuant to Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall promptly reimburse the Executive on a monthly basis for the difference between the amount the Executive pays to effect and continue such coverage and the employee contribution amount that similarly situated employees of the Company pay for the same or similar coverage under such group health plans (the “COBRA Benefit”). Each payment of the COBRA Benefit shall be paid to Executive on the Company’s first regularly scheduled pay date in the calendar month immediately following the calendar month in which the Executive submits to the Company documentation of the applicable premium payment having been paid by the Executive, which documentation shall be submitted by the Executive to the Company within thirty (30) days following the date on which the applicable premium payment is paid. The Executive shall be eligible to receive such reimbursement payments until the earliest of: (x) the last day of the Severance Period; (y) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (z) the date on which the Executive becomes eligible to receive coverage under a group health plan sponsored by another employer (and any such eligibility shall be promptly reported to the Company by the Executive); provided, however, that the election of COBRA continuation coverage and the payment of any premiums due with respect to such COBRA continuation coverage shall remain the Executive’s sole responsibility, and the Company shall not assume any obligation for payment of any such

premiums relating to such COBRA continuation coverage. Notwithstanding the foregoing, if the provision of the benefits described in this paragraph cannot be provided in the manner described above without penalty, tax or other adverse impact on the Company or any of its Affiliates, then the Company and the Executive shall negotiate in good faith to determine an alternative manner in which the Company may provide substantially equivalent benefits to the Executive without such adverse impact on the Company or such other Affiliate.

(b)The Accrued Bonus Payment (if any), the Severance Payment and the COBRA Benefit are subject to and conditioned upon the Executive: (i) executing, on or before the time provided by the Company to do so (which shall not be less than ten (10) days), and not revoking within any time provided by the Company to do so, a release of all claims in favor of, and in a form acceptable to the Company.

(c)To the extent, if any, that the aggregate amount of the installments of the Severance Payment that would otherwise be paid after March 15 of the calendar year following the calendar year in which the Termination Date occurs (the “Applicable March 15”) exceeds the maximum exemption amount under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), then such excess shall be paid to the Executive in a lump sum on the Applicable March 15 (or the first Business Day preceding the Applicable March 15 if the Applicable March 15 is not a Business Day) and the installments of the Severance Payment payable after the Applicable March 15 shall be reduced by such excess (beginning with the installment first payable after the Applicable March 15 and continuing with the next succeeding installment until the aggregate reduction equals such excess), and (ii) all remaining installments of the Severance Payment, if any, that would otherwise be paid pursuant to the preceding provisions of this Section 9(c) after December 31 of the calendar year following the calendar year in which the Termination Date occurs shall be paid with the installment of the Severance Payment, if any, due in December of the calendar year following the calendar year in which the Termination Date occurs.

10.Rights on Termination for Just Cause or Resignation without Good Reason

Upon resignation by the Executive other than for Good Reason or termination by the Company for Just Cause, the Executive shall be entitled only to the Accrued Entitlements.

11.Non-Competition

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it), within the Restricted Territory, be engaged or participate, either directly or indirectly in any manner including as an officer, director, shareholder, owner, partner, member, joint venturer, employee, independent contractor, consultant, advisor or sales representative, in any business or enterprise that competes with or is intending to compete with the Business of the Company or any of its Affiliates. Notwithstanding the foregoing, the Executive shall be permitted to own (as a passive investment) not more thantwo percent (2%) of the issued shares of a Company (including unexercised options or similar rights to acquire shares at a later date), the shares of which are listed on a recognized stock exchange or traded in the over the counter market, which carries on a business which is the same as or substantially similar to or which competes with or reasonably would compete with the Business.

12.Non-Solicitation and No Hire

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it):

(a)solicit, entice or attempt to solicit or entice, either directly or indirectly, any customer or prospective customer of the Company or any of its Affiliates about whom or which the Executive obtains Confidential Information or for whom or which the Executive has

responsibility as at the Termination Date, or at any time during the twelve (12) months prior to the Termination Date, to become a customer of any business or enterprise that competes with the Company or any of its Affiliates for any Business, or to limit or cease doing any Business with the Company or its Affiliate; or

(b)solicit or entice, or attempt to solicit or entice, or hire, either directly or indirectly, any employee or Distribution Partner of the Company or an Affiliate as at the Termination Date, or during the twelve (12) months prior to the Termination Date, to become employed or engaged by any business or enterprise that competes with the Company or any of its Affiliate for any Business, or solicit or entice such employee or Distribution Partner to limit or cease their employment or engagement with the Company or any of its Affiliate.

13.Confidentiality

In the course of the Executive’s employment hereunder, the Company will provide the Executive with (and the Executive will have access to) Confidential Information. The Executive shall not, either during the Term or at any time thereafter, directly or indirectly, use or disclose to any Person any Confidential Information, provided, however, that nothing in this section shall preclude the Executive from disclosing or using Confidential Information if:

(a)the Confidential Information is disclosed in the course of performing the Executive’s duties on behalf of the Company or any of its Affiliates;

(b)the Confidential Information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement;

(c)the Confidential Information was in the possession of or known to the Executive, without any obligation to keep it confidential, before it was disclosed to the Executive by the Company or any of its Affiliates; or

(d)disclosure of the Confidential Information is required to be made by any law, regulation, governmental body or authority, or by court order.

Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict the Executive from lawfully (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to the Executive from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires the Executive to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify the Company that the Executive has engaged in any such conduct.

14.Proprietary and Moral Rights

(a)Proprietary Rights. The Executive recognizes the Company’s and its Affiliates’ proprietary rights in the tangible and intangible property of the Company and its Affiliates and acknowledges that the Executive has not obtained or acquired and shall not obtain or acquire any right, title or interest, in any of the property of the Company or its Affiliates or

any of their respective predecessors, successors, affiliates or related companies. Accordingly, any writing, communications, manuals, documents, instruments, contracts, agreements, files, literature, data, information, formulas, products, devices, apparatuses, trademarks, trade names, trade styles, service marks, logos, and any other intellectual property created, developed, made or conceived by the Executive either alone or in conjunction with others: (i) in connection with the Executive’s duties or responsibilities under this Agreement; and/or (ii) resulting from the use of any information, equipment, materials or premises owned, leased, or contracted for by the Company or any of its Affiliates (collectively, the “Materials”) shall be the sole and exclusive property of the Company and its Affiliates (as applicable).

(b)Waiver of Moral Rights. The Executive irrevocably waives, to the greatest extent permitted by law, all of the Executive’s moral rights whatsoever in the Materials, including any right to the integrity of any Materials, any right to be associated with any Materials, and any right to restrict or prevent the modification or use, of any Materials in any way whatsoever. To the extent applicable, the Executive irrevocably transfers to the Company all rights to restrict any violations of moral rights in any of the Materials, including any distortion, mutilation or other modification.

(c)Assignment of Rights. To the extent that the Executive may own or otherwise acquire any right, title or interest in and to any Materials (including any intellectual property rights in the Materials) during the term of this Agreement and thereafter, the Executive agrees to assign, and hereby irrevocably assigns, all such right, title and interest automatically to the Company, including any renewals, extensions or reversions relating thereto and any right to bring an action or to collect compensation for past infringements, automatically upon the creation, development, making, or conception of same.

(d)Registrations. The Company will have the exclusive right to obtain copyright registrations, letters patent, industrial design registrations, trade-mark registrations or any other protection in respect of the Materials and the intellectual property rights relating to the Materials anywhere in the world. At the expense and request of the Company, the Executive shall, both during and after the Executive’s employment with the Company, execute all documents and do all other acts necessary in order to enable the Company to protect its rights in any of the Materials and the intellectual property rights relating to the Materials.

15.Fiduciary and other Obligations

The Executive acknowledges that the obligations contained in Sections 11, 12, 13 and 14 of this Agreement are in addition to any statutory, fiduciary and other common law obligations that the Executive also owes to the Company and its Affiliates, during and after the Term. For greater certainty, nothing contained in this Agreement is a waiver, release or reduction of any statutory, fiduciary or common law obligations owed by the Executive to the Company and its Affiliates.

16.Notices

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by hand delivery or express overnight courier service or internationally-recognized second-day courier service or emailas hereinafter provided. Notice of change of address shall also be governed by this section. Notices shall be deemed to have been duly received (a) when delivered in person if given by hand delivery, (b) when sent by email transmission on a business day to the email address set forth below, if applicable; provided, however, that if a notice is sent by email transmission after normal business hours of the recipient or on a non-business day, then it shall be deemed to have been received on the next business day after it is sent, (c) on the first business day after such notice is sent by express overnight courier service, or (d) on the second business bay following deposit with an internationally-recognized

second-day courier service with proof of receipt maintained. Notices and other communications shall be addressed as follows:

(a)if to the Executive:

Richard J. Hunter

(b)if to the Company

DIRTT Environmental Solutions

Suite 1000, 6105 Tennyson Pkwy

Plano, TX 65024

Attn: General Counsel

legal@dirtt.net

17.Headings; Construction

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. Any and all Schedules referred to in this Agreement are, by such reference, incorporated herein and made a part hereof for all purposes. Unless the context requires otherwise, all references to laws, regulations, contracts, documents, agreements and instruments refer to such laws, regulations, contracts, documents, agreements and instruments as they may be amended from time to time, and references to particular provisions of laws or regulations include a reference to the corresponding provisions of any succeeding law or regulation. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement, including all Schedules attached hereto, and not to any particular provision hereof. Unless the context requires otherwise, the word “or” is not exclusive. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. All references to “including” shall be construed as meaning “including without limitation.” Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

18.Applicable Deductions and Withholdings

The payments and benefits set forth in this Agreement are subject to all applicable statutory deductions and withholdings including: (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling and (b) any deductions consented to in writing by the Executive.

19.Reasonableness and Enforceability of Restrictions

(a)The Company shall provide the Executive access to Confidential Information for use only during the Term, and the Executive acknowledges and agrees that the Company and its Affiliates will be entrusting the Executive, in the Executive’s unique and special capacity, with developing the goodwill of the Company and its Affiliates, and as an express incentive for the Company to enter into this Agreement and employ the Executive hereunder, the Executive has voluntarily agreed to the covenants set forth in Section 11 and Section 12.

(b)The Executive acknowledges and agrees that all of the restrictions contained in Sections 11, 12, 13, 14 and 15 of this Agreement (including the definition of Business, the definition of Restricted Territory (which fairly reflects the geographic scope of the Business activities carried on by the Company and its Affiliates and the length of the Restricted Period) are reasonable in all respects and necessary to protect the Confidential Information and other legitimate interests of the Company and its Affiliates, and will not unduly restrict the Executive’s ability to secure alternative employment following the termination of the

Executive’s employment for any reason. If any covenant or provision (or part thereof) of this Agreement is determined by a court of competent jurisdiction to be void or unenforceable in whole or in part, for any reason, it shall be interpreted to provide the broadest possible restriction permitted by law and will be deemed not to affect or impair the validity of any other covenant or provision of this Agreement, which shall remain in full force and effect.

(c)The Executive acknowledges and agrees the Company and the Affiliate will suffer irreparable harm in the event that the Executive breaches any of its obligations under Sections 11, 12, 13, 14 or 15 of this Agreement, and that monetary damages would be impossible to quantify and inadequate to compensate the Company and its Affiliates for such a breach. Accordingly, the Executive agrees that in the event of any breach or a threatened breach by the Executive of any of the provisions of this Agreement, the Company and each of its Affiliates shall be entitled to seek, in addition to any other rights, remedies or damages available to the Company at law or in equity, an interim and permanent injunction, in order to prevent or restrain any such breach or threatened breach by the Executive, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security.

(d)The restrictions and obligations of the Executive under Sections 11, 12, 13, 14 and 15 of this Agreement shall survive the termination of this Agreement for any reason.

20.Third-Party Beneficiaries

The Parent and each other Affiliate of the Company that is not a signatory to this Agreement shall be a third-party beneficiary of the Executive’s representations, covenants, and obligations under Sections 11, 12, 13, 14 and 15 and shall be entitled to enforce such representations, covenants, and obligations as if a party hereto.

21.Entire Agreement, Amendment, No Waiver

This Agreement constitutes the entire agreement between the parties hereto and between the Executive and any other Affiliate of the Company regarding the subject matter hereof, and shall supersede and replace any and all prior agreements, undertakings, representations or negotiations (including the offer letter from the Parent to the Executive dated August 8, 2022).There are no warranties, representations or agreements between the parties except as specifically set forth or referred to in this Agreement. Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall the waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

22.Assignment

Neither the Executive nor the Company may assign its rights hereunder without the consent of the other party; provided, however, that the Company may assign its rights hereunder without the Executive’s consent to any Affiliate of the Company or to a successor Company which acquires (whether directly or indirectly, by purchase, amalgamation, arrangement, merger, consolidation, dissolution or otherwise) all or substantially all of the business and/or assets of the Company and expressly assumes and agrees to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

23.Currency

All amounts in this Agreement are in United States currency unless otherwise specified.

24.Governing Law; Submission to Jurisdiction

This Agreement shall in all respects be construed according to the laws of the State of Texas without regard to its conflict of laws principles that would result in the application of the laws of another jurisdiction. With respect to any claim or dispute related to or arising under this Agreement, the parties hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts (as applicable) located in Dallas County, Texas. THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT THEY ARE KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVING THEIR RIGHTS TO A JURY TRIAL.

25.Severability

If an arbitrator or court of competent jurisdiction determines that any provision of this Agreement (or portion thereof) is invalid or unenforceable, then the invalidity or unenforceability of that provision (or portion thereof) shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

26.Waiver of Breach

Any waiver of this Agreement must be executed by the party to be bound by such waiver. No waiver by either party hereto of a breach of any provision of this Agreement by the other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of either party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time.

27.Section 409A

(a)Notwithstanding any provision of this Agreement to the contrary, all provisions of this Agreement are intended to comply with Section 409A of the Internal Revenue Code of 1986 (the “Code”), and the applicable Treasury regulations and administrative guidance issued thereunder (collectively, “Section 409A”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of the Executive’s employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.

(b)To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by the Company no later than the last day of the Executive’s taxable year following the taxable year in which such expense was incurred by the Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period in which the arrangement is in effect.

(c)Notwithstanding any provision in this Agreement to the contrary, if any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if the Executive’s receipt of such payment or benefit is not delayed until the earlier of (i) the date of the Executive’s death or (ii) the date that is six (6) months after the Termination

Date (such date, the “Section 409A Payment Date”), then such payment or benefit shall not be provided to the Executive (or the Executive’s estate, if applicable) until the Section 409A Payment Date. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall the Company or any of its Affiliates be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

28.Clawback

Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company, whether in existence as of the Effective Date or later adopted, pursuant to any such law, government regulation or stock exchange listing requirement).

29.Counterparts

This Agreement may be signed in counterparts and by facsimile or .pdf electronic mail transmission and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument.

[Signature page follows]

IN WITNESS WHEREOF the parties acknowledge and agree that they have read and understand the terms of this Agreement, and that they have had an opportunity to seek independent legal advice prior to entering into this Agreement, and have executed this Agreement as of the Effective Date.

DIRTT ENVIRONMENTAL SOLUTIONS, INC.

By:_/s/ Benjamin Urban _____________________

Name: Benjamin Urban

Title: Chief Executive Officer

Richard J. Hunter

___/s/ Richard Hunter _____________________

EX-10.3

Exhibit 10.3

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is entered into on August 17, 2022

BETWEEN:

Dirtt Environmental Solutions, Inc.(the “Company”)

- and -

Brad Little
(the “Executive”)

RECITALS:

A. The Company wishes to employ the Executive pursuant to this Employment Agreement.

B. The Executive wishes to accept employment with the Company under this Agreement.

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

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Company and the Executive agree as follows:

1.Definitions

In this Agreement,

(a)“Accrued Entitlements” has the meaning set out in Section 9(a)(iv).

(b)“Affiliate” means any person or entity Controlling, Controlled by, or Under Common Control with the Company. The term “Control,” including the correlative terms “Controlling,” “Controlled By,” and “Under Common Control with” means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any Company or other ownership interest, by contract or otherwise) of a person or entity. For the purposes of the preceding sentence, Control shall be deemed to exist when a person or entity possesses, directly or indirectly, through one or more intermediaries (i) in the case of a company, more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership or joint venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); or (iii) in the case of any other person or entity, more than 50% of the economic or beneficial interest therein. For the avoidance of doubt, with respect to the Company, the term Affiliate includes the Parent.

(c)“Agreement” means this Employment Agreement, as may be amended or supplemented from time to time as provided for herein.

(d)“Board” means the Board of Directors of the Parent.

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

(f)“Business” means the business of designing, manufacturing and installing prefabricated interiors in commercial and residential buildings, and includes, for greater certainty and without limitation: (i) the following products which can be integrated with interior wall solutions: (A) pre-fabricated modular network data cable distribution, (B) pre-fabricated and

electrical power cable distribution, (C) pre-fabricated modular case goods, and (D) pre-fabricated low-profile flooring; (ii) the development and sale or license to third parties of 3D computer aided design software for the design, construction and maintenance of buildings and the design, construction, modification and furnishing of building interiors; and (iii) such other business as the Company or any of its Affiliates becomes engaged in during the Term that is related in a material way to the duties and responsibilities of the Executive.

(g)“Confidential Information” means all confidential or proprietary information, intellectual property (including trade secrets) and confidential facts relating to the business and affairs of the Company and its Affiliates, whether oral or in writing, or presented visually or electronically, and includes business and technical information, marketing and business plans, strategies, research and development materials and matters, databases, specifications, formulations, tooling, prototypes, sketches, models, drawings, specifications, procurement requirements, engineering information, samples, computer software (source and object codes), forecasts, identity of or details about actual or potential customers or projects, techniques, inventions, discoveries, know-how, and trade secrets. Notwithstanding the foregoing, Confidential Information does not include any information:

(i)that becomes publicly available through no fault or breach of this Agreement by the Executive; or

(ii)that the Executive possesses prior to the date on which the Executive first became employed or engaged by the Company or any of its Affiliates and that the Executive obtained from a source other than the Company or any of its Affiliates.

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

(i)“Good Reason” means:

(i)a material diminution in the Executive’s Salary or authority, duties and responsibilities with the Company, the Parent and any of the Parent’s other direct or indirect subsidiaries; provided, however, that if the Executive is serving as an officer or member of the board of directors (or similar governing body) of the Parent, the Company or any of their Affiliates, in no event shall the removal of the Executive as an officer or board member, regardless of the reason for such removal, constitute Good Reason;

(ii)a material breach by the Company of any of its obligations under this Agreement; or

(iii)subject to section 3(c), the relocation of the geographic location of the Executive’s principal place of employment by more than fifty (50) miles from the location of the Executive’s principal place of employment as of the Effective Date; provided, however, that travel in the course of Executive’s employment (including to other locations of the Company and Parent in the United States and Canada) shall not be considered to be a Good Reason event under this Section 1(i)(iii).

Notwithstanding the foregoing provisions of this Section 1(i) or any other provision of this Agreement to the contrary, any assertion by the Executive of a termination for Good Reason shall not be effective unless all of the following conditions are satisfied: (A) the condition described in Section 1(i)(i), (ii) or (iii) giving rise to the Executive’s termination of employment must have arisen without the Executive’s consent; (B) the Executive must provide written notice to the Board of the existence of such condition(s) within thirty (30) days after the initial occurrence of such condition(s); (C) the condition(s) specified in such

notice must remain uncorrected for thirty (30) days following the Board’s receipt of such written notice; and (D) the date of the Executive’s termination of employment must occur within sixty (60) days after the initial occurrence of the condition(s) specified in such notice.

(j)“Just Cause” means any gross negligence, willful misconduct or breach of fiduciary duty by the Executive in relation to the performance of the Executive’s duties under this Agreement, any material neglect by the Executive of her duties under this Agreement, or any of the following:

(i)fraud, misappropriation, embezzlement or malfeasance on the part of the Executive with respect to the property, interests or funds of the Company or its Affiliates;

(ii)any misfeasance or nonfeasance in office which is willfully or grossly negligent on the part of the Executive;

(iii)the breach by the Executive of any policy of the Company or its Affiliates or the breach by the Executive of any policy or law relating to non-discrimination, non-retaliation or anti-harassment (including sexual harassment);

(iv)the breach by the Executive of her obligations under any noncompetition, non-solicitation, confidentiality or company property covenants under this Agreement; or

(v)the Executive’s conviction for a felony or indictable offense or any other crime involving fraud or moral turpitude, or a plea of no contest with regard to any of the same.

(k)“Materials” has the meaning set out in Section 14(a).

(l)“Parent” means DIRTT Environmental Solutions Ltd.

(m)“Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation, with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted.

(n)“Restricted Period” means twelve (12) months from the Termination Date.

(o)“Restricted Territory” means: Canada, the United States of America and any other countries as the Company or any of its Affiliates develop business interests during the Term, and which the Company advises the Executive in writing within twenty (20) days following the Termination Date are part of the Restricted Territory.

(p)“Salary” has the meaning set out in Section 5(a).

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

(r)“Term” has the meaning set out in Section 4.

(s)“Termination Date” has the meaning set out in Section 8(b).

2.Employment of the Executive and Position

Commencing on August 23, 2022 (the “Effective Date”), the Executive shall hold the position of Chief Financial Officer and shall report directly to the Chief Executive Officer. As Chief Financial Officer of the Company, the Executive shall perform those duties set forth in any applicable position description adopted and amended by the Company from time to time, and such other duties as the Executive shall reasonably be directed to perform by the Company from time to time in respect of the business and operations of the Company, the Parent and their Affiliates.

3.Performance of Duties

(a)During the Term, the Executive shall devote his full working time and attention to the performance of his duties on behalf of the Company and its Affiliates, shall faithfully, honestly and diligently serve the Company and its Affiliates and shall use his best efforts and skill to promote the best interests of the Company and its Affiliates at all times. Notwithstanding the foregoing, the Executive may devote a reasonable amount of time during non-business hours to charitable organizations and boards, provided that such participation does not adversely impact the performance of [his/her] duties hereunder or breach any of the other terms of this Agreement or any other obligation that the Executive owes the Company or any of its Affiliates.

(b)In performing his duties under this Agreement, the Executive shall comply with any written policies, procedures or rules established by the Company or Parent from time to time, as may be amendedby the Company or Parent at their discretion.

(c)The Executive’s principal place of employment as of the Effective Date shall be the Company’s offices in Plano, Texas; provided, however, the Executive will be required to relocate to the Company’s offices in Calgary, Alberta no later than April 15, 2023 and such relocation will not constitute a Good Reason event under Section 1(i)(iii). The Executive also acknowledges and agrees that business travel will be required in the course of performing his duties. Parent will assist the Executive with obtaining a Canadian work permit to enable Executive to relocate to the Company’s offices in Calgary, Alberta, and upon obtaining such work permit, the Executive and Parent will enter into an amended and restated Employment Agreement with such changes as are necessary to give effect to such relocation.

4.Employment Period

The Executive shall be employed by the Company hereunder commencing on the Effective Date, and the Executive’s employment hereunder will terminate upon the Termination Date (as defined below). The period that the Executive is employed hereunder is referred to as the “Term”.

5.Remuneration

(a)Base Salary. For the Executive’s services under this Agreement, during the Term, the Company shall pay the Executive an annualized base salary of three hundred thousand dollars ($300,000), less required deductions and applicable withholdings (the “Salary”).

(b)Benefits. During the Term, the Executive shall be eligible to participate in the benefit plans made available by the Company to its similarly situated employees from time to time in accordance with, and subject to, the terms and conditions of such plans as may be amended by the Company at its discretion from time to time. The Company shall not, by reason of this Section 5(b), be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such plan, so long as such changes are similarly applicable to any similarly situated Company employees generally.

(c)Bonus. During the Term, the Executive will be eligible to participate in the Parent’s Variable Pay Plan (“VPP”), as amended from time to time and in accordance with and subject to the terms and conditions thereof and as set out therein. The Executive’s annual target bonus opportunity (the “Bonus”) will be as established by the Board from time to time. For the 2022 calendar year, Executive will not participate in the VPP, but instead will be eligible for (i) a bonus with a target payout of 60% of Executive’s 2022 annual Salary payable in share awards issued under the Company’s 2020 Long Term Incentive Plan (“LTI Plan”), and (ii) a supplemental bonus with a target payout of 50,000 share awards issued under the LTI Plan (collectively, the “2022 Bonus Opportunity”). The amount of the Executive’s payment under either the VPP or the 2022 Bonus Opportunity, if any, in respect of a calendar year shall be dependent upon, calculated in reference to, and paid in accordance with, the achievement of applicable performance objectives as set out and evaluated by the Board in its sole discretion.

(d)Equity-Based Incentive Compensation. The Executive will be eligible to receive grants of equity-based incentives under the Company's LTI Plan, each as amended from time to time and in accordance with and subject to the terms thereof, provided, however, that Executive shall not be entitled to any equity-based incentives for the 2022 calendar year except as outlined in 5(c) above. The amount and type of the equity-based incentives for any year will be determined by the Board and may change from year to year.

(e)Signing Bonus. The Company shall pay the Executive a one-time signing bonus of $50,000, less required deductions and applicable withholdings, within thirty (30) days following the Effective Date.

6.Expenses

(a)General. The Company shall pay or reimburse the Executive for all reasonable travel and other out-of-pocket expenses incurred or paid by the Executive in the performance of his duties hereunder.

(b)Relocation Expenses. The Company shall pay or reimburse the Executive for all reasonable, standard and customary moving and relocation expenses incurred between the Effective Date and June 30, 2023. (the “Relocation Payment”). If any portion of the Relocation Payment provided to or for the benefit of the Executive results in taxable income to the Executive, the Company shall provide the Executive with an amount equal to any income and other taxes payable by the Executive upon the provision of such Relocation Payment (and an additional amount equal to any taxes imposed on such tax gross-up amount), such that the Executive shall not incur any tax costs with respect to such Relocation Payment.

(c)Tax Preparation Expenses. The Company shall reimburse the Executive for reasonable and necessary legal and/or accounting fees incurred in the preparation of the Executive’s income tax returns, up to a maximum of $5,000 per year.

The payment or reimbursement of expenses in this Section 6 shall be made upon the presentation of expense statements or other supporting documentation as the Company may reasonably require, in accordance with any expense reimburse policies implemented by the Company from time to time. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of such documentation (but in any event not later than the close of the Executive’s taxable year following the taxable year in which the expense is incurred by the Executive). In no event shall any reimbursement be made to the Executive for any expenses incurred after the date of the Executive’s termination of employment with the Company.

7.Vacation

As of the Effective Date, the Executive shall be eligible for vacation with pay of up to four (4) weeks per complete calendar year (pro-rated for partial calendar years) that the Executive is employed hereunder. Vacation eligibility will be increased by 1 (one) week per year for every five (5) completed years of the Executive’s service from the Effective Date, to a maximum of up to six (6) weeks per complete calendar year. Vacation shall accrue and be taken in accordance with Company vacation policies as in effect from time to time. The Executive may carry forward a maximum of ten (10) vacation days from one year to the next. Any vacation carried over must be used in the first quarter of the following calendar year.

8.Termination

(a)Notice. The Executive’s employment hereunder:

(i)may be terminated by the Company at any time for Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 10 of this Agreement;

(ii)will terminate automatically upon the death of the Executive;

(iii)may be terminated by the Company at any time without Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 9 of this Agreement;

(iv)may be terminated by the Executive for Good Reason; or

(v)may be terminated by resignation of the Executive without Good Reason upon providing one (1) month’s prior written notice to the Company; provided, however, that if the Executive has provided notice to the Company of the Executive’s termination of employment without Good Reason, the Company may determine, in its sole discretion, that such termination shall be effective on any date prior to the effective date of termination provided in such notice (and, if such earlier date is so required, then it shall not change the basis for the Executive’s termination of employment nor be construed or interpreted as a termination of employment pursuant to Section 8(a)(iii)).

(b)Effective Date of Termination. The effective date on which the Executive’s employment hereunder is terminated (the “Termination Date”) shall be:

(i)in the case of termination under Section 8(a)(i) or Section 8(a)(iii), the day specified by the Company in writing;

(ii)in the case of termination under Section 8(a)(ii), the date of death; or

(iii)in the case of termination under Section 8(a)(iv), the last day of the applicable notice period referred to in Section 1(i); or

(iv)in the case of termination under Section 8(a)(v), the last day of the applicable notice period referred to therein (unless an earlier date is designated by the Company pursuant to Section 8(a)(v)).

(c)Return of Property, etc.On the Termination Date, the Executive shall (i) be deemed to have automatically resigned from all offices and directorships held by the Executive with the Company and its Affiliates and agrees to execute, immediately upon request, any such written resignations or other documentation as may be requested by the Company with respect thereto, (ii) deliver to the Company (and not retain any copies of) all Materials in

the Executive’s possession or under the Executive’s control, and (iii) deliver to the Company any keys, access cards, business cards, credit and charge cards, computer, cell phone or other property or device issued or provided to him by or on behalf of the Company or any Affiliate.

9.Rights on Termination (without Just Cause or for Good Reason)

Upon termination of the Executive’s employment by the Company without Just Cause or by the Executive for Good Reason, the following provisions shall apply:

(a)the Executive shall receive from the Company:

(i)payment of the Executive’s accrued but unpaid Salary up to the Termination Date;

(ii)reimbursement of all expenses incurred in accordance with Section 6 up to the Termination Date;

(iii)provision of all benefits up to the Termination Date in accordance with Section 5(b);

(iv)payment of the Executive’s accrued but unused vacation entitlement existing as of the Termination Date (subsections (i) through (iv) are hereinafter referred to as the “Accrued Entitlements”);

(v)subject to the final sentence of Section 5(c), and Section 9(b), payment of the Bonus earned (if any) for the year in which the termination occurs, pro-rata from the start of that Bonus year to the Termination Date, based on actual performance during the entire Bonus year, as determined by the Company following the Bonus year and payable to the Executive in accordance with Section 5(c) following completion of the Bonus year (the “Accrued Bonus Payment”);

(vi)subject to Sections 9(b) and (c), the continued payment of Salary during the Severance Period (such payment, the “Severance Payment”), in accordance with the Company’s ordinary payroll practices;

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

(viii)subject to Section 9(b), for the portion, if any, of the Severance Period that the Executive elects to continue coverage for the Executive and the Executive’s spouse and eligible dependents, if any, under the Company’s group health plans pursuant to Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall promptly reimburse the Executive on a monthly basis for the difference between the amount the Executive pays to effect and continue such coverage and the employee contribution amount that similarly situated employees of the Company pay for the same or similar coverage under such group health plans (the “COBRA Benefit”). Each payment of the COBRA Benefit shall be paid to Executive on the Company’s first regularly scheduled pay date in the calendar month immediately following the calendar month in which the Executive submits to the Company documentation of the applicable premium payment having been paid by the Executive, which documentation shall be submitted by the Executive to the Company within thirty (30) days following the date on which the applicable premium payment is paid. The Executive shall be eligible to receive such reimbursement payments until the earliest of: (x) the last day of the Severance Period; (y) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (z) the date on which the Executive becomes eligible to receive coverage under a group health plan sponsored by

another employer (and any such eligibility shall be promptly reported to the Company by the Executive); provided, however, that the election of COBRA continuation coverage and the payment of any premiums due with respect to such COBRA continuation coverage shall remain the Executive’s sole responsibility, and the Company shall not assume any obligation for payment of any such premiums relating to such COBRA continuation coverage. Notwithstanding the foregoing, if the provision of the benefits described in this paragraph cannot be provided in the manner described above without penalty, tax or other adverse impact on the Company or any of its Affiliates, then the Company and the Executive shall negotiate in good faith to determine an alternative manner in which the Company may provide substantially equivalent benefits to the Executive without such adverse impact on the Company or such other Affiliate.

(b)The Accrued Bonus Payment (if any), the Severance Payment and the COBRA Benefit are subject to and conditioned upon the Executive: (i) executing, on or before the time provided by the Company to do so (which shall not be less than ten (10) days), and not revoking within any time provided by the Company to do so, a release of all claims in favor of, and in a form acceptable to the Company.

(c)To the extent, if any, that the aggregate amount of the installments of the Severance Payment that would otherwise be paid after March 15 of the calendar year following the calendar year in which the Termination Date occurs (the “Applicable March 15”) exceeds the maximum exemption amount under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), then such excess shall be paid to the Executive in a lump sum on the Applicable March 15 (or the first Business Day preceding the Applicable March 15 if the Applicable March 15 is not a Business Day) and the installments of the Severance Payment payable after the Applicable March 15 shall be reduced by such excess (beginning with the installment first payable after the Applicable March 15 and continuing with the next succeeding installment until the aggregate reduction equals such excess), and (ii) all remaining installments of the Severance Payment, if any, that would otherwise be paid pursuant to the preceding provisions of this Section 9(c) after December 31 of the calendar year following the calendar year in which the Termination Date occurs shall be paid with the installment of the Severance Payment, if any, due in December of the calendar year following the calendar year in which the Termination Date occurs.

10.Rights on Termination for Just Cause or Resignation without Good Reason

Upon resignation by the Executive other than for Good Reason or termination by the Company for Just Cause, the Executive shall be entitled only to the Accrued Entitlements.

11.Non-Competition

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it), within the Restricted Territory, be engaged or participate, either directly or indirectly in any manner including as an officer, director, shareholder, owner, partner, member, joint venturer, employee, independent contractor, consultant, advisor or sales representative, in any business or enterprise that competes with or is intending to compete with the Business of the Company or any of its Affiliates. Notwithstanding the foregoing, the Executive shall be permitted to own (as a passive investment) not more thantwo percent (2%) of the issued shares of a Company (including unexercised options or similar rights to acquire shares at a later date), the shares of which are listed on a recognized stock exchange or traded in the over the counter market, which carries on a business which is the same as or substantially similar to or which competes with or reasonably would compete with the Business.

12.Non-Solicitation and No Hire

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it):

(a)solicit, entice or attempt to solicit or entice, either directly or indirectly, any customer or prospective customer of the Company or any of its Affiliates about whom or which the Executive obtains Confidential Information or for whom or which the Executive has responsibility as at the Termination Date, or at any time during the twelve (12) months prior to the Termination Date, to become a customer of any business or enterprise that competes with the Company or any of its Affiliates for any Business, or to limit or cease doing any Business with the Company or its Affiliate; or

(b)solicit or entice, or attempt to solicit or entice, or hire, either directly or indirectly, any employee or Distribution Partner of the Company or an Affiliate as at the Termination Date, or during the twelve (12) months prior to the Termination Date, to become employed or engaged by any business or enterprise that competes with the Company or any of its Affiliate for any Business, or solicit or entice such employee or Distribution Partner to limit or cease their employment or engagement with the Company or any of its Affiliate.

13.Confidentiality

In the course of the Executive’s employment hereunder, the Company will provide the Executive with (and the Executive will have access to) Confidential Information. The Executive shall not, either during the Term or at any time thereafter, directly or indirectly, use or disclose to any Person any Confidential Information, provided, however, that nothing in this section shall preclude the Executive from disclosing or using Confidential Information if:

(a)the Confidential Information is disclosed in the course of performing the Executive’s duties on behalf of the Company or any of its Affiliates;

(b)the Confidential Information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement;

(c)the Confidential Information was in the possession of or known to the Executive, without any obligation to keep it confidential, before it was disclosed to the Executive by the Company or any of its Affiliates; or

(d)disclosure of the Confidential Information is required to be made by any law, regulation, governmental body or authority, or by court order.

Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict the Executive from lawfully (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to the Executive from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires the Executive to obtain prior authorization before

engaging in any conduct described in this paragraph, or to notify the Company that the Executive has engaged in any such conduct.

14.Proprietary and Moral Rights

(a)Proprietary Rights. The Executive recognizes the Company’s and its Affiliates’ proprietary rights in the tangible and intangible property of the Company and its Affiliates and acknowledges that the Executive has not obtained or acquired and shall not obtain or acquire any right, title or interest, in any of the property of the Company or its Affiliates or any of their respective predecessors, successors, affiliates or related companies. Accordingly, any writing, communications, manuals, documents, instruments, contracts, agreements, files, literature, data, information, formulas, products, devices, apparatuses, trademarks, trade names, trade styles, service marks, logos, and any other intellectual property created, developed, made or conceived by the Executive either alone or in conjunction with others: (i) in connection with the Executive’s duties or responsibilities under this Agreement; and/or (ii) resulting from the use of any information, equipment, materials or premises owned, leased, or contracted for by the Company or any of its Affiliates (collectively, the “Materials”) shall be the sole and exclusive property of the Company and its Affiliates (as applicable).

(b)Waiver of Moral Rights. The Executive irrevocably waives, to the greatest extent permitted by law, all of the Executive’s moral rights whatsoever in the Materials, including any right to the integrity of any Materials, any right to be associated with any Materials, and any right to restrict or prevent the modification or use, of any Materials in any way whatsoever. To the extent applicable, the Executive irrevocably transfers to the Company all rights to restrict any violations of moral rights in any of the Materials, including any distortion, mutilation or other modification.

(c)Assignment of Rights. To the extent that the Executive may own or otherwise acquire any right, title or interest in and to any Materials (including any intellectual property rights in the Materials) during the term of this Agreement and thereafter, the Executive agrees to assign, and hereby irrevocably assigns, all such right, title and interest automatically to the Company, including any renewals, extensions or reversions relating thereto and any right to bring an action or to collect compensation for past infringements, automatically upon the creation, development, making, or conception of same.

(d)Registrations. The Company will have the exclusive right to obtain copyright registrations, letters patent, industrial design registrations, trade-mark registrations or any other protection in respect of the Materials and the intellectual property rights relating to the Materials anywhere in the world. At the expense and request of the Company, the Executive shall, both during and after the Executive’s employment with the Company, execute all documents and do all other acts necessary in order to enable the Company to protect its rights in any of the Materials and the intellectual property rights relating to the Materials.

15.Fiduciary and other Obligations

The Executive acknowledges that the obligations contained in Sections 11, 12, 13 and 14 of this Agreement are in addition to any statutory, fiduciary and other common law obligations that the Executive also owes to the Company and its Affiliates, during and after the Term. For greater certainty, nothing contained in this Agreement is a waiver, release or reduction of any statutory, fiduciary or common law obligations owed by the Executive to the Company and its Affiliates.

16.Notices

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by hand delivery or express overnight courier service or internationally-recognized second-day courier service or emailas hereinafter provided. Notice of change of address shall also be governed by this section. Notices shall be deemed to have been duly received (a) when delivered in person if given by hand delivery, (b) when sent by email transmission on a business day to the email address set forth below, if applicable; provided, however, that if a notice is sent by email transmission after normal business hours of the recipient or on a non-business day, then it shall be deemed to have been received on the next business day after it is sent, (c) on the first business day after such notice is sent by express overnight courier service, or (d) on the second business bay following deposit with an internationally-recognized second-day courier service with proof of receipt maintained. Notices and other communications shall be addressed as follows:

(a)if to the Executive:

Brad Little

(b)if to the Company

DIRTT Environmental Solutions

Suite 1000, 6105 Tennyson Pkwy

Plano, TX 65024

Attn: General Counsel

legal@dirtt.net

17.Headings; Construction

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. Any and all Schedules referred to in this Agreement are, by such reference, incorporated herein and made a part hereof for all purposes. Unless the context requires otherwise, all references to laws, regulations, contracts, documents, agreements and instruments refer to such laws, regulations, contracts, documents, agreements and instruments as they may be amended from time to time, and references to particular provisions of laws or regulations include a reference to the corresponding provisions of any succeeding law or regulation. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement, including all Schedules attached hereto, and not to any particular provision hereof. Unless the context requires otherwise, the word “or” is not exclusive. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. All references to “including” shall be construed as meaning “including without limitation.” Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

18.Applicable Deductions and Withholdings

The payments and benefits set forth in this Agreement are subject to all applicable statutory deductions and withholdings including: (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling and (b) any deductions consented to in writing by the Executive.

19.Reasonableness and Enforceability of Restrictions

(a)The Company shall provide the Executive access to Confidential Information for use only during the Term, and the Executive acknowledges and agrees that the Company and its Affiliates will be entrusting the Executive, in the Executive’s unique and special capacity, with developing the goodwill of the Company and its Affiliates, and as an express incentive

for the Company to enter into this Agreement and employ the Executive hereunder, the Executive has voluntarily agreed to the covenants set forth in Section 11 and Section 12.

(b)The Executive acknowledges and agrees that all of the restrictions contained in Sections 11, 12, 13, 14 and 15 of this Agreement (including the definition of Business, the definition of Restricted Territory (which fairly reflects the geographic scope of the Business activities carried on by the Company and its Affiliates and the length of the Restricted Period) are reasonable in all respects and necessary to protect the Confidential Information and other legitimate interests of the Company and its Affiliates, and will not unduly restrict the Executive’s ability to secure alternative employment following the termination of the Executive’s employment for any reason. If any covenant or provision (or part thereof) of this Agreement is determined by a court of competent jurisdiction to be void or unenforceable in whole or in part, for any reason, it shall be interpreted to provide the broadest possible restriction permitted by law and will be deemed not to affect or impair the validity of any other covenant or provision of this Agreement, which shall remain in full force and effect.

(c)The Executive acknowledges and agrees the Company and the Affiliate will suffer irreparable harm in the event that the Executive breaches any of its obligations under Sections 11, 12, 13, 14 or 15 of this Agreement, and that monetary damages would be impossible to quantify and inadequate to compensate the Company and its Affiliates for such a breach. Accordingly, the Executive agrees that in the event of any breach or a threatened breach by the Executive of any of the provisions of this Agreement, the Company and each of its Affiliates shall be entitled to seek, in addition to any other rights, remedies or damages available to the Company at law or in equity, an interim and permanent injunction, in order to prevent or restrain any such breach or threatened breach by the Executive, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security.

(d)The restrictions and obligations of the Executive under Sections 11, 12, 13, 14 and 15 of this Agreement shall survive the termination of this Agreement for any reason.

20.Third-Party Beneficiaries

The Parent and each other Affiliate of the Company that is not a signatory to this Agreement shall be a third-party beneficiary of the Executive’s representations, covenants, and obligations under Sections 11, 12, 13, 14 and 15 and shall be entitled to enforce such representations, covenants, and obligations as if a party hereto.

21.Entire Agreement, Amendment, No Waiver

This Agreement constitutes the entire agreement between the parties hereto and between the Executive and any other Affiliate of the Company regarding the subject matter hereof, and shall supersede and replace any and all prior agreements, undertakings, representations or negotiations (including the offer letter from the Parent to the Executive dated August [10] 2022).There are no warranties, representations or agreements between the parties except as specifically set forth or referred to in this Agreement. Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall the waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

22.Assignment

Neither the Executive nor the Company may assign its rights hereunder without the consent of the other party; provided, however, that the Company may assign its rights hereunder without the Executive’s consent to any Affiliate of the Company or to a successor Company which acquires (whether directly or

indirectly, by purchase, amalgamation, arrangement, merger, consolidation, dissolution or otherwise) all or substantially all of the business and/or assets of the Company and expressly assumes and agrees to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

23.Currency

All amounts in this Agreement are in United States currency unless otherwise specified.

24.Governing Law; Submission to Jurisdiction

This Agreement shall in all respects be construed according to the laws of the State of Texas without regard to its conflict of laws principles that would result in the application of the laws of another jurisdiction. With respect to any claim or dispute related to or arising under this Agreement, the parties hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts (as applicable) located in Dallas County, Texas. THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT THEY ARE KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVING THEIR RIGHTS TO A JURY TRIAL.

25.Severability

If an arbitrator or court of competent jurisdiction determines that any provision of this Agreement (or portion thereof) is invalid or unenforceable, then the invalidity or unenforceability of that provision (or portion thereof) shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

26.Waiver of Breach

Any waiver of this Agreement must be executed by the party to be bound by such waiver. No waiver by either party hereto of a breach of any provision of this Agreement by the other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of either party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time.

27.Section 409A

(a)Notwithstanding any provision of this Agreement to the contrary, all provisions of this Agreement are intended to comply with Section 409A of the Internal Revenue Code of 1986 (the “Code”), and the applicable Treasury regulations and administrative guidance issued thereunder (collectively, “Section 409A”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of the Executive’s employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.

(b)To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by the Company no later than the last day of the Executive’s taxable year following the taxable year in which such expense was incurred by the Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be

violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period in which the arrangement is in effect.

(c)Notwithstanding any provision in this Agreement to the contrary, if any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if the Executive’s receipt of such payment or benefit is not delayed until the earlier of (i) the date of the Executive’s death or (ii) the date that is six (6) months after the Termination Date (such date, the “Section 409A Payment Date”), then such payment or benefit shall not be provided to the Executive (or the Executive’s estate, if applicable) until the Section 409A Payment Date. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall the Company or any of its Affiliates be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

28.Clawback

Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company, whether in existence as of the Effective Date or later adopted, pursuant to any such law, government regulation or stock exchange listing requirement).

29.Counterparts

This Agreement may be signed in counterparts and by facsimile or .pdf electronic mail transmission and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument.

[Signature page follows]

IN WITNESS WHEREOF the parties acknowledge and agree that they have read and understand the terms of this Agreement, and that they have had an opportunity to seek independent legal advice prior to entering into this Agreement, and have executed this Agreement as of the Effective Date.

DIRTT ENVIRONMENTAL SOLUTIONS, INC.

By:____/s/ Benjamin Urban _____________________

Name: Benjamin Urban

Title: Chief Executive Officer

Brad Little

_____/s/ Bradley S. Little_______________________

EX-10.4

Exhibit 10.4

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT is made as of the 24th day of December 2019 (the “Effective Date”)

BETWEEN:

Dirtt Environmental Solutions, LTD.(the “Company”)

- and -

NANDINI SOMAYAJI

(the “Executive”)

RECITALS:

A. The Executive is currently an employee of the Company and the Company wishes to retain the Executive in the role of Vice President, Legal and to employ the Executive pursuant to this Executive Employment Agreement.

B. The Executive wishes to continue employment with the Company under this Agreement.

C. The parties agree that their employment relationship will be governed by the terms and conditions of this Agreement, commencing the Effective Date (as hereinafter defined).

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement, including the promotion, the Retention Payment and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Company and the Executive agree as follows:

1.Definitions

In this Agreement,

(a)“Accrued Entitlements” has the meaning set out in Section 9(a)(iv).

(b)“Affiliate” means any person or entity Controlling, Controlled by, or Under Common Control with the Company. The term “Control,” including the correlative terms “Controlling,” “Controlled By,” and “Under Common Control with” means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any Company or other ownership interest, by contract or otherwise) of a person or entity. For the purposes of the preceding sentence, Control shall be deemed to exist when a person or entity possesses, directly or indirectly, through one or more intermediaries (i) in the case of a Company more than 50% of the outstanding

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voting securities thereof; (ii) in the case of a limited liability company, partnership or joint venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); or (iii) in the case of any other person or entity, more than 50% of the economic or beneficial interest therein. The term Affiliate includes, without limitation, DIRTT Environmental Solutions Inc.

(c)“Agreement” means this Executive Employment Agreement, as may be amended or supplemented from time to time as provided for herein, and the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this Agreement and unless otherwise indicated, references to Sections are to sections of this Agreement.

(d)“Board” means the Board of Directors of the Company.

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

(f)“Business” means the business of designing, manufacturing and installing prefabricated interiors in commercial and residential buildings, and includes, for greater certainty and without limitation: (i) the following products which can be integrated with interior wall solutions: (A) pre-fabricated modular network data cable distribution, (B) pre-fabricated and electrical power cable distribution, (C) pre-fabricated modular case goods, and (D) pre-fabricated low-profile flooring; (ii) the development and sale or license to third parties of 3D computer aided design software for the design, construction and maintenance of buildings and the design, construction, modification and furnishing of building interiors; and (iii) such other business as the Company or any of its Affiliates becomes engaged in during the Term that is related in a material way to the duties and responsibilities of the Executive, and which the Corporation advises the Executive in writing within Twenty (20) days following the Termination Date is part of the Business.

(g)“Confidential Information” means all confidential or proprietary information, intellectual property (including trade secrets) and confidential facts relating to the business and affairs of the Company and its Affiliates, whether oral or in writing, or presented visually or electronically, and includes, without limitation, business and technical information, marketing and business plans, strategies, research and development materials and matters, databases, specifications, formulations, tooling, prototypes, sketches, models, drawings, specifications, procurement requirements, engineering information, samples, computer software (source and object codes), forecasts, identity of or details about actual or potential customers or projects, techniques, inventions, discoveries, know-how, and trade secrets. Notwithstanding the foregoing, Confidential Information does not include any information:

(i)that becomes publicly available through no fault or breach of this Agreement by the Executive; or

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(ii)that the Executive possesses prior to the date on which the Executive first became employed or engaged by the Company or any of its Affiliates.

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

(i)“ESC” means the Employment Standards Code (Alberta) or such other employment standards legislation as may apply, as amended from time to time.

(j)“Extended Retention Period” means 12 months from the Start Date.

(k)“Good Reason” means:

(i)a material diminution in Executive’s Salary or authority, duties and responsibilities with the Company and any of the Company's other direct or indirect subsidiaries; provided, however, that if the Executive is serving as an officer or member of the board of Directors (or similar governing body) of the Company or any of its Affiliates, in no event shall the removal of the Executive as an officer or board member, regardless of the reason for such removal, constitute Good Reason;

(ii)a material breach by the Company of any of its obligations under this Agreement; or

(iii)the relocation of the geographic location of the Executive’s principal place of employment by more than fifty (50) miles from the location of the Executive’s principal place of employment as of the Effective Date; provided, however, that travel in the course of Executive’s employment (including to other locations of the Company or any of its Affiliates in the United States and Canada) shall not be considered to be a Good Reason event under this Section 1(j)(iii).

Notwithstanding the foregoing provisions of this Section 1(j) or any other provision of this Agreement to the contrary, any assertion by the Executive of a termination for Good Reason shall not be effective unless all of the following conditions are satisfied: (A) the condition described in Section 1(j)(i), (ii) or (iii) giving rise to the Executive’s termination of employment must have arisen without the Executive’s consent; (B) the Executive must provide written notice to the Board of the existence of such condition(s) within thirty (30) days after the initial occurrence of such condition(s); (C) the condition(s) specified in such notice must remain uncorrected for thirty (30) days following the Board’s receipt of such written notice; and (D) the date of the Executive’s termination of employment must occur within sixty (60) days after the initial occurrence of the condition(s) specified in such notice.

(l)“Just Cause” means any gross negligence, willful misconduct or breach of fiduciary duty by the Executive in relation to the performance of the Executive’s

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duties under this Agreement, any material neglect by the Executive of her duties under this Agreement, or any of the following:

(i)fraud, misappropriation, embezzlement or malfeasance on the part of the Executive with respect to the property, interests or funds of the Company or its Affiliates;

(ii)any misfeasance or nonfeasance in office which is willfully or grossly negligent on the part of the Executive;

(iii)the material breach by the Executive of any policy of the Company or its Affiliates or the breach by the Executive of any policy or law relating to non-discrimination, non-retaliation or anti-harassment (including without limitation sexual harassment);

(iv)the breach by the Executive of her obligations under any noncompetition, non-solicitation, confidentiality or company property covenants under this Agreement;

(v)the Executive’s conviction for an indictable offense or any other crime involving fraud or moral turpitude, or a plea of no contest with regard to any of the same; or

(vi)any other act or omission by the Executive that would entitle the Company to terminate the Executive’s employment for cause under the common law.

(m)“Materials” has the meaning set out in Section 14(a).

(n)“Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation, with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted.

(o)“Restricted Period” means twelve (12) months from the Termination Date.

(p)“Restricted Territory” means: (i) Canada, the United States of America and the countries listed in Schedule “A” hereto; and (ii) any other countries where the Company or any of its Affiliates develop business interests during the Term, and which the Company advises the Executive in writing within twenty (20) days following the Termination Date are part of the Restricted Territory.

(q) “Retention Period” means 6 months from the Start Date.

(r)“Salary” has the meaning set out in Section 5(a).

(s)“Severance Period” means twelve (12) months from the Termination Date.

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(t)“Start Date” means the date that the new General Counsel of the Company commences active employment with the Company. The Executive will be notified in writing of the Start Date.

(u)“Term” has the meaning set out in Section 4.

(v)“Termination Date” has the meaning set out in Section 8(b).

2.Employment of the Executive and Position

Commencing on the Effective Date, the Executive shall hold the position of Vice President, Legal and shall report directly to the General Counsel. As Vice President, Legalof the Company, the Executive shall perform those duties set forth in any applicable position description adopted and amended by the Company from time to time, and such other duties as the Executive shall reasonably be directed to perform by the Company from time to time in respect of the business and operations of the Company and its Affiliates.

3.Performance of Duties

(a)During the Term, the Executive shall devote substantially all of her working time and attention to the performance of her duties on behalf of the Company and its Affiliates, shall faithfully, honestly and diligently serve the Company and its Affiliates and shall use her best efforts and skill to promote the best interests of the Company and its Affiliates at all times. Notwithstanding the foregoing, the Executive may devote a reasonable amount of time during non-business hours to charitable organizations and boards, provided that such participation does not adversely impact the performance of her duties hereunder or breach any of the other terms of this Agreement or any other obligation that the Executive owes the Company or any of its Affiliates.

(b)In performing her duties under this Agreement, the Executive shall comply with any written policies, procedures or rules established by the Company from time to time, as may be amendedby the Company at their discretion.

4.Employment Period

The Executive shall be employed by the Company hereunder commencing on the Effective Date, and the Executive’s employment hereunder will terminate when written notice of such termination is provided by either the Company or the Executive to the other party. The period that the Executive is employed hereunder is referred to as the “Term”.

5.Remuneration

(a)Base Salary. For the Executive’s services under this Agreement, during the Term the Company shall pay the Executive an annualized base salary of $200,000, less required withholdings and statutory deductions (the “Salary”).

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(b)Benefits. During the Term, the Executive shall be eligible to participate in the benefit plans made available by the Company to its similarly situated employees from time to time in accordance with, and subject to, the terms and conditions of such plans, as may be amended by the Company at its discretion from time to time. The Company shall not, by reason of this Section 5(b), be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such plan, so long as such changes are similarly applicable to any similarly situated Company employees generally.

(c)Bonus. During the Term, the Executive will be eligible to participate in the Company's Variable Pay Plan (“VPP”), as amended from time to time and in accordance with and subject to the terms and conditions thereof and as set out herein. The Executive’s annual target bonus opportunity shall be equal to 30% of Salary as in effect at the beginning of the applicable calendar year (the “Target Bonus”). The amount of the Executive’s payment under the VPP, if any, in respect of a calendar year (the “Bonus”) is dependent upon and calculated in reference to the achievement of applicable performance objectives as set out and evaluated by the Board under the VPP, in its sole discretion. The Bonus, if any, will be paid to the Executive in accordance with the terms of the VPP.

(d)Equity Based Incentive Compensation. The Executive shall be eligible to receive periodic grants of equity-based incentive compensation from the Company, in such amounts and on such terms as may be established by the Company at its sole discretion, subject to the terms and conditions of the applicable plan (as may be amended by the Company from time to time) and the terms and conditions of the applicable award agreements.

(e)Retention Payment. The Executive shall be eligible to receive one of the following payments: (i) a one-time lump sum retention payment of $50,000, less required withholdings and statutory deductions, at the end of the Retention Period; or (ii) upon written notice to the Executive, at any time within the first 3 months of the Retention Period, at the sole discretion of the Company, the Company can unilaterally extend the Retention Period to the Extended Retention Period and the Executive will be eligible to receive a one-time lump sum retention payment of $100,000, less required withholdings and statutory deductions, at the end of the Extended Retention Period. The retention payments described in this section 5(e) are conditional on the following:

(i)that the Executive remains continuously and actively employed by DIRTT through to the end of the Retention Period or the Extended Retention Period, as applicable, and does not resign her employment with the Company for any reason other than Good Reason and is not terminated by the Company for Just Cause prior to the end of the Retention Period or the Extended Retention Period, as applicable. For greater certainty, if the Executive receives notice that the Retention Period has been extended to the Extended Retention Period, the Executive will not be eligible for any retention payment if she resigns her employment with the Company for any reason

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other than Good Reason or is terminated for Just Cause prior to the end of Extended Retention Period. If, however, the Executive is terminated without Just Cause or the Executive resigns for Good Reason prior to the end of the Retention Period or Extended Retention Period, as applicable, she will be entitled to the applicable retention payment under this section 5(e); and

(ii)that the Executive complies at all times with the Executive’s obligations under Sections 11, 12, 13, 14 and 15 of this Agreement.

The retention payment described above will be paid to the Executive within 30 days following the end of the later of the Retention Period or Extended Retention Period, as may be applicable.

6.Expenses

The Company shall pay or reimburse the Executive for all reasonable travel and other out-of-pocket expenses incurred or paid by the Executive in the performance of his duties, upon the presentation of expense statements or other supporting documentation as the Company may reasonably require, in accordance with any expense reimburse policies implemented by the Company from time to time. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of such documentation (but in any event not later than the close of the Executive’s taxable year following the taxable year in which the expense is incurred by the Executive). In no event shall any reimbursement be made to the Executive for any expenses incurred after the date of the Executive’s termination of employment with the Company.

7.Vacation

As of the Effective Date, the Executive shall be eligible for vacation with pay of four (4) weeks per complete calendar year (pro-rated for partial calendar years) that the Executive is employed hereunder. Vacation shall accrue and be taken in accordance with Company vacation policies as in effect from time to time. The Executive may carry forward a maximum of ten (10) vacation days from one year to the next, provided that in each vacation year the Executive shall take or be paid out at least the minimum statutory vacation entitlement under the ESC. Any vacation carried-over must be used in the first quarter of the following calendar year.

8.Termination

(a)Notice. The Executive’s employment hereunder:

(i)may be terminated by the Company at any time for Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 10 of this Agreement;

(ii)will terminate automatically upon the death of the Executive;

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(iii)may be terminated by the Company at any time without Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 9 of this Agreement;

(iv)may be terminated by the Executive for Good Reason; or

(v)may be terminated by resignation of the Executive without Good Reason upon providing one (1) month’s prior written notice to the Company; provided, however, that if the Executive has provided notice to the Company of the Executive’s termination of employment without Good Reason, the Company may determine, in its sole discretion, that such termination shall be effective on any date prior to the effective date of termination provided in such notice subject only to any minimum notice requirements in the ESC (and, if such earlier date is so required, then it shall not change the basis for the Executive’s termination of employment nor be construed or interpreted as a termination of employment pursuant to Section 8(a)(iii)).

(b)Effective Date of Termination. The effective date on which the Executive’s employment hereunder is terminated (the “Termination Date”) shall be:

(i)in the case of termination under Section 8(a)(i) or Section 8(a)(iii), the day specified by the Company in writing;

(ii)in the case of termination under Section 8(a)(ii), the date of death; or

(iii)in the case of termination under Section 8(a)(iv), the last day of the applicable notice period referred to in Section 1(j); or

(iv)in the case of termination under Section 8(a)(v), the last day of the applicable notice period referred to therein (unless an earlier date is designated by the Company pursuant to Section 8(a)(v)).

(c)Return of Property, etc. On the Termination Date, the Executive shall (A) be deemed to have resigned from all offices and Directorships held by the Executive with the Company and its Affiliates and agrees to execute, immediately upon request, any such written resignations or other documentation as may be customary to give effect thereto, (B) deliver to the Company (and not retain any copies of) all Materials in the Executive’s possession or under the Executive’s control, and (C) deliver to the Company any keys, access cards, business cards, credit and charge cards, computer, cell phone or other property or device issued or provided to her by or on behalf of the Company or any Affiliate.

9.Rights on Termination (without Just Cause or for Good Reason)

Upon termination of the Executive’s employment by the Company without Just Cause or by the Executive for Good Reason, the following provisions shall apply:

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(a)the Executive shall receive from the Company:

(i)payment of the Executive’s accrued but unpaid Salary up to the Termination Date;

(ii)reimbursement of all expenses incurred in accordance with Section 6 up to the Termination Date;

(iii)provision of all benefits up to the Termination Date in accordance with Section 5(b);

(iv)payment of the Executive’s accrued but unused vacation entitlement existing as of the Termination Date (subsections (i) through (iv) are hereinafter referred to as the “Accrued Entitlements”);

(v)subject to Sections 9(b), (c), (d) and (f), payment of the Bonus earned (if any) for the year in which the termination occurs, pro-rata from the start of that Bonus year to the Termination Date, based on actual performance during the entire Bonus year, as determined by the Company following the Bonus year and payable to the Executive in accordance with Section 5(c) following completion of the Bonus year (the “Accrued Bonus Payment”);

(vi)subject to Sections 9(b), (c), (d) and (f), the continued payment of Salary during the Severance Period (the “Severance Payment”);

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

(viii)subject to Section 9(b), (c), (d) and (f), continued eligibility to participate in the benefits provided to the Executive by the Company under Section 5(b), not including any short-term disability, long term disability, ad&d, optional life insurance coverages or, in the event any benefits cannot be continued, payment of any amount equal to the Company’s cost for such benefits, payable monthly or on a pro-rata basis for any partial months, until the earlier of the conclusion of the statutory notice period or the date the Executive obtains any alternative benefit coverage (the “Benefit Continuation”).

(b)The Accrued Bonus Payment (if any), the Severance Payment and the Benefit Continuation are subject to and conditioned upon the Executive: (A) executing, on or before the Release Expiration Date (as defined below), a release of all claims in a form acceptable to the Company (the “Release”), which Release shall release the Company and each of its Affiliates, and the foregoing entities’ respective shareholders, members, partners, officers, managers, Directors, fiduciaries, employees, representatives, agents and benefit plans (and fiduciaries of such plans) from any and all claims, including any and all causes of action arising out of the

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Executive’s employment and engagement with the Company and any of its Affiliates or the termination of such employment and engagement, but excluding those payments and benefits agreed to be made or provided by the Company under Section 9(a)(v), (vi), (vii) and (viii); and (B) abiding by the terms of each of Sections 11, 12, 13, 14 and 15.

(c)The Severance Payment will be divided into a number of substantially equal installments equal to the number of months during the applicable Severance Period, subject only to the requirements of the ESC regarding the payment of minimum statutory termination pay.

(d)If the Release is not executed and returned to the Company on or before the Release Expiration Date, then the Executive shall not be entitled to any portion of the Accrued Bonus Payment (if any), the Severance Payment or the Benefit Continuation, subject only to the minimum requirements of the ESC regarding termination notice or pay in lieu of notice. As used herein, the “Release Expiration Date” is that date that is twenty-one (21) days following the date upon which the Company delivers the Release to the Executive (which shall occur no later than seven (7) days after the Termination Date).

(e)The payments and benefits referred to in Section 9 are not subject to mitigation and will not be reduced by any amounts received by the Executive in mitigation during the Severance Period.

(f)Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that the Executive is eligible to receive the Accrued Bonus Payment (if any), the Severance Payment or the Benefit Continuation pursuant to this Section 9 but, after such determination, the Company subsequently acquires evidence or determines that: (i) the Executive has failed to abide by the terms of Sections 11, 12, 13, 14 or 15; (ii) a Cause condition existed prior to the Termination Date that, had the Company been fully aware of such condition, would have given the Company the right to terminate the Executive’s employment pursuant to Section 8(a)(i); or (iii) the Executive has failed to advise the Company that the Executive has obtained alternative benefit coverage under Section 9(a)(viii), then the Company shall have the right to cease the payment of the Accrued Bonus Payment (if any), any future installments of the Severance Payment and the Benefit Continuation and the Executive shall promptly return to the Company: (A) in the case of Section 9(f)(i) or (ii) the full Accrued Bonus Payment (if any), allinstallments of the Severance Payment and the full value of the Benefit Continuation received by the Executive; or (B) in the case of Section 9(f)(iii), the full value of the Benefit Continuation received by the Executive.

10.Rights on Termination for Just Cause or Resignation without Good Reason

Upon resignation by the Executive other than for Good Reason or termination by the Company for Just Cause, the Executive shall be entitled only to the Accrued Entitlements.

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11.Non-Competition

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it), within the Restricted Territory, be engaged or participate, either directly or indirectly in any manner including, without limitation, as an officer, Director, shareholder, owner, partner, member, joint venturer, employee, independent contractor, consultant, advisor or sales representative, in any business or enterprise that competes with or is intending to compete with the Business of the Company or any of its Affiliates. Notwithstanding the foregoing, the Executive shall be permitted to own (as a passive investment) not more thantwo percent (2%) of the issued shares of a Company (including unexercised options or similar rights to acquire shares at a later date), the shares of which are listed on a recognized stock exchange or traded in the over the counter market, which carries on a business which is the same as or substantially similar to or which competes with or reasonably would compete with the Business.

12.Non-Solicitation and No Hire

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it):

(a)solicit, entice or attempt to solicit or entice, either directly or indirectly, any customer or prospective customer of the Company or any of its Affiliates as at the Termination Date, or at any time during the twelve (12) months prior to the Termination Date, to become a customer of any business or enterprise that competes with the Company or any of its Affiliates for any Business, or to limit or cease doing any Business with the Company or its Affiliate; or

(b)solicit or entice, or attempt to solicit or entice, or hire, either directly or indirectly, any employee or Distribution Partner of the Company or an Affiliate as at the Termination Date, or during the twelve (12) months prior to the Termination Date, to become employed or engaged by any business or enterprise that competes with the Company or any of its Affiliate for any Business, or solicit or entice such employee or Distribution Partner to limit or cease their employment or engagement with the Company or any of its Affiliate.

13.Confidentiality

In the course of the Executive’s employment hereunder, the Company will provide the Executive with (and the Executive will have access to) Confidential Information. The Executive shall not, either during the Term or at any time thereafter, directly or indirectly, use or disclose to any Person any Confidential Information, provided, however, that nothing in this section shall preclude the Executive from disclosing or using Confidential Information if:

(a)the Confidential Information is disclosed in the course of performing the Executive’s duties on behalf of the Company or any of its Affiliates;

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(b)the Confidential Information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement;

(c)the Confidential Information was in the possession of or known to the Executive, without any obligation to keep it confidential, before it was disclosed to the Executive by the Company or any of its Affiliates; or

(d)disclosure of the Confidential Information is required to be made by any law, regulation, governmental body or authority, or by court order.

Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict the Executive from lawfully (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to the Executive from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law.

14.Proprietary and Moral Rights

(a)Proprietary Rights. The Executive recognizes the Company’s and its Affiliates’ proprietary rights in the tangible and intangible property of the Company and its Affiliates and acknowledges that the Executive has not obtained or acquired and shall not obtain or acquire any right, title or interest, in any of the property of the Company or its Affiliates or any of their respective predecessors, successors, affiliates or related companies. Accordingly, any writing, communications, manuals, documents, instruments, contracts, agreements, files, literature, data, information, formulas, products, devices, apparatuses, trademarks, trade names, trade styles, service marks, logos, and any other intellectual property created, developed, made or conceived by the Executive either alone or in conjunction with others: (i) in connection with the Executive’s duties or responsibilities under this Agreement; and/or (ii) resulting from the use of any information, equipment, materials or premises owned, leased, or contracted for by the Company or any of its Affiliates (collectively, the “Materials”) shall be the sole and exclusive property of the Company and its Affiliates (as applicable).

(b)Waiver of Moral Rights. The Executive irrevocably waives, to the greatest extent permitted by law, all of the Executive’s moral rights whatsoever in the Materials, including any right to the integrity of any Materials, any right to be associated with any Materials, and any right to restrict or prevent the modification or use, of any Materials in any way whatsoever. To the extent applicable, the Executive irrevocably transfers to the Company all rights to restrict any violations of moral rights in any of the Materials, including any distortion, mutilation or other modification.

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(c)Assignment of Rights. To the extent that the Executive may own or otherwise acquire any right, title or interest in and to any Materials (including any intellectual property rights in the Materials) during the term of this Agreement and thereafter, the Executive agrees to assign, and hereby irrevocably assigns, all such right, title and interest automatically to the Company, including any renewals, extensions or reversions relating thereto and any right to bring an action or to collect compensation for past infringements, automatically upon the creation, development, making, or conception of same. At the expense and request of the Company, the Executive shall, both during and after the Executive’s employment with the Company, promptly execute all documents and do all other acts necessary in order to enable the Company to perfect its rights in any such assignment of Executive’s rights in the Materials.

(d)Registrations. The Company will have the exclusive right to obtain copyright registrations, letters patent, industrial design registrations, trade-mark registrations or any other protection in respect of the Materials and the intellectual property rights relating to the Materials anywhere in the world. At the expense and request of the Company, the Executive shall, both during and after the Executive’s employment with the Company, promptly execute all documents and do all other acts necessary in order to enable the Company to protect its rights in any of the Materials and the intellectual property rights relating to the Materials.

15.Fiduciary and other Obligations

The Executive acknowledges that the obligations contained in Sections 11, 12, 13 and 14 of this Agreement are in addition to any statutory, fiduciary and other common law obligations that the Executive also owes to the Company and its Affiliates, during and after the Term. For greater certainty, nothing contained in this Agreement is a waiver, release or reduction of any statutory, fiduciary or common law obligations owed by the Executive to the Company and its Affiliates.

16.Indemnification

If the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by the Executive or the Company or any of its Affiliates related to any contest or dispute between the Executive and the Company or any of its Affiliates with respect to this Agreement or the Executive’s employment or service hereunder, the Executive shall be indemnified and held harmless by the Company to the maximum extent permitted under the Company’s governing documents from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys’ fees); provided, however, that the Executive shall not be indemnified and held harmless pursuant to this Agreement if there has been a final and non-appealable judgment entered by an arbitrator or court of competent jurisdiction determining that, in respect of the matter for which the Executive is seeking indemnification pursuant to this Agreement, the Executive acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Executive’s conduct was unlawful, or if the Executive would otherwise not be entitled to indemnification pursuant to any applicable governing document of the Company.

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17.Notices

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by hand delivery or express overnight courier service or internationally-recognized second-day courier service or emailas hereinafter provided. Notice of change of address shall also be governed by this section. Notices shall be deemed to have been duly received (a) when delivered in person if given by hand delivery, (b) when sent by email transmission on a business day to the email address set forth below, if applicable; provided, however, that if a notice is sent by email transmission after normal business hours of the recipient or on a non-business day, then it shall be deemed to have been received on the next business day after it is sent, (c) on the first business day after such notice is sent by express overnight courier service, or (d) on the second business day following deposit with an internationally-recognized second-day courier service with proof of receipt maintained. Notices and other communications shall be addressed as follows:

(a)if to the Executive:

NANDINI SOMAYAJI

(b)if to the Company:

DIRTT Environmental Solutions
7303 30th Street, SE
Calgary AB T2C 1N6
Attention: General Counsel

18.Headings

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

19.Applicable Deductions and Withholdings

The payments and benefits set forth in this Agreement are subject to all applicable statutory deductions and withholdings including, without limitation: (a) all federal, provincial, local and other taxes as may be required pursuant to any law or governmental regulation or ruling and (b) any deductions consented to in writing by the Executive.

20.Reasonableness and Enforceability of Restrictions

(a)The Company shall provide the Executive access to Confidential Information for use only during the Term, and the Executive acknowledges and agrees that the Company and its Affiliates will be entrusting the Executive, in the Executive’s unique and special capacity, with developing the goodwill of the Company and its Affiliates, and as an express incentive for the Company to enter into this Agreement and employ the Executive hereunder, the Executive has voluntarily agreed to the covenants set forth in Section 11 and Section 12.

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(b)The Executive acknowledges and agrees that all of the restrictions contained in Sections 11, 12, 13 and 14 of this Agreement (including without limitation the definition of Business, the definition of Restricted Territory (which fairly reflects the geographic scope of the Business activities carried on by the Company and its Affiliates) and the length of the Restricted Period) are reasonable in all respects and necessary to protect the Confidential Information and other legitimate interests of the Company and its Affiliates, and will not unduly restrict the Executive’s ability to secure alternative employment following the termination of the Executive’s employment for any reason. If any covenant or provision (or part thereof) of this Agreement is determined by a court of competent jurisdiction to be void or unenforceable in whole or in part, for any reason, it shall be interpreted to provide the broadest possible restriction permitted by law and will be deemed not to affect or impair the validity of any other covenant or provision of this Agreement, which shall remain in full force and effect.

(c)The Executive acknowledges and agrees the Company and the Affiliate will suffer irreparable harm in the event that the Executive breaches any of its obligations under Sections 11, 12, 13, 14 or 15 of this Agreement, and that monetary damages would be impossible to quantify and inadequate to compensate the Company and its Affiliates for such a breach. Accordingly, the Executive agrees that in the event of any breach or a threatened breach by the Executive of any of the provisions of this Agreement, the Company and each of its Affiliates shall be entitled to seek, in addition to any other rights, remedies or damages available to the Company at law or in equity, an interim and permanent injunction, in order to prevent or restrain any such breach or threatened breach by the Executive, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security.

(d)The restrictions and obligations of the Executive under Sections 11, 12, 13, 14 or 15 of this Agreement shall survive the termination of this Agreement for any reason.

21.Third-Party Beneficiaries

Each other Affiliate of the Company that is not a signatory to this Agreement shall be a third-party beneficiary of the Executive’s representations, covenants, and obligations under Sections 11, 12, 13, 14 and 15 and shall be entitled to enforce such representations, covenants, and obligations as if a party hereto.

22.Entire Agreement, Amendment, No Waiver

This Agreement constitutes the entire agreement between the parties hereto and between the Executive and any other Affiliate of the Company regarding the subject matter hereof, and shall supersede and replace any and all prior agreements, undertakings, representations or negotiations.There are no warranties, representations or agreements between the parties except as specifically set forth or referred to in this Agreement. Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party

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to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall the waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

23.Assignment

Neither the Executive nor the Company may assign its rights hereunder without the consent of the other party; provided, however, that the Company may assign its rights hereunder without the Executive’s consent to any Affiliate of the Company or to a successor Company which acquires (whether directly or indirectly, by purchase, amalgamation, arrangement, merger, consolidation, dissolution or otherwise) all or substantially all of the business and/or assets of the Company and expressly assumes and agrees to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

24.Currency

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

25.Governing Law; Submission to Jurisdiction

This Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein. The Corporation and the Executive irrevocably submit to the executive jurisdiction of the courts of Alberta in respect of all matters relating to this Agreement, with the exception of any obligations of the Executive under Sections 11, 12, 13, 14 or 15 of this Agreement, which the Corporation may enforce in the courts of another jurisdiction where warranted in the opinion of the Corporation.

26.Severability

If court of competent jurisdiction determines that any provision of this Agreement (or portion thereof) is invalid or unenforceable, then the invalidity or unenforceability of that provision (or portion thereof) shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

27.Waiver of Breach

Any waiver of this Agreement must be executed by the party to be bound by such waiver. No waiver by either party hereto of a breach of any provision of this Agreement by the other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of either party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time.

28.Clawback

Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any

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other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company, whether in existence as of the Effective Date or later adopted, pursuant to any such law, government regulation or stock exchange listing requirement), subject only to any minimum statutory requirements of the ESC.

29.Counterparts

This Agreement may be signed in counterparts and by facsimile or .pdf electronic mail transmission and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument.

IN WITNESS WHEREOF the parties acknowledge and agree that they have read and understand the terms of this Agreement, and that they have had an opportunity to seek independent legal advice prior to entering into this Agreement and have executed this Agreement as of the Effective Date.

DIRTT ENVIRONMENTAL SOLUTIONS, LTD.

By: __/s/ Kevin O’ Meara____________

Name: Kevin O’Meara

Title: Chief Executive Officer

__/s/ Nandini Somayaji_____________

NANDINI SOMAYAJI

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SCHEDULE “A”

List of additional countries in the Restricted Territory as of the Effective Date of this Agreement:

•Saudi Arabia

•United Arab Emirates

•Yemen

•Qatar

•Kuwait

•Oman

•Jordan

•Lebanon

•Syria

•Iraq

•Egypt

•Libya

•Sudan

•Territory generally known as Kurdistan

EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is entered into on October 19, 2022.

BETWEEN:

Dirtt Environmental Solutions, Inc.(the “Company”)

- and -

Jeff Dopheide
(the “Executive”)

RECITALS:

A. The Company wishes to employ the Executive pursuant to this Employment Agreement.

B. The Executive wishes to accept employment with the Company under this Agreement.

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

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Company and the Executive agree as follows:

1.Definitions

In this Agreement,

(a)“Accrued Entitlements” has the meaning set out in Section 9(a)(iv).

(b)“Affiliate” means any person or entity Controlling, Controlled by, or Under Common Control with the Company. The term “Control,” including the correlative terms “Controlling,” “Controlled By,” and “Under Common Control with” means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any Company or other ownership interest, by contract or otherwise) of a person or entity. For the purposes of the preceding sentence, Control shall be deemed to exist when a person or entity possesses, directly or indirectly, through one or more intermediaries (i) in the case of a company, more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership or joint venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); or (iii) in the case of any other person or entity, more than 50% of the economic or beneficial interest therein. For the avoidance of doubt, with respect to the Company, the term Affiliate includes the Parent.

(c)“Agreement” means this Employment Agreement, as may be amended or supplemented from time to time as provided for herein.

(d)“Board” means the Board of Directors of the Parent.

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

(f)“Business” means the business of designing, manufacturing and installing prefabricated interiors in commercial and residential buildings, and includes, for greater certainty and without limitation: (i) the following products which can be integrated with interior wall solutions: (A) pre-fabricated modular network data cable distribution, (B) pre-fabricated and

electrical power cable distribution, (C) pre-fabricated modular case goods, and (D) pre-fabricated low-profile flooring; (ii) the development and sale or license to third parties of 3D computer aided design software for the design, construction and maintenance of buildings and the design, construction, modification and furnishing of building interiors; and (iii) such other business as the Company or any of its Affiliates becomes engaged in during the Term that is related in a material way to the duties and responsibilities of the Executive.

(g)“Confidential Information” means all confidential or proprietary information, intellectual property (including trade secrets) and confidential facts relating to the business and affairs of the Company and its Affiliates, whether oral or in writing, or presented visually or electronically, and includes business and technical information, marketing and business plans, strategies, research and development materials and matters, databases, specifications, formulations, tooling, prototypes, sketches, models, drawings, specifications, procurement requirements, engineering information, samples, computer software (source and object codes), forecasts, identity of or details about actual or potential customers or projects, techniques, inventions, discoveries, know-how, and trade secrets. Notwithstanding the foregoing, Confidential Information does not include any information:

(i)that becomes publicly available through no fault or breach of this Agreement by the Executive; or

(ii)that the Executive possesses prior to the date on which the Executive first became employed or engaged by the Company or any of its Affiliates and that the Executive obtained from a source other than the Company or any of its Affiliates.

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

(i)“Good Reason” means:

(i)a material diminution in the Executive’s Salary or authority, duties and responsibilities with the Company, the Parent and any of the Parent’s other direct or indirect subsidiaries; provided, however, that if the Executive is serving as an officer or member of the board of directors (or similar governing body) of the Parent, the Company or any of their Affiliates, in no event shall the removal of the Executive as an officer or board member, regardless of the reason for such removal, constitute Good Reason; or

(ii)a material breach by the Company of any of its obligations under this Agreement.

Notwithstanding the foregoing provisions of this Section 1(i) or any other provision of this Agreement to the contrary, any assertion by the Executive of a termination for Good Reason shall not be effective unless all of the following conditions are satisfied: (A) the condition described in Section 1(i)(i) or (ii) giving rise to the Executive’s termination of employment must have arisen without the Executive’s consent; (B) the Executive must provide written notice to the Board of the existence of such condition(s) within thirty (30) days after the initial occurrence of such condition(s); (C) the condition(s) specified in such notice must remain uncorrected for thirty (30) days following the Board’s receipt of such written notice; and (D) the date of the Executive’s termination of employment must occur within sixty (60) days after the initial occurrence of the condition(s) specified in such notice.

(j)“Just Cause” means any gross negligence, willful misconduct or breach of fiduciary duty by the Executive in relation to the performance of the Executive’s duties under this Agreement, any material neglect by the Executive of her duties under this Agreement, or any of the following:

(i)fraud, misappropriation, embezzlement or malfeasance on the part of the Executive with respect to the property, interests or funds of the Company or its Affiliates;

(ii)any misfeasance or nonfeasance in office which is willfully or grossly negligent on the part of the Executive;

(iii)the breach by the Executive of any policy of the Company or its Affiliates or the breach by the Executive of any policy or law relating to non-discrimination, non-retaliation or anti-harassment (including sexual harassment);

(iv)the breach by the Executive of her obligations under any noncompetition, non-solicitation, confidentiality or company property covenants under this Agreement; or

(v)the Executive’s conviction for a felony or indictable offense or any other crime involving fraud or moral turpitude, or a plea of no contest with regard to any of the same.

(k)“Materials” has the meaning set out in Section 14(a).

(l)“Parent” means DIRTT Environmental Solutions Ltd.

(m)“Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation, with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted.

(n)“Restricted Period” means twelve (12) months from the Termination Date.

(o)“Restricted Territory” means: Canada, the United States of America and any other countries as the Company or any of its Affiliates develop business interests during the Term, and which the Company advises the Executive in writing within twenty (20) days following the Termination Date are part of the Restricted Territory.

(p)“Salary” has the meaning set out in Section 5(a).

(q)

(r)“Term” has the meaning set out in Section 4.

(s)“Termination Date” has the meaning set out in Section 8(b).

2.Employment of the Executive and Position

Commencing on November 15, 2022 (the “Effective Date”), the Executive shall hold the position of Chief Revenue Officer and shall report directly to the Chief Executive Officer. As Chief Revenue Officer of the Company, the Executive shall perform those duties set forth in any applicable position description adopted and amended by the Company from time to time, and such other duties as the Executive shall reasonably be directed to perform by the Company from time to time in respect of the business and operations of the Company, the Parent and their Affiliates.

3.Performance of Duties

(a)During the Term, the Executive shall devote his full working time and attention to the performance of his duties on behalf of the Company and its Affiliates, shall faithfully, honestly and diligently serve the Company and its Affiliates and shall use his best efforts and skill to promote the best interests of the Company and its Affiliates at all times. Notwithstanding the foregoing, the Executive may devote a reasonable amount of time during non-business hours to charitable organizations and boards, provided that such participation does not adversely impact the performance of [his/her] duties hereunder or breach any of the other terms of this Agreement or any other obligation that the Executive owes the Company or any of its Affiliates.

(b)In performing his duties under this Agreement, the Executive shall comply with any written policies, procedures or rules established by the Company or Parent from time to time, as may be amendedby the Company or Parent at their discretion.

(c)The Executive’s principal place of employment as of the Effective Date shall be Mooresville, North Carolina. The Executive also acknowledges and agrees that business travel will be required in the course of performing his duties.

4.Employment Period

The Executive shall be employed by the Company hereunder commencing on the Effective Date, and the Executive’s employment hereunder will terminate upon the Termination Date (as defined below). The period that the Executive is employed hereunder is referred to as the “Term”.

5.Remuneration

(a)Base Salary. For the Executive’s services under this Agreement, during the Term, the Company shall pay the Executive an annualized base salary of two hundred fifty thousand dollars ($250,000), less required deductions and applicable withholdings (the “Salary”).

(b)Benefits. During the Term, the Executive shall be eligible to participate in the benefit plans made available by the Company to its similarly situated employees from time to time in accordance with, and subject to, the terms and conditions of such plans as may be amended by the Company at its discretion from time to time. The Company shall not, by reason of this Section 5(b), be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such plan, so long as such changes are similarly applicable to any similarly situated Company employees generally.

(c)Bonus. During the Term, the Executive will be eligible to participate in the Parent’s Variable Pay Plan (“VPP”), as amended from time to time and in accordance with and subject to the terms and conditions thereof and as set out therein. The Executive’s annual target bonus opportunity (the “Bonus”) will be as established by the Board from time to time. For the 2022 calendar year, Executive shall not participate in the VPP. The amount of the Executive’s payment under either the VPP, if any, in respect of a calendar year shall be dependent upon, calculated in reference to, and paid in accordance with, the achievement of applicable performance objectives as set out and evaluated by the Board in its sole discretion.

(d)Equity-Based Incentive Compensation. The Executive will be eligible to receive grants of equity-based incentives under the Company's LTI Plan, each as amended from time to time and in accordance with and subject to the terms thereof. For the 2022 calendar year, the Executive shall not be entitled to any equity-based incentives. . The amount and type of the equity-based incentives for any year will be determined by the Board and may change from year to year.

(e)Additional Equity-Based Incentive Grant. In addition to any grant of equity-based incentives under the Company’s LTI Plan as set out in 5(d), for the 2023 calendar year, the Executive shall be eligible to receive a grant of equity-based incentives with a grant value of up to one hundred ten thousand dollars ($110,000) upon the achievement of applicable performance objectives as set and evaluated by the Board.

6.Expenses

The Company shall pay or reimburse the Executive for all reasonable travel and other out-of-pocket expenses incurred or paid by the Executive in the performance of his duties hereunder. The payment or reimbursement of expenses in this Section 6 shall be made upon the presentation of expense statements or other supporting documentation as the Company may reasonably require, in accordance with any expense reimburse policies implemented by the Company from time to time. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of such documentation (but in any event not later than the close of the Executive’s taxable year following the taxable year in which the expense is incurred by the Executive). In no event shall any reimbursement be made to the Executive for any expenses incurred after the date of the Executive’s termination of employment with the Company.

7.Vacation

As of the Effective Date, the Executive shall be eligible for vacation with pay of up to four (4) weeks per complete calendar year (pro-rated for partial calendar years) that the Executive is employed hereunder. Vacation eligibility will be increased by 1 (one) week per year for every five (5) completed years of the Executive’s service from the Effective Date, to a maximum of up to six (6) weeks per complete calendar year. Vacation shall accrue and be taken in accordance with Company vacation policies as in effect from time to time. The Executive may carry forward a maximum of ten (10) vacation days from one year to the next. Any vacation carried over must be used in the first quarter of the following calendar year.

8.Termination

(a)Notice. The Executive’s employment hereunder:

(i)may be terminated by the Company at any time for Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 10 of this Agreement;

(ii)will terminate automatically upon the death of the Executive;

(iii)may be terminated by the Company at any time without Just Cause, without prior notice and without further obligation to the Executive, other than as set out in Section 9 of this Agreement;

(iv)may be terminated by the Executive for Good Reason; or

(v)may be terminated by resignation of the Executive without Good Reason upon providing one (1) month’s prior written notice to the Company; provided, however, that if the Executive has provided notice to the Company of the Executive’s termination of employment without Good Reason, the Company may determine, in its sole discretion, that such termination shall be effective on any date prior to the effective date of termination provided in such notice (and, if such earlier date is so required, then it shall not change the basis for the Executive’s termination of employment nor be construed or interpreted as a termination of employment pursuant to Section 8(a)(iii)).

(b)Effective Date of Termination. The effective date on which the Executive’s employment hereunder is terminated (the “Termination Date”) shall be:

(i)in the case of termination under Section 8(a)(i) or Section 8(a)(iii), the day specified by the Company in writing;

(ii)in the case of termination under Section 8(a)(ii), the date of death; or

(iii)in the case of termination under Section 8(a)(iv), the last day of the applicable notice period referred to in Section 1(i); or

(iv)in the case of termination under Section 8(a)(v), the last day of the applicable notice period referred to therein (unless an earlier date is designated by the Company pursuant to Section 8(a)(v)).

(c)Return of Property, etc.On the Termination Date, the Executive shall (i) be deemed to have automatically resigned from all offices and directorships held by the Executive with the Company and its Affiliates and agrees to execute, immediately upon request, any such written resignations or other documentation as may be requested by the Company with respect thereto, (ii) deliver to the Company (and not retain any copies of) all Materials in the Executive’s possession or under the Executive’s control, and (iii) deliver to the Company any keys, access cards, business cards, credit and charge cards, computer, cell phone or other property or device issued or provided to him by or on behalf of the Company or any Affiliate.

9.Rights on Termination (without Just Cause or for Good Reason)

Upon termination of the Executive’s employment by the Company without Just Cause or by the Executive for Good Reason, the following provisions shall apply:

(a)the Executive shall receive from the Company:

(i)payment of the Executive’s accrued but unpaid Salary up to the Termination Date;

(ii)reimbursement of all expenses incurred in accordance with Section 6 up to the Termination Date;

(iii)provision of all benefits up to the Termination Date in accordance with Section 5(b);

(iv)payment of the Executive’s accrued but unused vacation entitlement existing as of the Termination Date (subsections (i) through (iv) are hereinafter referred to as the “Accrued Entitlements”);

(v)subject to the final sentence of Section 5(c), and Section 9(b), payment of the Bonus earned (if any) for the year in which the termination occurs, pro-rata from the start of that Bonus year to the Termination Date, based on actual performance during the entire Bonus year, as determined by the Company following the Bonus year and payable to the Executive in accordance with Section 5(c) following completion of the Bonus year (the “Accrued Bonus Payment”); and

(vi)any equity-based incentive compensation awards held by the Executive shall be dealt with in accordance with the applicable plan terms then in effect.

(b)The Accrued Bonus Payment (if any) is subject to and conditioned upon the Executive: (i) executing, on or before the time provided by the Company to do so (which shall not be less

than twenty-one (21) days), and not revoking within any time provided by the Company to do so, a release of all claims in favor of, and in a form acceptable to the Company.

10.Rights on Termination for Just Cause or Resignation without Good Reason

Upon resignation by the Executive other than for Good Reason or termination by the Company for Just Cause, the Executive shall be entitled only to the Accrued Entitlements.

11.Non-Competition

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it), within the Restricted Territory, be engaged or participate, either directly or indirectly in any manner including as an officer, director, shareholder, owner, partner, member, joint venturer, employee, independent contractor, consultant, advisor or sales representative, in any business or enterprise that competes with or is intending to compete with the Business of the Company or any of its Affiliates. Notwithstanding the foregoing, the Executive shall be permitted to own (as a passive investment) not more thantwo percent (2%) of the issued shares of a Company (including unexercised options or similar rights to acquire shares at a later date), the shares of which are listed on a recognized stock exchange or traded in the over the counter market, which carries on a business which is the same as or substantially similar to or which competes with or reasonably would compete with the Business.

12.Non-Solicitation and No Hire

The Executive shall not, during the Term and for the Restricted Period (regardless of the reason for termination of the Executive’s employment or the party causing it):

(a)solicit, entice or attempt to solicit or entice, either directly or indirectly, any customer or prospective customer of the Company or any of its Affiliates about whom or which the Executive obtains Confidential Information or for whom or which the Executive has responsibility as at the Termination Date, or at any time during the twelve (12) months prior to the Termination Date, to become a customer of any business or enterprise that competes with the Company or any of its Affiliates for any Business, or to limit or cease doing any Business with the Company or its Affiliate; or

(b)solicit or entice, or attempt to solicit or entice, or hire, either directly or indirectly, any employee or Distribution Partner of the Company or an Affiliate as at the Termination Date, or during the twelve (12) months prior to the Termination Date, to become employed or engaged by any business or enterprise that competes with the Company or any of its Affiliate for any Business, or solicit or entice such employee or Distribution Partner to limit or cease their employment or engagement with the Company or any of its Affiliate.

13.Confidentiality

In the course of the Executive’s employment hereunder, the Company will provide the Executive with (and the Executive will have access to) Confidential Information. The Executive shall not, either during the Term or at any time thereafter, directly or indirectly, use or disclose to any Person any Confidential Information, provided, however, that nothing in this section shall preclude the Executive from disclosing or using Confidential Information if:

(a)the Confidential Information is disclosed in the course of performing the Executive’s duties on behalf of the Company or any of its Affiliates;

(b)the Confidential Information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement;

(c)the Confidential Information was in the possession of or known to the Executive, without any obligation to keep it confidential, before it was disclosed to the Executive by the Company or any of its Affiliates; or

(d)disclosure of the Confidential Information is required to be made by any law, regulation, governmental body or authority, or by court order.

Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict the Executive from lawfully (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to the Executive from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires the Executive to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify the Company that the Executive has engaged in any such conduct.

14.Proprietary and Moral Rights

(a)Proprietary Rights. The Executive recognizes the Company’s and its Affiliates’ proprietary rights in the tangible and intangible property of the Company and its Affiliates and acknowledges that the Executive has not obtained or acquired and shall not obtain or acquire any right, title or interest, in any of the property of the Company or its Affiliates or any of their respective predecessors, successors, affiliates or related companies. Accordingly, any writing, communications, manuals, documents, instruments, contracts, agreements, files, literature, data, information, formulas, products, devices, apparatuses, trademarks, trade names, trade styles, service marks, logos, and any other intellectual property created, developed, made or conceived by the Executive either alone or in conjunction with others: (i) in connection with the Executive’s duties or responsibilities under this Agreement; and/or (ii) resulting from the use of any information, equipment, materials or premises owned, leased, or contracted for by the Company or any of its Affiliates (collectively, the “Materials”) shall be the sole and exclusive property of the Company and its Affiliates (as applicable).

(b)Waiver of Moral Rights. The Executive irrevocably waives, to the greatest extent permitted by law, all of the Executive’s moral rights whatsoever in the Materials, including any right to the integrity of any Materials, any right to be associated with any Materials, and any right to restrict or prevent the modification or use, of any Materials in any way whatsoever. To the extent applicable, the Executive irrevocably transfers to the Company all rights to restrict any violations of moral rights in any of the Materials, including any distortion, mutilation or other modification.

(c)Assignment of Rights. To the extent that the Executive may own or otherwise acquire any right, title or interest in and to any Materials (including any intellectual property rights in the Materials) during the term of this Agreement and thereafter, the Executive agrees to assign, and hereby irrevocably assigns, all such right, title and interest automatically to the Company, including any renewals, extensions or reversions relating thereto and any right to bring an action or to collect compensation for past infringements, automatically upon the creation, development, making, or conception of same.

(d)Registrations. The Company will have the exclusive right to obtain copyright registrations, letters patent, industrial design registrations, trade-mark registrations or any other protection in respect of the Materials and the intellectual property rights relating to the Materials anywhere in the world. At the expense and request of the Company, the Executive shall, both during and after the Executive’s employment with the Company, execute all documents and do all other acts necessary in order to enable the Company to protect its rights in any of the Materials and the intellectual property rights relating to the Materials.

15.Fiduciary and other Obligations

The Executive acknowledges that the obligations contained in Sections 11, 12, 13 and 14 of this Agreement are in addition to any statutory, fiduciary and other common law obligations that the Executive also owes to the Company and its Affiliates, during and after the Term. For greater certainty, nothing contained in this Agreement is a waiver, release or reduction of any statutory, fiduciary or common law obligations owed by the Executive to the Company and its Affiliates.

16.Notices

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by hand delivery or express overnight courier service or internationally-recognized second-day courier service or emailas hereinafter provided. Notice of change of address shall also be governed by this section. Notices shall be deemed to have been duly received (a) when delivered in person if given by hand delivery, (b) when sent by email transmission on a business day to the email address set forth below, if applicable; provided, however, that if a notice is sent by email transmission after normal business hours of the recipient or on a non-business day, then it shall be deemed to have been received on the next business day after it is sent, (c) on the first business day after such notice is sent by express overnight courier service, or (d) on the second business bay following deposit with an internationally-recognized second-day courier service with proof of receipt maintained. Notices and other communications shall be addressed as follows:

(a)if to the Executive:

Jeff Dopheide

(b)if to the Company

DIRTT Environmental Solutions

Suite 1000, 6105 Tennyson Pkwy

Plano, TX 65024

Attn: General Counsel

legal@dirtt.net

17.Headings; Construction

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. Any and all Schedules referred to in this Agreement are, by such reference, incorporated herein and made a part hereof for all purposes. Unless the context requires otherwise, all references to laws, regulations, contracts, documents, agreements and instruments refer to such laws, regulations, contracts, documents, agreements and instruments as they may be amended from time to time, and references to particular provisions of laws or regulations include a reference to the corresponding provisions of any succeeding law or regulation. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall refer to the entire Agreement, including all Schedules attached hereto, and not to any particular provision hereof. Unless the context requires otherwise, the word

“or” is not exclusive. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. All references to “including” shall be construed as meaning “including without limitation.” Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

18.Applicable Deductions and Withholdings

The payments and benefits set forth in this Agreement are subject to all applicable statutory deductions and withholdings including: (a) all federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling and (b) any deductions consented to in writing by the Executive.

19.Reasonableness and Enforceability of Restrictions

(a)The Company shall provide the Executive access to Confidential Information for use only during the Term, and the Executive acknowledges and agrees that the Company and its Affiliates will be entrusting the Executive, in the Executive’s unique and special capacity, with developing the goodwill of the Company and its Affiliates, and as an express incentive for the Company to enter into this Agreement and employ the Executive hereunder, the Executive has voluntarily agreed to the covenants set forth in Section 11 and Section 12.

(b)The Executive acknowledges and agrees that all of the restrictions contained in Sections 11, 12, 13, 14 and 15 of this Agreement (including the definition of Business, the definition of Restricted Territory (which fairly reflects the geographic scope of the Business activities carried on by the Company and its Affiliates and the length of the Restricted Period) are reasonable in all respects and necessary to protect the Confidential Information and other legitimate interests of the Company and its Affiliates, and will not unduly restrict the Executive’s ability to secure alternative employment following the termination of the Executive’s employment for any reason. If any covenant or provision (or part thereof) of this Agreement is determined by a court of competent jurisdiction to be void or unenforceable in whole or in part, for any reason, it shall be interpreted to provide the broadest possible restriction permitted by law and will be deemed not to affect or impair the validity of any other covenant or provision of this Agreement, which shall remain in full force and effect.

(c)The Executive acknowledges and agrees the Company and the Affiliate will suffer irreparable harm in the event that the Executive breaches any of its obligations under Sections 11, 12, 13, 14 or 15 of this Agreement, and that monetary damages would be impossible to quantify and inadequate to compensate the Company and its Affiliates for such a breach. Accordingly, the Executive agrees that in the event of any breach or a threatened breach by the Executive of any of the provisions of this Agreement, the Company and each of its Affiliates shall be entitled to seek, in addition to any other rights, remedies or damages available to the Company at law or in equity, an interim and permanent injunction, in order to prevent or restrain any such breach or threatened breach by the Executive, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security.

(d)The restrictions and obligations of the Executive under Sections 11, 12, 13, 14 and 15 of this Agreement shall survive the termination of this Agreement for any reason.

20.Third-Party Beneficiaries

The Parent and each other Affiliate of the Company that is not a signatory to this Agreement shall be a third-party beneficiary of the Executive’s representations, covenants, and obligations under Sections 11,

12, 13, 14 and 15 and shall be entitled to enforce such representations, covenants, and obligations as if a party hereto.

21.Entire Agreement, Amendment, No Waiver

This Agreement constitutes the entire agreement between the parties hereto and between the Executive and any other Affiliate of the Company regarding the subject matter hereof, and shall supersede and replace any and all prior agreements, undertakings, representations or negotiations (including the offer letter from the Parent to the Executive dated October 14, 2022).There are no warranties, representations or agreements between the parties except as specifically set forth or referred to in this Agreement. Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall the waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

22.Assignment

Neither the Executive nor the Company may assign its rights hereunder without the consent of the other party; provided, however, that the Company may assign its rights hereunder without the Executive’s consent to any Affiliate of the Company or to a successor Company which acquires (whether directly or indirectly, by purchase, amalgamation, arrangement, merger, consolidation, dissolution or otherwise) all or substantially all of the business and/or assets of the Company and expressly assumes and agrees to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

23.Currency

All amounts in this Agreement are in United States currency unless otherwise specified.

24.Governing Law; Submission to Jurisdiction

This Agreement shall in all respects be construed according to the laws of the State of Texas without regard to its conflict of laws principles that would result in the application of the laws of another jurisdiction. With respect to any claim or dispute related to or arising under this Agreement, the parties hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts (as applicable) located in Dallas County, Texas. THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT THEY ARE KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVING THEIR RIGHTS TO A JURY TRIAL.

25.Severability

If an arbitrator or court of competent jurisdiction determines that any provision of this Agreement (or portion thereof) is invalid or unenforceable, then the invalidity or unenforceability of that provision (or portion thereof) shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

26.Waiver of Breach

Any waiver of this Agreement must be executed by the party to be bound by such waiver. No waiver by either party hereto of a breach of any provision of this Agreement by the other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provision or condition at the same or any subsequent time. The failure of either party hereto to take any action by reason of any breach will not deprive such party of the right to take action at any time.

27.Section 409A

(a)Notwithstanding any provision of this Agreement to the contrary, all provisions of this Agreement are intended to comply with Section 409A of the Internal Revenue Code of 1986 (the “Code”), and the applicable Treasury regulations and administrative guidance

issued thereunder (collectively, “Section 409A”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of the Executive’s employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.

(b)To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by the Company no later than the last day of the Executive’s taxable year following the taxable year in which such expense was incurred by the Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period in which the arrangement is in effect.

(c)Notwithstanding any provision in this Agreement to the contrary, if any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if the Executive’s receipt of such payment or benefit is not delayed until the earlier of (i) the date of the Executive’s death or (ii) the date that is six (6) months after the Termination Date (such date, the “Section 409A Payment Date”), then such payment or benefit shall not be provided to the Executive (or the Executive’s estate, if applicable) until the Section 409A Payment Date. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall the Company or any of its Affiliates be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

28.Clawback

Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company, whether in existence as of the Effective Date or later adopted, pursuant to any such law, government regulation or stock exchange listing requirement).

29.Counterparts

This Agreement may be signed in counterparts and by facsimile or .pdf electronic mail transmission and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument.

[Signature page follows]

IN WITNESS WHEREOF the parties acknowledge and agree that they have read and understand the terms of this Agreement, and that they have had an opportunity to seek independent legal advice prior to entering into this Agreement, and have executed this Agreement as of the Effective Date.

DIRTT ENVIRONMENTAL SOLUTIONS, INC.

By:___/s/ Benjamin Urban_____________________

Name: Benjamin Urban

Title: Chief Executive Officer

Jeff Dopheide

_____/s/ Jeff Dopheide _________________________

EX-10.6

Exhibit 10.6

INDEMNITY AGREEMENT

THIS INDEMNITY AGREEMENT is made as of this 11th day of August, 2022

BETWEEN:

DIRTT ENVIRONMENTAL SOLUTIONS LTD., a corporation

governed by the laws of the Province of Alberta (the “Corporation”)

-and-

Richard Hunter, (the “Indemnified Party”)

RECITALS:

A.The Indemnified Party serves as a director and/or officer of the Corporation or the Indemnified Party is a former director or officer of the Corporation or acts or has acted at the Corporation’s request as a director, officer or similar capacity of any subsidiary or affiliate of the Corporation or any entity of which the Corporation is or was a shareholder, partner, member or creditor (each an “Entity”);

B.The Corporation considers it desirable and in the best interests of the Corporation to enter into this Agreement to set out the circumstances and manner in which the Indemnified Party may be indemnified in respect of certain liabilities and expenses which the Indemnified Party may incur as a result of acting or having acted as a director or officer of the Corporation or, at the Corporation’s request, as a director, officer or similar capacity of an Entity; and

C.The by-laws of the Corporation contemplate that the Indemnified Party may be indemnified in certain circumstances.

NOW THEREFORE, IN CONSIDERATION OF the promises and mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and the Indemnified Party acting as a director or officer of the Corporation or, at the Corporation’s request, as a director, officer or similar capacity of an Entity, the Corporation and the Indemnified Party do hereby covenant and agree as follows:

ARTICLE 1

DEFINITIONS AND PRINCIPLES OF INTERPRETATION

1.1Definitions

Whenever used in this Agreement, the following words and terms shall have the meanings set out below:

(a)“Act” means the Business Corporations Act (Alberta) as of the date hereof, provided that if the Act is amended after the date hereof in a manner which permits the Corporation to provide broader rights of indemnification than are permitted on the date hereof, this Agreement shall be construed so as to give effect to such broader rights;

(b)“Agreement” means this indemnity agreement and all amendments or restatements as permitted under this Agreement, and references to “Article” or “Section” mean the specified Article or Section of this Agreement, and “paragraph” means the specified paragraph of this Agreement;

(c)“Claims” means any claim, demand, suit, action, cause of action, proceeding, inquiry, arbitration, mediation, alternative dispute resolution mechanism, hearing, discovery or investigation of whatever nature, whether anticipated, threatened, pending, commenced, continuing or completed of whatever kind including any civil, criminal, administrative, arbitrative, regulatory, investigative (formal or informal) or other claim of any nature whatsoever; any appeal in or related to any such claim, demand, suit, action, cause of action, proceeding, inquiry, arbitration, mediation, alternative dispute resolution mechanism, hearing, discovery or investigation; and any inquiry or investigation (including discovery) whether conducted by or in the right of the Corporation or any other person that the Indemnified Party in good faith believes could lead to any such claim, demand, suit, action, cause of action, proceeding, inquiry, arbitration, mediation, alternative dispute resolution mechanism, hearing, discovery or investigation or appeal thereof;

(d)“Court” means the Court of Queen’s Bench of Alberta (Judicial District of Calgary), including any appeal courts arising therefrom;

(e)“ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended;

(f)“Exchange Act” means the United States Securities Exchange Act of 1934, as amended;

(g)“Expenses” means all legal fees and disbursements, retainers, accountant’s fees and disbursements, private investigator fees and disbursements, other professionals’ fees and disbursements, court costs, transcript costs, fees and expenses of experts, witness fees and expenses, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, penalties, and all other disbursements, costs or expenses of the types customarily incurred in connection with prosecuting, defending (including affirmative defences and counterclaims), preparing to prosecute or defend, investigating, being or preparing to be a witness in, or participating in or preparing to participate in a Claim and all interest or finance charges attributable to any thereof. Without limiting the foregoing, “Expenses” also shall include Expenses incurred in connection with any appeal resulting from any Claim, including the principal, premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Should any payments by the Corporation under this Agreement be determined to be subject to any national, provincial, federal, state or local income or excise tax, “Expenses” shall also include such amounts as are necessary to place the Indemnified Party in the same after-tax position (after giving effect to all applicable taxes) as the Indemnified Party would have been in had no such tax been determined to apply to such payments. Also, in this Agreement “witness” includes responding (or objecting) to a discovery or similar request, whether in writing or in an oral deposition, in any Claim.

(h)“Losses” means any and all amounts related to all costs, charges and Expenses reasonably incurred by the Indemnified Party, which shall include all losses, damages (including

incidental and consequential damages), fees (including any legal, professional or advisory fees, retainers, charges or disbursements and including costs of services of any experts), claims, awards, statutory obligations, amounts paid to settle or dispose of any Claim or satisfy any judgment, fines, penalties or liabilities (including all interest, assessments and other charges paid or payable in connection with or in respect of such losses, damages, fees, claims, awards, statutory obligations, amounts paid to settle or dispose of any Claim or satisfy any judgment, fines, penalties or liabilities), without limitation, and whether incurred alone or jointly with others, including any amounts which the Indemnified Party may reasonably suffer, sustain, incur or be required to pay in respect of the investigation, defence, settlement or appeal of or preparation for any Claim or with any action to establish a right to indemnification under this Agreement, and for greater certainty, includes all Taxes, interest, penalties and related outlays of the Indemnified Party arising from any indemnification of the Indemnified Party by the Corporation pursuant to this Agreement;

(i)“Parties” means the Corporation and the Indemnified Party collectively and “Party”

means any one of them;

(j)“Policy” means the directors’ and officers’ errors and omissions insurance policy of the Corporation; and

(k)“Taxes” includes any assessment, reassessment, claim or other amount for taxes, charges, duties, levies, imposts, ERISA excise taxes or penalties, or similar amounts, including any interest and penalties in respect thereof.

1.2Certain Rules of Interpretation

In this Agreement:

(a)Governing Law – This Agreement is a contract made under and shall be governed by and construed in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable in the Province of Alberta. The Parties hereby irrevocably submit and attorn to the exclusive jurisdiction of the Court with respect to all matters arising out of or relating to this Agreement and all matters, agreements or documents contemplated by this Agreement. The Parties hereby waive any objections they may have to the venue being in such Court, including any claim that any such venue is in an inconvenient forum. For greater certainty, all references to “applicable law” in this Agreement shall refer to the laws of the Province of Alberta and the federal laws of Canada applicable in the Province of Alberta.

(b)Headings – Headings of Articles and Sections are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

(c)Number and Inclusion – Unless the context otherwise requires, words importing the singular include the plural and vice versa. Whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation.”

(d)Severability – If, in any jurisdiction, any provision of this Agreement or its application to any Party or circumstance is restricted, prohibited or unenforceable, such provision shall,

as to such jurisdiction, be ineffective only to the extent of such restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement and without affecting the validity or enforceability of such provision in any other jurisdiction or without affecting its application to other Parties or circumstances.

(e)Entire Agreement – This Agreement constitutes the entire agreement between the Parties and sets out all the covenants, promises, warranties, representations, conditions, understandings and agreements between the Parties pertaining to the subject matter ofthis Agreement and supersedes all prior agreements, understandings, negotiations and discussions, oral or written. There are no covenants, promises, warranties, representations, conditions, understandings or other agreements, oral or written, between the Parties in connection with the subject matter of this Agreement except as specifically set forth in this Agreement, including Section 2.8.

ARTICLE 2 OBLIGATIONS

2.1Obligations of the Corporation

(a)General Indemnity – The Corporation will, to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, including to the extent permitted under the Act, exonerate, indemnify and hold the Indemnified Party and the Indemnified Party’s respective heirs, executors, administrators and other legal representatives of the Indemnified Party (each of which is included in any reference hereinafter made to the Indemnified Party) harmless from and against, and will pay to the Indemnified Party, any and all Losses which the Indemnified Party may suffer, sustain, incur or be required to pay in respect of any Claim to which a director or officer is made a party by reason of being a director or officer of the Corporation or director, officer or in similar capacity of an Entity at the Corporation’s request.

(b)Conditions – The indemnity provided for in Section 2.1(a) will only be available if the Indemnified Party:

(i)acted honestly and in good faith with a view to the best interest of the Corporation or as the case may be, to the best interest of an Entity for which the Indemnified Party acted as a director, officer or in a similar capacity at the Corporation’s request; and

(ii)in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing the Indemnified Party’s conduct was lawful.

The Indemnified Party shall be presumed to have fulfilled the foregoing conditions unless it is determined by the Court that the Indemnified Party has not (and the burden of proof shall be on the Corporation to rebut such presumption).

(c)Derivative Claims – The Corporation shall to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, provided the Indemnified Party fulfills the conditions in Section 2.1(b), with the approval of the Court if such approval is required exonerate, indemnify and hold the

Indemnified Party harmless, and advance moneys under Section 2.1(k) to the Indemnified Party, in respect of a Claim by or on behalf of the Corporation or other entity to procure a judgment in the Corporation’s favour to which the Indemnified Party is made a party by reason of being or having been a director or officer of the Corporation or director, officer or in similar capacity of an Entity at the Corporation’s request. The Corporation will advance or reimburse, as applicable, all Losses incurred by the Indemnified Party in connection with the Indemnified Party’s participation in such Claim as provided in this Section 2.1(c). The Corporation shall pay to the Indemnified Party, if applicable, a reasonable per diem amount for time spent in connection with a Claim under this Section 2.1(c) as provided in Section 2.1(l).

(d)Indemnity as of Right – Notwithstanding anything in this Agreement, provided the Indemnified Party fulfills the conditions in Section 2.1(b), the Corporation shall be required to indemnify the Indemnified Party in respect of all Losses incurred by the Indemnified Party in respect of any Claim to which the Indemnified Party is made a party by reason of being or having been a director or officer of the Corporation or director, officer or in similar capacity of an Entity at the Corporation’s request, if after the final disposition of such Claim, the Indemnified Party has not been reimbursed for those Losses.

(e)Incidental and Additional Expenses – The Corporation shall to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit pay or reimburse the Indemnified Party for (i) the Indemnified Party’s reasonable and necessary travel, lodging or accommodation costs, charges or expenses paid or incurred by or on behalf of the Indemnified Party in connection with a Claim where such Claim is subject to indemnification hereunder; (ii) the Indemnified Party’s reasonable fees and Expenses incurred in connection with efforts to recover under any directors and officers liability insurance policies maintained by the Corporation; and (iii) the Indemnified Party’s reasonable fees and Expenses incurred in connection with enforcement of, or claims for breaches of, any provision of this Agreement.

(f)Witness Expenses – The Corporation shall to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit pay or reimburse the Indemnified Party for the reasonable and necessary Expenses incurred by Indemnified Party, including a reasonable per diem amount as provided in Section 2.1(l), in connection with time spent in the investigation or as a witness for the Corporation or an Entity with respect to any Claim, by reason of the Indemnified Party being a director or officer of the Corporation or director, officer or in similar capacity of an Entity at the Corporation’s request.

(g)Specific Indemnity for Statutory Obligations – Without limiting the generality of the preceding Sections 2.1(a) through 2.1(f) of this Agreement, the Corporation agrees, to the fullest extent permitted by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, to exonerate, indemnify and hold the Indemnified Party harmless from and against any and all Losses arising by operation of statute and incurred by or imposed upon the Indemnified Party in relation to the affairs of the Corporation in the Indemnified Party’s capacity as a director or officer thereof, including all statutory obligations to creditors, employees, suppliers, contractors, subcontractors, and any government or any agency or division of any government,

whether federal, provincial, state, regional or municipal, or which in any way involve the business or affairs of the Corporation or an Entity for which the Indemnified Party acted as a director, officer or similar capacity at the Corporation’s request, provided that the indemnity provided for in this Section 2.1(g) will be available unless it is determined by the Court that the Indemnified Party has not fulfilled the conditions in Section 2.1(b) above.

(h)Change of Law – In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of an Alberta corporation to indemnify a director or officer, it is the intent of the parties hereto that the Indemnified Party shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change after that date of this Agreement in any applicable law, statute or rule which narrows the rights of an Alberta corporation to indemnify a director or officer, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ right and obligations hereunder except as set forth in Section 2.9.

(i)Partial Indemnification – If the Indemnified Party is determined by the Court to be entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Losses incurred in respect of any Claim but not for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnified Party for the portion thereof to which the Indemnified Party is determined by the Court to be so entitled.

(j)Indemnification for Losses of an Indemnified Party Who Is Wholly or Partly Successful – To the extent the Indemnified Party is a party to (or a participant in) a Claim and is successful, on the merits or otherwise, in the defence of any Claim or any issue or matter therein, the Corporation shall, to the fullest extent permitted by applicable law, exonerate, indemnify, and hold the Indemnified Party harmless against all Losses incurred by the Indemnified Party therewith. If the Indemnified Party is not wholly successful in such Claim but is successful, on the merits or otherwise, as to one or more but less than all the issues or matters in such Claim, the Corporation shall, to the fullest extent permitted by applicable law, exonerate, indemnify, and hold the Indemnified Party harmless against all Losses incurred by the Indemnified Party in connection with each successfully resolved issue or matter. For purposes of this Section 2.1(j), without limitation, the termination of any issue or matter in a Claim by dismissal, with or without prejudice, shall be deemed to be a successful result as to such issue or matter.

(k)Advance of Expenses – The Corporation shall, at the request of the Indemnified Party, to the maximum extent permitted under the Act or otherwise by law on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, promptly: (i) reimburse the Indemnified Party for all Losses incurred by the Indemnified Party in relation to a Claim claimed by the Indemnified Party to be subject to indemnification hereunder; and (ii) pay reasonable and customary advance payments and costs and expenses to service providers of the Indemnified Party; in each case, prior to any settlement or resolution of such Claim to enable the Indemnified Party to properly investigate, defend or appeal such Claim. The Corporation shall pay such advances within ten (10) days after the receipt by the Corporation of a written request from the Indemnified Party requesting such payment or payments from time to time, whether prior to or after final disposition of a Claim. If it is ultimately determined in a final judgment

of a court of competent jurisdiction or final arbitration award of an applicable arbitration proceeding that has become non-appealable that the Indemnified Party did not fulfill the conditions in Section 2.1(b) or that the Indemnified Party was not entitled to be fully so indemnified, such advance, or the appropriate portion thereof, upon written notice of such determination being given by the Corporation to the Indemnified Party detailing the basis for such determination, shall be repayable on demand without interest. The Indemnified Party shall not be required to provide collateral or otherwise secure the Indemnified Party’s agreement to repay described in the prior sentence. If and to the extent the Indemnified Party makes any such repayment to the Corporation, the obligation of the Corporation to indemnify the Indemnified Party will continue in accordance with the terms of this Agreement.

(l)Per Diem Charge – In addition to any other amount payable to the Indemnified Party under this Agreement, the Indemnified Party shall be entitled to receive from the Corporation a per diem payment (the “Per Diem Charge”) for time spent with respect to any Claim for which the Indemnified Party is otherwise entitled to indemnification pursuant to any one of the foregoing provisions of Section 2.1 of this Agreement. For directors, the Per Diem Charge shall be an amount equal to US$350 per hour. For officers, the Per Diem Charge shall be zero if the Indemnified Party is still employed on a full time basis by the Corporation at the time the Per Diem Charge is payable or has been terminated for cause by the Corporation, and the Per Diem Charge shall be in an amount equal to US$350 per hour if the Indemnified Party is not employed on a full time basis by the Corporation at the time the Per Diem Charge is payable other than as a result of termination for cause.

(m)Taxes – For greater certainty, a Claim subject to indemnification pursuant to Article 2 of this Agreement shall include any Taxes which the Indemnified Party may be subject to or suffer or incur as a result of, in respect of, arising out of or referable to any indemnification of the Indemnified Party by the Corporation pursuant to this Agreement; provided, however, that any amount required to be paid with respect to such Taxes shall be payable by the Corporation only upon the Indemnified Party remitting or being required to remit any amount payable on account of such Taxes.

(n)Right to Access – The Indemnified Party (and its legal representatives) is entitled to have access to and inspect the Corporation’s records and documents which are under its control and which may be reasonably necessary in order to defend the Indemnified Party against a Claim which has been or which the Indemnified Party reasonably anticipates may be made against the Indemnified Party, provided that the Indemnified Party (and its legal representatives) maintains all such information in the strictest confidence except to the extent necessary for the defence of the Indemnified Party. The Corporation shall provide the Indemnified Party (and its legal representatives) with access to the relevant documents and records during the regular business hours of the Corporation as soon as practicable following a request for such access by or on behalf of the Indemnified Party. The Indemnified Party (and its legal representatives) shall be entitled to make and receive copies (including electronic copies) of any of such records and documents of the Corporation at the cost of the Corporation and such copies shall be provided as soon as practicable following a request therefor by or on behalf of the Indemnified Party. If the Indemnified Party is the subject of or is implicated in any way during the proceeding of any Claim, the Corporation will share with the Indemnified Party (and its legal

representatives) any information that it has turned over to any third parties in connection therewith.

(o)Enforcement – The Indemnified Party’s right to indemnification and other rights under this Agreement shall be specifically enforceable by the Indemnified Party in a “court” (as defined in the Act) and shall be enforceable notwithstanding any adverse determination by or on behalf of the Corporation’s board of directors and no such determination shall create a presumption that the Indemnified Party is not entitled to be indemnified hereunder. In any such action, the Corporation shall have the burden of proving that indemnification is not required or permitted under this Agreement.

(p)Court Approvals – If the payment of an indemnity under any provision of this Agreement requires any court or other approvals, the Corporation shall make the application or seek such other required approvals and use reasonable best efforts to obtain such order or other required approvals, including paying the costs of such application or seeking such other required approvals and paying the expenses of the Indemnified Party, to the extent permitted by applicable law, in connection with any such order or approval process. If the Corporation fails to do so, the Indemnified Party may apply to the Court or other applicable court, agency or body for an order or seek such other required approvals approving the indemnity of the Indemnified Party pursuant to this Agreement, and the Corporation shall pay the expenses of the Indemnified Party, to the extent permitted by applicable law, in connection with any such order or approval process.

2.2Notice of Proceedings

(a)The Indemnified Party shall give notice in writing to the Corporation as soon as practicable upon being served with any statement of claim, writ, notice of motion, indictment, subpoena, investigation order or other document commencing, threatening or continuing any Claim which may result in a claim for indemnification under this Agreement, and the Corporation agrees to give the Indemnified Party notice in writing as soon as practicable upon it being served with any statement of claim, writ, notice of motion, indictment, subpoena, investigation order or other document commencing, threatening or continuing any Claim which may result in a claim for indemnification under this Agreement. Such notice shall include a description of the Claim or threatened Claim, a summary of the facts giving rise to the Claim or threatened Claim and, if possible, an estimate of any potential liability arising under the Claim or threatened Claim. Failure by either party to so notify the other of any Claim shall not relieve the Corporation from liability under this Agreement except to the extent that the failure materially prejudices the Corporation.

(b)If, at the time the Corporation gives the Indemnified Party notice in connection with Section 2.2(a), a Policy is in effect with respect to the Indemnified Party, the Corporation shall give prompt notice of the applicable Claim to its insurers in accordance with the procedures set forth in such Policy. The Corporation shall thereafter take all necessary or desirable action to cause such insurers to pay all amounts payable as a result of such Claim in accordance with the terms of such Policy.

2.3Subrogation

Promptly after receiving written notice from the Indemnified Party of any Claim or threatened Claim (other than a Claim by or on behalf of the Corporation to procure a judgment in its favour against the Indemnified Party), the Corporation may by notice in writing to the Indemnified Party, and upon the written request of the Indemnified Party the Corporation shall, in a timely manner assume conduct of the defence thereof and retain counsel on behalf of the Indemnified Party who is reasonably satisfactory to the Indemnified Party, to represent the Indemnified Party in respect of the Claim. On delivery of such notice by the Corporation, other than pursuant to Section 2.4, the Corporation shall not be liable to the Indemnified Party under this Agreement for any fees and disbursements of counsel the Indemnified Party may subsequently incur with respect to the same matter. If the Corporation assumes conduct of the defence on behalf of the Indemnified Party, the Indemnified Party hereby consents to the conduct thereof and of any action taken by the Corporation, in good faith, in connection therewith, and the Indemnified Party shall fully cooperate in such defence including the provision of documents, attending examinations for discovery, making affidavits, meeting with counsel, testifying and divulging to the Corporation all information reasonably required to defend or prosecute the Claim.

2.4Separate Counsel

In connection with any Claim or other matter for which the Indemnified Party may be entitled to indemnity under this Agreement, the Indemnified Party shall have the right to employ separate counsel and consultants of the Indemnified Party’s choosing and to participate in and approve any settlement by the Corporation of any Claim involving or affecting in any manner whatsoever the Indemnified Party, and provided that:

(a) the employment of such counsel and consultants of the Indemnified Party’s choosing have been previously approved by the Corporation, acting reasonably; or (b) the Indemnified Party has reasonably concluded that there may be a conflict of interest between the Corporation and the Indemnified Party in defending such Claim; then all fees, expenses and disbursements of such counsel and consultants shall be at the Corporation’s expense and shall be paid within ten (10) days of invoices being submitted to the Corporation.

2.5Presumption of Indemnification

(a)In making a determination with respect to entitlement to indemnification hereunder, the Corporation shall, to the fullest extent not prohibited by law, presume that the Indemnified Party is entitled to indemnification under this Agreement, and the Corporation shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by the Court of any determination contrary to that presumption. Neither the failure of the Corporation to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because the Indemnified Party has met the applicable standard of conduct, nor an actual determination by the Corporation that the Indemnified Party has not met such applicable standard of conduct, shall be a defence to the action or create a presumption that the Indemnified Party has not met the applicable standard of conduct.

(b)If the Corporation shall not have made a determination with respect to entitlement to indemnification within sixty (60) days after receipt by the Corporation of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and the Indemnified Party

shall be entitled to such indemnification, absent a prohibition of such indemnification under applicable law.

(c)The knowledge or actions, or failure to act, of any director, officer, agent or employee of the Entity shall not be imputed to the Indemnified Party for purposes of determining the right to indemnification under this Agreement.

2.6Presumption of Good Faith

(a)For the purposes of any determination of good faith under this Agreement, the Indemnified Party shall be deemed to have acted in good faith if the Indemnified Party’s action is based on the records or books of account of the Corporation or an Entity, including applicable financial statements, or on information supplied to the Indemnified Party by officers of the Corporation or an Entity (other than the Indemnified Party) in the course of their duties, or on the advice of legal counsel of the Corporation, an Entity, their respective board of directors, counsel selected by any committee of their respective board of directors or on information or records given or reports made to the Corporation or an Entity by an independent certified public accountant or by an appraiser, investment banker, compensation consultant or other expert selected with reasonable care by the Corporation, an Entity, their respective board of directors or any committee of their respective board of directors or by any other person as to matters the Indemnified Party reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. The provisions of this Section 2.6 shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnified Party may be deemed to have fulfilled the conditions in Section 2.1(b) or met any other applicable standard of conduct.

(b)Unless the Court or a court of competent jurisdiction otherwise has held or decided that the Indemnified Party is not entitled to be fully or partially indemnified under this Agreement, the termination of any civil, criminal or administrative action or proceedings by judgement, order, settlement, conviction or similar or other result or upon a plea of “no contest” or the equivalent will not, of itself: (i) create a presumption for the purposes of this Agreement that the Indemnified Party did not act honestly and in good faith with a view to the best interests of the Corporation or Entity; (ii) in the case of a criminal or administrative action or proceeding that is enforced by monetary penalty, that the Indemnified Party did not have reasonable grounds for believing that the Indemnified Party’s conduct was lawful; or (iii) that the Indemnified Party is not entitled to indemnity under this Agreement.

2.7Settlement of a Claim

For greater certainty, no admission of liability and no settlement of any Claim in a manner adverse to the Indemnified Party shall be made without the consent of the Indemnified Party, acting reasonably. No admission of liability shall be made by the Indemnified Party without the consent of the Corporation and the Corporation shall not be liable for any settlement of any Claim made without its consent, acting reasonably.

2.8Other Rights and Remedies Unaffected

The indemnification and advance payment provided in this Agreement shall not derogate from or exclude any other rights to which the Indemnified Party may be entitled under any provision of the Act or otherwise at law, the articles or by-laws of the Corporation, any applicable policy of insurance, guarantee or third-party indemnity, any vote of shareholders of the Corporation, or otherwise, both as to matters arising out of the Indemnified Party’s capacity as a director or officer of the Corporation or as to matters arising out of any other capacity in which the Indemnified Party may act for or on behalf of the Corporation.

2.9Exceptions

Any other provision herein to the contrary notwithstanding, the Corporation shall not be obligated pursuant to the terms of this Agreement:

(a)Claims Initiated by the Indemnified Party – To indemnify or advance expenses to the Indemnified Party with respect to any proceeding or Claim initiated or brought voluntarily by the Indemnified Party and not by way of defence, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any statute, the articles or by-laws of the Corporation or otherwise but such indemnification or advancement of expenses may be provided by the Corporation in specific cases if the Corporation’s board of directors has approved the initiation or bringing of such suit.

(b)Frivolous Proceedings – To indemnify the Indemnified Party for any expenses incurred by the Indemnified Party with respect to any proceeding instituted by the Indemnified Party to enforce or interpret this Agreement, if the Court or a court of competent jurisdiction determines that each of the material assertions made by the Indemnified Party in such proceedings were frivolous.

(c)Insured Claims – To make any payment in connection with any Claim made against the Indemnified Party to the extent the Indemnified Party has otherwise received payment (under any insurance policy, the articles or by-laws of the Corporation, contract or otherwise) of the amounts otherwise indemnifiable hereunder. If the Corporation makes any indemnification payment to the Indemnified Party in connection with any particular expense indemnified hereunder and the Indemnified Party has already received or thereafter receives, and is entitled to retain, duplicate payments in reimbursement of the same particular expense, then the Indemnified Party shall reimburse the Corporation in an amount equal to the lesser of: (i) the amount of such duplicate payment; and (ii) the full amount of such indemnification payment made by the Corporation.

(d)Claims for Unlawful Profits – To indemnify the Indemnified Party for the disgorgement of profits arising from the purchase and sale by the Indemnified Party of securities in violation of Section 16(b) of the Exchange Act (or any successor statute) or any other applicable securities law or Losses incurred by the Indemnified Party for Claims in connection with such payment.

(e)Other Indemnification – To indemnify the Indemnified Party for expenses for which the Indemnified Party is indemnified by the Corporation otherwise than pursuant to this Agreement.

(f)Not Lawful – To indemnify the Indemnified Party if (and to the extent that) a final decision by the Court, a court of competent jurisdiction, or an arbitration body having jurisdiction in the matter shall determine that such indemnification is not lawful.

2.10Articles and By-Laws

The Corporation agrees that the articles and by-laws of the Corporation in effect on the date hereof shall not be amended to reduce, limit, hinder or delay: (a) the rights of the Indemnified Party granted hereunder; or (b) the ability of the Corporation to indemnify the Indemnified Party as required hereunder. The Corporation further agrees that it shall exercise the powers granted to it under the articles and by- laws of the Corporation and applicable law to indemnify the Indemnified Party to the fullest extent possible as required by this Agreement.

ARTICLE 3

INSURANCE

3.1The Policy

The Corporation shall purchase and maintain, or cause to be purchased and maintained, while the Indemnified Party remains a director or officer of the Corporation or director, officer or a similar capacity of an Entity at the Corporation’s request, and in accordance with Section 3.6, for a period of six (6) years after the Indemnified Party ceases to be a director or officer of the Corporation, a Policy including Side “A” difference in conditions coverage, for the benefit of the Indemnified Party containing such customary terms and conditions and in such amounts as are available to the Corporation on reasonable commercial terms, having regard to the nature and size of the business and operations of the Corporation and its subsidiaries from time to time. In all such Policies, the Indemnified Party, by reference to the Indemnified Party’s position or otherwise, shall be named as an insured. The Corporation shall thereafter take all necessary or desirable action to cause its insurer to pay, on behalf of the Indemnified Party, all amounts payable as a result of such Claims in accordance with the terms of such policies.

3.2Variation of Policy

So long as the Indemnified Party is a director or officer of the Corporation or director, officer or similar capacity of an Entity at the Corporation’s request, and, in accordance with Section 3.6, for a period of six

(6) years thereafter, the Corporation shall not seek to amend or discontinue the Policy or allow the Policy to lapse.

3.3Run-Off Coverage

If the Policy is discontinued for any reason, the Corporation shall purchase, maintain and administer, or cause to be purchased, maintained and administered for a period of six (6) years after such discontinuance, insurance for the benefit of the Indemnified Party (the “Run-Off Coverage”), on such terms as the Corporation then maintains in existence for its directors and officers, to the extent permitted by law and provided such Run-Off Coverage is available on commercially acceptable terms and premiums (as determined by the Corporation’s board of directors acting reasonably). The Run-Off Coverage shall provide coverage only in respect of events occurring prior to the discontinuance of the Policy.

3.4Insurable Events

If an insurable event occurs, the Corporation shall indemnify the Indemnified Party as agreed hereto regardless of whether the Corporation receives the insurance proceeds. The Indemnified Party is entitled to full indemnification as agreed hereto notwithstanding any deductible amounts or policy limits contained in any such insurance policy.

3.5Exclusion of Indemnity

Notwithstanding any other provision in this Agreement to the contrary, the Corporation shall not be obligated to indemnify the Indemnified Party under this Agreement for any Losses which have been paid to, by or on behalf of, the Indemnified Party under the Policy or any other applicable policy of insurance maintained by the Corporation.

3.6Post Office Directors and Officers Insurance

Following the Indemnified Party ceasing to be a director or officer of the Corporation or director, officer or similar capacity of an Entity at the Corporation’s request, for any reason whatsoever, the Corporation shall continue to purchase and maintain directors’ and officers’ liability insurance, for the benefit of the Indemnified Party for a minimum of six (6) years, such that the Indemnified Party’s insurance coverage is, during that time, the same as any insurance coverage the Corporation purchases and maintains for the benefit of its then current directors and officers, from time to time. Notwithstanding the foregoing, if: (a) liability insurance coverage for former directors and officers is no longer available; or (b) it is no longer industry practice among responsible companies to procure liability insurance for former directors and officers and the cost to the Corporation to do so would be commercially unreasonable (as determined by the board of directors acting reasonably), the Corporation shall be relieved of its obligation to procure liability insurance coverage for former directors and officers; provided that the Corporation procures such level of insurance coverage, if any, as is available for former directors and officers at a commercially reasonable rate and adopts comparable measures to protect its former directors and officers in the circumstances as are adopted by other responsible companies. The onus is on the Corporation to establish that the circumstances described in the previous sentence exist.

3.7Deductible under Directors and Officers Insurance

If for any reason whatsoever, any directors’ and officers’ liability insurer asserts that the Indemnified Party is subject to a deductible under any existing or future Policy purchased and maintained by the Corporation for the benefit of the Indemnified Party, the Corporation shall pay the deductible for and on behalf of the Indemnified Party.

3.8Notice

The Corporation agrees to provide notice of any material changes in the insurance coverage referred to in Article 3 during the period in which the Indemnified Party serves as director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request and for a period of six (6) years thereafter.

3.9Most Favoured Nation

The Corporation agrees that if the Corporation enters into any indemnity agreement or similar arrangement with any person who is, or becomes, a director or officer of the Corporation or a director, officer or

similar capacity of an Entity at the Corporation’s request, and such agreement or arrangement contains any provision which is more favourable to the other party to such agreement than the provisions of this Agreement are to the Indemnified Party then, and in each such case, the Corporation shall provide written notice of such provision to the Indemnified Party (which shall include a copy of such provision). Upon such notice, unless the Indemnified Party elects otherwise within five (5) days of receipt of such notice, this Agreement shall be deemed to be amended to conform the provisions of this Agreement to such more favourable provision.

ARTICLE 4 MISCELLANEOUS

4.1Corporation and Indemnified Party to Cooperate

The Corporation and the Indemnified Party shall, from time to time, provide such information and cooperate with the other, as the other may reasonably request, in respect of all matters under this Agreement.

4.2Effective Time

This Agreement shall be deemed to have effect as and from the first date that the Indemnified Party became a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request.

4.3Insolvency

The liability of the Corporation under this Agreement shall not be affected, discharged, impaired, mitigated or released by reason of the discharge or release of the Indemnified Party in any bankruptcy, insolvency, receivership or other similar proceeding of creditors.

4.4Multiple Proceedings

No action or proceeding brought or instituted under this Agreement and no recovery pursuant thereto shall be a bar or defence to any further action or proceeding which may be brought under this Agreement.

4.5Termination

(a)Nothing in this Agreement will prevent the Indemnified Party from resigning as adirector or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request at any time.

(b)The obligations of the Corporation will not terminate or be released upon the Indemnified Party resigning or ceasing to act as a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request.

4.6Limitation of Actions and Release of Claims

To the extent permitted by applicable law, no legal action shall be brought and no course of action shall be asserted by or on behalf of the Corporation against the Indemnified Party after the expiration of two years from the date of the Indemnified Party’s ceasing to act as a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request and the Corporation agrees that any claim or cause of action of the Corporation shall be extinguished and the Indemnified Party be

deemed released therefrom absolutely unless asserted by the commencement of legal action in a court of

competent jurisdiction within such two yearperiod.

ARTICLE 5 CONTRIBUTION

5.1.Contribution Payment

(a)To the fullest extent permitted by law, whether or not the indemnification provided in Article 2 is available, in respect of any threatened, pending or completed Claim in which the Corporation is jointly liable with the Indemnified Party (or would be if joined in such Claim), the Corporation shall pay, in the first instance, the entire amount of any judgment or settlement of such Claim without requiring the Indemnified Party to contribute to such payment, and the Corporation hereby waives and relinquishes any right of contribution it may have against the Indemnified Party. The Corporation shall not enter into any settlement of any Claim in which the Corporation is jointly liable with the Indemnified Party (or would be if joined in such Claim) unless such settlement provides for a full and final release of all claims asserted against the Indemnified Party.

(b)Without diminishing or impairing the obligations of the Corporation set forth in the preceding paragraph, if, for any reason, the Indemnified Party shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed Claim in which the Corporation is jointly liable with the Indemnified Party (or would be if joined in such Claim), the Corporation shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by the Indemnified Party in proportion to the relative benefits received by the Corporation and all officers, directors or employees of the Corporation, other than the Indemnified Party, who are jointly liable with the Indemnified Party (or would be if joined in such Claim), on the one hand, and the Indemnified Party, on the other hand, from the transaction or events from which such Claim arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Corporation and all officers, directors or employees of the Corporation other than the Indemnified Party who are jointly liable with the Indemnified Party (or would be if joined in such Claim), on the one hand, and the Indemnified Party, on the other hand, in connection with the transaction or events that resulted in such Expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered.

(c)The Corporation hereby agrees, to the fullest extent permitted by applicable law, to fully indemnify and hold the Indemnified Party harmless from any claims of contribution which may be brought by officers, directors or employees of the Corporation, other than the Indemnified Party, who may be jointly liable with the Indemnified Party.

(d)To the fullest extent permissible under applicable law and without diminishing or impairing the obligations of the Corporation set forth in the preceding paragraphs of this Section 5.1, if the indemnification provided for in this Agreement is unavailable to the Indemnified Party for any reason whatsoever, the Corporation, in lieu of indemnifying the Indemnified Party, shall contribute to the amount incurred by the Indemnified Party, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in

settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Claim in order to reflect (i) the relative benefits received by the Corporation and the Indemnified Party as a result of the event(s) and/or transaction(s) giving cause to such Claim; and/or (ii) the relative fault of the Corporation (and its directors, officers, employees and agents) and the Indemnified Party in connection with such event(s) and/or transaction(s).

5.2 Relative Fault

The relative fault of the Indemnified Party, on the one hand, and of the Corporation and any and all other parties (including officers and directors of the Corporation other than the Indemnified Party) who may be at fault with respect to such matter shall be determined (i) by reference to the relative fault of the Indemnified Party as determined by the court or other governmental agency assessing the contribution amounts or (ii) to the extent such court or other governmental agency does not apportion relative fault, by independent counsel agreed to by both the Corporation and the Indemnified Party after giving effect to, among other things, the degree of which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, the degree to which their conduct is active or passive, the degree of the knowledge, access to information, and opportunity to prevent or correct the subject matter of the Claim and other relevant equitable considerations of each party. The Corporation and the Indemnified Party agree that it would not be just and equitable if contribution pursuant to this Section 5.2 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 5.2.

ARTICLE 6 GENERAL

6.1.Term

This Agreement shall continue after the Indemnified Party ceases to serve as a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request and shall survive indefinitely.

6.2.Deeming Provision

The Indemnified Party shall be deemed to have acted or be acting at the specific request of the Corporation upon the Indemnified Party’s being appointed or elected as a director or officer of the Corporation or a director, officer or similar capacity of an Entity at the Corporation’s request.

6.3.Assignment

Neither Party may assign this Agreement or any rights or obligations under this Agreement without the prior written consent of the other Party. This Agreement shall enure to the benefit of and be binding upon the Parties and the heirs, executors and administrators and other legal representatives of the Indemnified Party and the successors and permitted assigns of the Corporation (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Corporation).

6.4.Amendments and Waivers

No supplement, modification, amendment or waiver or termination of this Agreement and, unless otherwise specified, no consent or approval by any Party, shall be binding unless executed in writing by the Party to be bound thereby. For greater certainty, the rights of the Indemnified Party under this Agreement shall not be prejudiced or impaired by permitting or consenting to any assignment in bankruptcy, receivership, insolvency or any other creditor’s proceedings of or against the Corporation or by the winding-up or dissolution of the Corporation.

6.5.Notices

Any notice, consent or approval required or permitted to be given in connection with this Agreement (in this Section referred to as a “Notice”) shall be in writing and shall be sufficiently given if delivered (whether in person, by courier service or other personal method of delivery), or if transmitted by facsimile or e-mail:

(a)in the case of a Notice to the Indemnified Party at: Benjamin Urban

Facsimile:

e-mail:

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

Attn: General Counsel 7303 30th Street S.E. Calgary, Alberta T2C 1N6 Facsimile:

e-mail:

Any Notice delivered or transmitted to a Party as provided above shall be deemed to have been given and received on the day it is delivered or transmitted, provided that it is delivered or transmitted on a business day prior to 5:00 p.m. local time in the place of delivery or receipt. However, if the Notice is delivered or transmitted after 5:00 p.m. local time or if such day is not a business day then the Notice shall be deemed to have been given and received on the next business day.

Any Party may, from time to time, change its address for Notice set out in this Section 6.5 by giving Notice to the other Party in accordance with the provisions of this Section.

6.6.Further Assurances

The Corporation and the Indemnified Party shall, with reasonable diligence, do all such further acts, deeds or things and execute and deliver all such further documents as may be necessary or advisable for the purpose of assuring and conferring on the Indemnified Party the rights hereby created or intended, and of giving effect to and carrying out the intention or facilitating the performance of the terms of this Agreement or to evidence any advance made pursuant to Section 2.1(k).

6.7.Independent Legal Advice

The Indemnified Party acknowledges that the Indemnified Party has been advised to obtain independent legal advice with respect to entering into this Agreement, that it has obtained such independent legal advice or has expressly determined not to seek such advice, and that the Indemnified Party is entering into this Agreement with full knowledge of the contents hereof, of the Indemnified Party’s own free will and with full capacity and authority to do so.

6.8.Execution and Delivery

This Agreement may be executed by the Parties in counterparts and may be executed and delivered by facsimile or other form of electronic transmission, and all such counterparts and facsimiles or forms of electronic transmission together shall be deemed to be an original and shall constitute one and the same agreement.

[Signature Page Follows]

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

DIRTT ENVIRONMENTAL SOLUTIONS LTD

            Per: /s/ Benjamin Urban

Name: Benjamin Urban

Title: Chief Executive Officer

SIGNED, SEALED AND DELIVERED In the presence of: /s/ Nandini Somayaji /s/ Richard Hunter
Witness	Richard Hunter

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Schedule I

The Company entered into an Indemnification Agreement with each of Bradley Little and Nandini Somayaji that is identical to the one entered into with Richard Hunter.

EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO EXCHANGE ACT RULE 13A-14(a) OR RULE 15D-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Benjamin Urban, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “registrant”) for the quarter ended September 30, 2022;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2022	By:	/s/ Benjamin Urban
		Benjamin Urban
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO EXCHANGE ACT RULE 13A-14(a) OR RULE 15D-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bradley S. Little, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “registrant”) for the quarter ended September 30, 2022;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2022	By:	/s/ Bradley S. Little
		Bradley S. Little
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “Company”) for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Benjamin Urban, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2022	By:	/s/ Benjamin Urban
		Benjamin Urban
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of DIRTT Environmental Solutions Ltd. (the “Company”) for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bradley S. Little, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2022	By:	/s/ Bradley S. Little
		Bradley S. Little
		Chief Financial Officer
		(Principal Financial Officer)

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2022	Nov. 01, 2022
Document Cover Page [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2022
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Entity Registrant Name	DIRTT ENVIRONMENTAL SOLUTIONS LTD
Entity Central Index Key	0001340476
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity File Number	001-39061
Entity Tax Identification Number	00-0000000
Entity Address, Address Line One	7303 30th Street S.E.
Entity Address, City or Town	Calgary
Entity Address, State or Province	AB
Entity Interactive Data Current	Yes
Entity Address, Postal Zip Code	T2C 1N6
City Area Code	403
Local Phone Number	723-5000
Entity Incorporation, State or Country Code	Z4
Entity Common Stock, Shares Outstanding		88,714,941
Title of 12(b) Security	Common Shares, without par value
Trading Symbol	DRTT
Security Exchange Name	NASDAQ

XML

Interim Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current Assets
Cash and cash equivalents	$ 6,818	$ 60,313
Restricted cash	3,611	3,095
Trade and accrued receivables, net of expected credit losses of $0.1 million at September 30, 2022 and at December 31, 2021	19,553	14,063
Other Receivables	8,009	3,477
Inventory	23,295	18,457
Prepaids and other current assets	5,389	4,399
Total Current Assets	66,675	103,804
Property, plant and equipment, net	43,450	51,697
Capitalized software, net	4,634	7,395
Operating lease right-of-use assets, net	31,965	30,880
Other assets	5,192	5,663
Total Assets	151,916	199,439
Current Liabilities
Accounts payable and accrued liabilities	26,104	22,751
Other liabilities	1,787	2,379
Customer deposits and deferred revenue	3,027	2,420
Current portion of long-term debt and accrued interest	3,221	3,323
Current portion of lease liabilities	5,626	6,214
Total Current Liabilities	39,765	37,087
Long-term debt	61,997	67,319
Long-term lease liabilities	29,141	27,267
Total Liabilities	130,903	131,673
SHAREHOLDERS’ EQUITY
Common shares, unlimited authorized without par value, 88,266,915 issued and outstanding at September 30, 2022 and 85,345,433 at December 31, 2021	187,930	181,782
Additional paid-in capital	9,592	13,200
Accumulated other comprehensive loss	(16,143)	(15,916)
Accumulated deficit	(160,366)	(111,300)
Total Shareholders’ Equity	21,013	67,766
Total Liabilities and Shareholders’ Equity	$ 151,916	$ 199,439

XML

Interim Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Trade and other receivables, expected credit losses	$ 126	$ 130
Common shares, authorized	Unlimited	Unlimited
Common shares, no par value	$ 0	$ 0
Common shares, shares issued	88,266,915	85,345,433
Common shares, shares outstanding	88,266,915	85,345,433

XML

Interim Condensed Consolidated Statement of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenues [Abstract]
Total revenue	$ 46,747	$ 34,098	$ 129,734	$ 104,665
Total cost of sales	39,739	31,648	113,163	89,621
Gross profit	7,008	2,450	16,571	15,044
Expenses
Sales and marketing	6,089	7,536	21,094	21,770
General and administrative	6,542	7,546	21,412	22,567
Operations support	2,321	2,374	7,347	6,884
Technology and development	1,695	2,146	5,714	6,005
Stock-based compensation	918	837	3,546	3,792
Reorganization	3,426		12,281
Total operating expenses	20,991	20,439	71,394	61,018
Operating loss	(13,983)	(17,989)	(54,823)	(45,974)
Government subsidies	7,141	2,935	7,765	10,434
Foreign exchange gain	1,356	526	1,870	286
Interest income	19	20	50	62
Interest expense	(1,276)	(823)	(3,935)	(2,117)
Non Operating (income) loss	7,240	2,658	5,750	8,665
Loss before tax	(6,743)	(15,331)	(49,073)	(37,309)
Income taxes
Current tax expense (recovery)	(16)		(16)	210
Deferred income tax expense	0	88	0	137
Income tax expense	(16)	88	(16)	347
Net loss	$ (6,727)	$ (15,419)	$ (49,057)	$ (37,656)
Loss per share
Basic loss per share	$ (0.08)	$ (0.18)	$ (0.57)	$ (0.44)
Diluted loss per share	$ (0.08)	$ (0.18)	$ (0.57)	$ (0.44)
Weighted average number of shares outstanding (in thousands)
Basic	87,446	85,325	86,299	84,922
Diluted	87,446	85,325	86,299	84,922
Product [Member]
Revenues [Abstract]
Total revenue	$ 44,307	$ 33,054	$ 124,849	$ 101,683
Total cost of sales	37,965	30,717	109,757	85,359
Service [Member]
Revenues [Abstract]
Total revenue	2,440	1,044	4,885	2,982
Total cost of sales	$ 1,774	$ 931	$ 3,406	2,506
Under-utilized Capacity [Member]
Revenues [Abstract]
Total cost of sales				$ 1,756

XML

Interim Condensed Consolidated Statement of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]
Loss for the period	$ (6,727)	$ (15,419)	$ (49,057)	$ (37,656)
Exchange differences on translation of foreign operations	(66)	(855)	(227)	466
Comprehensive loss for the period	$ (6,793)	$ (16,274)	$ (49,284)	$ (37,190)

XML

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Shares	Additional paid-in capital	Accumulated Other Comprehensive Loss	Accumulated deficit
Beginning Balance at Dec. 31, 2020	$ 116,531	$ 180,639	$ 10,175	$ (17,018)	$ (57,265)
Beginning Balance (in shares) at Dec. 31, 2020		84,681,364
Stock-based compensation	796		796
Foreign currency translation adjustment	605			605
Net loss for the period	(12,499)				(12,499)
Ending Balance at Mar. 31, 2021	105,433	$ 180,639	10,971	(16,413)	(69,764)
Ending Balance (in shares) at Mar. 31, 2021		84,681,364
Beginning Balance at Dec. 31, 2020	116,531	$ 180,639	10,175	(17,018)	(57,265)
Beginning Balance (in shares) at Dec. 31, 2020		84,681,364
Foreign currency translation adjustment	466
Net loss for the period	(37,656)
Ending Balance at Sep. 30, 2021	81,942	$ 181,762	12,023	(16,552)	(95,291)
Ending Balance (in shares) at Sep. 30, 2021		85,334,555
Beginning Balance at Mar. 31, 2021	105,433	$ 180,639	10,971	(16,413)	(69,764)
Beginning Balance (in shares) at Mar. 31, 2021		84,681,364
Stock-based compensation	1,285		1,285
Issued on vesting of RSUs and share awards		$ 1,074	(1,074)
Issued on vesting of RSUs and share awards (in shares)		630,211
RSUs and Share Awards withheld to settle employee tax obligations	(594)		(252)		(342)
Foreign currency translation adjustment	716			716
Net loss for the period	(9,738)				(9,738)
Ending Balance at Jun. 30, 2021	97,102	$ 181,713	10,930	(15,697)	(79,844)
Ending Balance (in shares) at Jun. 30, 2021		85,311,575
Stock-based compensation	1,177		1,177
Issued on vesting of RSUs and share awards		$ 49	(49)
Issued on vesting of RSUs and share awards (in shares)		22,980
RSUs and Share Awards withheld to settle employee tax obligations	(63)		(35)		(28)
Foreign currency translation adjustment	(855)			(855)
Net loss for the period	(15,419)				(15,419)
Ending Balance at Sep. 30, 2021	81,942	$ 181,762	12,023	(16,552)	(95,291)
Ending Balance (in shares) at Sep. 30, 2021		85,334,555
Beginning Balance at Dec. 31, 2021	67,766	$ 181,782	13,200	(15,916)	(111,300)
Beginning Balance (in shares) at Dec. 31, 2021		85,345,433
Stock-based compensation	1,339		1,339
Issued on vesting of RSUs and share awards		$ 1,203	(1,203)
Issued on vesting of RSUs and share awards (in shares)		487,544
RSUs and Share Awards withheld to settle employee tax obligations	(198)		(189)		(9)
Foreign currency translation adjustment	433			433
Net loss for the period	(23,042)				(23,042)
Ending Balance at Mar. 31, 2022	46,298	$ 182,985	13,147	(15,483)	(134,351)
Ending Balance (in shares) at Mar. 31, 2022		85,832,977
Beginning Balance at Dec. 31, 2021	67,766	$ 181,782	13,200	(15,916)	(111,300)
Beginning Balance (in shares) at Dec. 31, 2021		85,345,433
Foreign currency translation adjustment	(227)
Net loss for the period	(49,057)
Ending Balance at Sep. 30, 2022	21,013	$ 187,930	9,592	(16,143)	(160,366)
Ending Balance (in shares) at Sep. 30, 2022		88,266,915
Beginning Balance at Mar. 31, 2022	46,298	$ 182,985	13,147	(15,483)	(134,351)
Beginning Balance (in shares) at Mar. 31, 2022		85,832,977
Stock-based compensation	1,286		1,286
Issued on vesting of RSUs and share awards		$ 3,268	(3,268)
Issued on vesting of RSUs and share awards (in shares)		1,155,851
RSUs and Share Awards withheld to settle employee tax obligations	(536)		(536)
Foreign currency translation adjustment	(594)			(594)
Net loss for the period	(19,288)				(19,288)
Ending Balance at Jun. 30, 2022	27,166	$ 186,253	10,629	(16,077)	(153,639)
Ending Balance (in shares) at Jun. 30, 2022		86,988,828
Stock-based compensation	846		846
Issued on vesting of RSUs and share awards		$ 1,587	(1,587)
Issued on vesting of RSUs and share awards (in shares)		874,266
Issued for employee share purchase plan	90	$ 90	0
Issued for employee share purchase plan,Shares		403,821
RSUs and Share Awards withheld to settle employee tax obligations	(296)		(296)
Foreign currency translation adjustment	(66)			(66)
Net loss for the period	(6,727)				(6,727)
Ending Balance at Sep. 30, 2022	$ 21,013	$ 187,930	$ 9,592	$ (16,143)	$ (160,366)
Ending Balance (in shares) at Sep. 30, 2022		88,266,915

XML

Interim Condensed Consolidated Statement of Cash Flows - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net loss for the period	$ (6,727)	$ (15,419)	$ (49,057)	$ (37,656)
Adjustments:
Depreciation and amortization	4,236	3,815	12,202	10,638
Stock-based compensation, net of settlements	888	837	2,596	3,580
Foreign exchange (gain) loss	(1,365)	(735)	(2,147)	(495)
Accretion of convertible debentures	163	89	505	236
Loss (gain) on disposal of equipment	44	15	(121)	15
Deferred income tax expense	0	88	0	137
Changes in operating assets and liabilities:
Trade and accrued receivables	(819)	2,488	(5,814)	(479)
Other receivables	(7,419)	1,616	(4,566)	1,752
Inventory	1,052	(944)	(6,052)	(1,444)
Prepaid and other assets, current and long term	(254)	(1,858)	(1,421)	(1,709)
Accounts payable and accrued liabilities	2,748	(2,330)	5,921	(3,587)
Other liabilities	(70)	(1,581)	(109)	186
Customer deposits and deferred revenue	(3,078)	1,112	641	2,429
Current portion of long-term debt and accrued interest	(44)	601	(186)	1,607
Lease liabilities	(22)	15	99	918
Net cash flows (used in) provided by operating activities	(10,667)	(12,191)	(47,509)	(23,872)
Cash flows from investing activities:
Purchase of property, plant and equipment, net of accounts payable changes	(360)	(1,755)	(2,247)	(10,462)
Capitalized software development expenditures	(385)	(516)	(1,286)	(1,852)
Other asset expenditures	(86)	(60)	(367)	(387)
Proceeds on sales of equipment	141	0	214	0
Recovery of software development expenditures	46	121	91	145
Net cash flows used in investing activities	(644)	(2,210)	(3,595)	(12,556)
Cash flows from financing activities:
Proceeds received on long-term debt	0	0	647	37,952
Repayment of long-term debt	(616)	(457)	(1,852)	(1,217)
Employee tax payments on vesting of RSUs	(296)	(63)	(597)	(652)
Net cash flows (used in) provided by financing activities	(912)	(520)	(1,802)	36,083
Effect of foreign exchange on cash, cash equivalents and restricted cash	(293)	(130)	(73)	581
Net (decrease) increase in cash, cash equivalents and restricted cash	(12,516)	(15,051)	(52,979)	236
Cash, cash equivalents and restricted cash, beginning of period	22,945	61,133	63,408	45,846
Cash, cash equivalents and restricted cash, end of period	10,429	46,082	10,429	46,082
Supplemental disclosure of cash flow information:
Interest paid	(1,108)	(1,231)	(3,439)	(1,360)
Income taxes received	$ 0	$ 369	$ 3,207	$ 321

XML

Interim Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2022	Sep. 30, 2021
Statement of Cash Flows [Abstract]
Cash and cash equivalents	$ 6,818	$ 43,288
Restricted cash	3,611	2,794
Total cash, cash equivalents and restricted cash	$ 10,429	$ 46,082

XML

GENERAL INFORMATION

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

GENERAL INFORMATION

1. GENERAL INFORMATION

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

DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to unrelated companies and Construction Partners of the Company.

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 Nasdaq Global Select Market (“Nasdaq”) under the symbol “DRTT”.

XML

BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

2. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the Financial Statements contain all adjustments necessary, consisting of only normal recurring adjustments, for a fair statement of its financial position as of September 30, 2022, and its results of operations and cash flows for the three and nine months ended September 30, 2022 and 2021. The condensed balance sheet at December 31, 2021, 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, 2021 and 2020 and for each of the three years in the period ended December 31, 2021 included in the Annual Report on Form 10-K of the Company as filed with the SEC and applicable securities commission or similar regulatory authorities in Canada. As described in Note 6, the Company adopted ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance effective January 1, 2022. There was no impact of this standard on our disclosures or accounting for government assistance.

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 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 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 customer’s construction projects can be influenced by a number of factors including the prevailing economic climate and weather.

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LIQUIDITY

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Unusual Risk Or Uncertainty Impact

3. LIQUIDITY

The Company has been negatively impacted by the effect of COVID-19 on the non-residential construction industry, costs incurred associated with the Company’s contested director elections, reorganization costs to reconstitute the executive team and align the Company’s cost structure with current sales activity, and significant inflation on raw materials costs, which have resulted in a significant usage of cash in recent periods which has been funded through Convertible Debentures and Leasing Facilities entered into in the prior year (refer to Note 9). As at September 30, 2022, the Company had $6.8 million of cash on hand and $9.0 million of available borrowings (December 31, 2021 - $60.3 million and $10.4 million of available borrowings).

We have implemented a number of restructuring initiatives to create a reduced cost structure moving forward (refer to Note 5) and have implemented multiple price increases during the year to mitigate the impact of inflation on raw material costs. While these actions, combined with an increasing project pipeline is promising, we continue to see unpredictability in our pace of orders. As a result, the Company has initiated certain strategic actions to improve our balance sheet in the short term. First, historically we have licensed the use of ICE software to certain strategic partners for use in their business, and DIRTT has provided licensing and developer software support for these counterparties. We are in the process of evaluating multiple initiatives related to the further use of ICE software by third parties. Second, we have certain properties that are currently owned that we are evaluating for potential sale and lease back arrangements. We do not intend to vacate these premises as they still serve a valuable aspect of our value proposition, but this type of arrangement would provide us with a one-time cash payment in the near term, in exchange for future rent payments. We expect these strategic initiatives to result in positive cash inflows in 2023. As these transactions are awaiting finalization, we are undertaking a Private Placement (defined in Note 15) of common shares, supported by significant shareholders and directors and officers of the Company to bridge any cash requirements between now and the completion and closing of the noted strategic transactions (refer to Note 15).

We have assessed the Company’s liquidity position as at September 30, 2022, using multiple scenarios taking into account our sales outlook for the next year, our existing cash balances and available credit facilities and the probability of executing the strategic transactions noted above. Based on this analysis we believe the Company has sufficient liquidity to support ongoing operations for the next twelve months. However, should anticipated profitable growth and increased labor headcount and manufacturing capacity not occur or should there be a delayed recovery of the North American construction activities from the pandemic, a sustained economic depression and its adverse impacts on customer demand or significant inflationary pressure on raw materials and transportation cost that we are unable to recover through price increases, the Company will need to identify alternative sources of financing, further reduce its cost structure, delay capital expenditures, evaluate potential asset sales and potentially curtail or cease certain operations. While the Company is confident that it will be able to raise additional capital when needed or under acceptable terms, there can be no absolute assurance it will be able to do so.

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COVID-19

9 Months Ended

Sep. 30, 2022

Accounting Changes and Error Corrections [Abstract]

COVID-19

4. COVID-19

The impact of the COVID-19 pandemic on our future consolidated results of operations remains uncertain. The extent to which COVID-19 impacts our employees, operations, customers, suppliers and financial results depends on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic (and whether there is a resurgence or multiple resurgences in the future, including the impact of new variants); government actions taken in response to the pandemic, including required shutdowns or vaccine or testing mandates; the availability, acceptance, distribution and continued effectiveness of vaccines; the impact on construction activity, including the effect on our customers’ demand for our ceiling and wall systems; supply chain disruptions; rising inflation; labor shortages; sustained remote or hybrid work models; our ability to manufacture and sell our products; and the ability of our customers to pay for our products. While many of our products support life-sustaining activities and essential construction, we and certain of our customers or suppliers may be impacted by national, federal, state and provincial actions, orders and policies regarding the COVID-19 pandemic, including: temporary closures of non-life-sustaining businesses, shelter-in-place orders, and travel, social distancing and quarantine policies, the implementation and enforcement of which vary in each of the jurisdictions in which we operate. We did not record any asset impairments, inventory charges or material bad debt reserves related to COVID-19 during the three and nine months ended September 30, 2022 and 2021, but future events may require such charges which could have a material adverse effect on our financial condition, liquidity or results of operations.

Government subsidies

In the United States, the Employee Retention Credit ("ERC") was established by Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") to provide an incentive for employers to keep their employees on their payroll during COVID-19 closures. The ERC is a refundable payroll tax credit based on qualified wages paid by an eligible employer between March 12, 2020, and October 1, 2021 for companies experiencing a significant decline in gross receipts during a calendar quarter or having operations fully or partially suspended during the quarter due to COVID-19. During the third quarter of 2022, the Company determined it was eligible for the ERC for the first three quarters of 2021 and has filed a claim for $7.3 million in payroll tax credits ($7.1 million net of expenses). As of September 30, 2022 these credits have not been received and are included in other receivables in the balance sheet.

As part of the Canadian federal government’s COVID-19 Economic Response Plan, the Canadian government established the Canadian Emergency Wage Subsidy (“CEWS”). The CEWS provided the Company with a taxable subsidy in respect of a specific portion of wages paid to Canadian employees during qualifying periods extending from March 15, 2020 to October 23, 2021 based on the percentage decline of certain of the Company’s Canadian sourced revenues during each qualifying period. The Company’s eligibility for the CEWS was subject to change for each qualifying period and was reviewed by the Company for each qualifying period, with amounts being received by the Company for various, but not each, qualifying period. Pursuant to amendments enacted as part of the 2021 Canadian federal budget, the Company is required to repay a portion of the CEWS amounts received for any qualifying period commencing after June 5, 2021 where the aggregate compensation for “specified executives” (within the meaning of the CEWS) during the 2021 calendar year exceeds the aggregate compensation for “specified executives” during the 2019 calendar year. Upon finalization of 2021 compensation to specified executives, approximately C$0.5 million ($0.4 million) of subsidies was repaid to the Canadian authorities in the second quarter of 2022. The repayment amount was fully provided for in the third quarter of 2021 in accounts payable and accrued liabilities and in the first quarter of 2022 the Company reversed a $0.6 million incremental provision related to this that is no longer necessary.

On November 19, 2020, the Canadian government also implemented the Canada Emergency Rent Subsidy (“CERS”). The CERS provided a taxable subsidy to cover eligible expenses for qualifying properties, subject to certain maximums, for qualifying periods extending from September 27, 2020 to October 23, 2021, with the amount of the subsidy available to the Company being based on the percentage decline of certain of the Company’s Canadian-sourced revenues in each qualifying period. The Company’s eligibility for the CERS was subject to change for each qualifying period and was reviewed by the Company for each qualifying period.

The last claim period under the CEWS and CERS programs ended on October 23, 2021. The Company is not eligible and did not receive any new Canadian government subsidies in the three or nine months ended September 30, 2022.

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REORGANIZATION

9 Months Ended

Sep. 30, 2022

Restructuring and Related Activities [Abstract]

REORGANIZATION

5. REORGANIZATION

During the nine month period ended September 30, 2022, the Company undertook a number of reorganization initiatives:

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

On February 22, 2022, we commenced the process of closing our Phoenix Facility, shifting related manufacturing to both our Savannah and Calgary aluminum manufacturing facilities. The closure of the Phoenix Facility was substantially completed in the second quarter of 2022. The Company entered into a sublease arrangement during the second quarter of 2022, commencing July 1, 2022, which exceeds the contractual lease commitments under the Right of Use assets.

Workforce Reductions, Board and Management Changes

In February and July of 2022, we announced our intention to eliminate a portion of our salaried workforce including manufacturing and office positions along with other cost reduction initiatives. The Company’s Board of Directors was reconstituted following a contested proxy contest in April 2022 which was deemed a change of control under the Company’s insurance policy resulting in additional insurance expenditures. Further, the Company made changes to several executive officer roles during the nine months ended September 30, 2022, which resulted in incurring certain termination benefits and recruitment costs.

Temporary Suspension of Operations at Rock Hill, South Carolina (the "Rock Hill Facility")

On August 23, 2022, we announced the temporary suspension of operations at our Rock Hill Facility, shifting related manufacturing to our Calgary manufacturing facility.

Reorganization costs incurred:

	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
Termination benefits		2,843			6,870
Insurance costs on change of control		-			3,676
Phoenix Facility closure		-			853
Rock Hill temporary suspension of operations		144			144
Other costs		439			738
Total reorganization costs		3,426			12,281
	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
Opening reorganization costs in accounts payable and accrued liabilities		1,555			-
Reorganization expense		3,426			12,281
Reorganization costs paid		(3,228	)		(10,528	)
Reorganization costs in accounts payable and accrued liabilities at September 30, 2022		1,753			1,753

Of the $1.8 million payable, $1.5 million relates to termination benefits and $0.3 million relates to other reorganization costs.

Discontinuation of Reflect Product Line and Other Charges Incurred

In August 2022, the Company discontinued the Reflect and other product lines, resulting in a one time inventory write-down of $1.0 million, and an acceleration of amortization expense associated with ICE development for Reflect of $1.0 million in cost of sales.

Additionally, the Company accelerated the depreciation of certain items of property, plant and equipment associated with the closure of the Phoenix Facility resulting in an additional $1.1 million of depreciation and amortization incurred in the first quarter of 2022.

These costs were included in cost of sales:

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2022		September 30, 2022
Accelerated depreciation and amortization associated with closure of the Phoenix Facility		-		1,054
Accelerated amortization associated with product line discontinuation		1,019		1,019
Provision for inventory of discontinued product lines		1,035		1,035
Incremental cost of sales		2,054		3,108

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ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2022

Accounting Standards Update and Change in Accounting Principle [Abstract]

ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

6. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

In 2021, the Financial Accounting Standards Board issued Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The ASU provides guidance on required disclosures with respect to government assistance in a company’s notes to the annual financial statements. The amendments in the ASU are effective for periods beginning after December 15, 2021. The Company has adopted this standard effective January 1, 2022 and notes there is no significant impact of this standard on our accounting or disclosures for government assistance.

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

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TRADE AND OTHER RECEIVABLES

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

TRADE AND OTHER RECEIVABLES

7. TRADE AND ACCRUED RECEIVABLES AND OTHER RECEIVABLES

Accounts receivable are recorded at the invoiced amount, do not require collateral and 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 statement of operations.

In order to manage and assess our risk, management maintains credit policies that include regular review of credit limits of individual receivables and systematic monitoring of aging of trade receivables and the financial wellbeing of our customers. In addition, we acquired trade credit insurance effective April 1, 2020. At September 30, 2022, approximately 83% of our trade accounts receivable are insured, relating to accounts receivables from counterparties deemed creditworthy by the insurer and excluding accounts receivable from government entities, which have arisen since April 1, 2020 when the trade credit insurance became effective.

Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the three months ended September 30, 2022 and 2021, no Construction Partner accounted for greater than 10% of revenue. No Construction Partner accounted for greater than 10% of revenue for the nine months ended September 30, 2022 and one Construction Partner accounted for $13.5 million of revenue for the nine months ended September 30, 2021, which is greater than 10% of total revenue. In addition, and where possible, we collect a 50% deposit on sales, excluding government and certain other clients.

The Company’s aged receivables were as follows:

	As at
	September 30,			December 31,
	2022			2021
Current		17,021			13,572
Overdue		2,658			621
		19,679			14,193
Less: expected credit losses		(126	)		(130	)
		19,553			14,063

No adjustment to our expected credit losses of $0.1 million was required for the nine months ended September 30, 2022. 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.

For the period ended September 30, 2022, the Company classified Other Receivables separately from Trade and Accrued Receivables on the balance sheet, as reconciled below:

	As at,
	September 30,			December 31,
	2022			2021
Trade and accrued receivables		19,679			14,193
Allowance for doubtful accounts		(126	)		(130	)
Accounts receivable		19,553			14,063
Sales tax receivable		289			196
Income taxes receivable		2			3,194
Government subsidies		7,141			-
Other receivables		577			87
Other receivables (reclassified on the balance sheet)		8,009			3,477
Total Trade and other receivables, as previously presented		27,562			17,540

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OTHER LIABILITIES

9 Months Ended

Sep. 30, 2022

Other Liabilities Disclosure [Abstract]

OTHER LIABILITIES

8. OTHER LIABILITIES

	As at,
	September 30, 2022		December 31, 2021
Warranty provisions(1)		1,275		1,451
DSU liability		329		785
Sublease deposits		138		-
Other provisions		45		143
Other liabilities		1,787		2,379

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

	September 30, 2022			December 31, 2021
As at January 1		1,451			1,763
Adjustments to timber provision		-			(500	)
Additions to warranty provision		726			1,019
Payments related to warranties		(902	)		(831	)
		1,275			1,451

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LONG-TERM DEBT

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

LONG-TERM DEBT

. LONG-TERM DEBT

	Revolving Credit Facility		Leasing Facilities			Convertible Debentures			Total Debt
Balance on December 31, 2020		-		5,967			-			5,967
Issuances		-		9,805			55,107			64,912
Accretion of issue costs		-		-			352			352
Accrued interest		-		556			1,935			2,491
Interest payments		-		(556	)		(987	)		(1,543	)
Principal repayments		-		(1,808	)		-			(1,808	)
Exchange differences		-		(55	)		326			271
Balance at December 31, 2021		-		13,909			56,733			70,642
Current portion of long-term debt and accrued interest		-		2,386			937			3,323
Long-term debt		-		11,523			55,796			67,319
Balance on December 31, 2021		-		13,909			56,733			70,642
Issuances		-		647			-			647
Accretion of issue costs		-		-			505			505
Accrued interest		-		562			2,691			3,253
Interest payments		-		(562	)		(2,877	)		(3,439	)
Principal repayments		-		(1,852	)		-			(1,852	)
Exchange differences		-		(267	)		(4,271	)		(4,538	)
Balance at September 30, 2022		-		12,437			52,781			65,218
Current portion of long-term debt and accrued interest		-		2,520			701			3,221
Long-term debt		-		9,917			52,080			61,997

Revolving Credit Facility

On February 12, 2021, the Company entered into a loan agreement governing a C$25.0 million senior secured revolving credit facility with the Royal Bank of Canada (“RBC”), as lender (the “RBC Facility”). Under the RBC Facility, the Company is able to borrow up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of (i) 75% of the book value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims (the “Borrowing Base”). At September 30, 2022, available borrowings are C$12.4 million ($9.0 million), of which no amounts have been drawn. Interest is calculated at the Canadian or U.S. prime rate plus 30 basis points or at the Canadian Dollar Offered Rate or LIBOR plus 155 basis points. Under the RBC Facility, if the “Aggregate Excess Availability”, defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash, is less than C$5.0 million, the Company is subject to a fixed charge coverage ratio (“FCCR”) covenant of 1.10:1 on a trailing twelve-month basis until such time the borrowing availability net of unrestricted cash exceeds C$5.0 million for at least thirty consecutive calendar days. Additionally, if the FCCR has been below 1.10:1 for the three immediately preceding months, the Company is required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Leasing Facilities (defined below). The Company did not meet the three-month FCCR requirement during the third quarter of 2022 which resulted in requiring the restriction of $3.6 million of cash. Should an event of default occur or the Aggregate Excess Availability be less than C$6.25 million for five consecutive business days, the Company would enter a cash dominion period whereby the Company’s bank accounts would be blocked by RBC and daily balances will set-off any borrowings and any remaining amounts made available to the Company.

Leasing Facilities

The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) and a $14.0 million equipment leasing facility in the United States (the “U.S. Leasing Facility” and, together with the Canada Leasing Facility, the “Leasing Facilities”) with RBC, and one of its affiliates, which are available for equipment expenditures and certain equipment expenditures already incurred. The Leasing Facilities, respectively, have seven and five-year terms and bear interest at 4.25% and 5.59%. The U.S. Leasing Facility is amortized over a six-year term and extendible at the Company’s option for an additional year.

During the three and nine months ended September 30, 2022, the Company received $nil (twelve months ended December 31, 2021: $9.8 million) of cash consideration under the U.S. Leasing Facility. The associated financial liabilities are shown on the consolidated balance sheet in current other liabilities and long-term debt. In April 2022 the Company received C$0.9 million ($0.7 million) under the Canada Leasing Facility.

Convertible Debentures

On January 25, 2021, the Company completed a C$35.0 million ($27.5 million) bought-deal financing of convertible unsecured subordinated debentures with a syndicate of underwriters (the “January Debentures”). On January 29, 2021, the Company issued a further C$5.25 million ($4.1 million) of the January Debentures under the terms of an overallotment option granted to the underwriters. The January Debentures will mature and be repayable on January 31, 2026 (the “January Debentures Maturity Date”) and will accrue interest at the rate of 6.00% per annum payable semi-annually in arrears on the last day of January and July of each year commencing on July 31, 2021 until the January Debentures Maturity Date. Interest and principal are payable in cash or shares at the option of the Company. The January Debentures will be convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the January Debentures Maturity Date and the date specified by the Company for redemption of the January Debentures at a conversion price of C$4.65 per common share, being a ratio of approximately 215.0538 common shares per C$1,000 principal amount of the January Debentures. Costs of the transaction were approximately C$2.7 million, including the underwriters’ commission.

On December 1, 2021, the Company completed a C$35.0 million ($27.4 million) bought-deal financing of convertible unsecured subordinated debentures with a syndicate of underwriters (the “December Debentures” and, together with the January Debentures, the “Debentures”). These December Debentures will mature and be repayable on December 31, 2026 (the “December Debentures Maturity Date”) and will accrue interest at the rate of 6.25% per annum payable semi-annually in arrears on the last day of June and December of each year commencing on 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 at a conversion price of C$4.20 per common share, being a ratio of approximately 238.0952 common shares per C$1,000 principal amount of the December Debentures. Costs of the transaction were approximately C$2.3 million, including the underwriters’ commission.

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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

. STOCK-BASED COMPENSATION

In May 2020, shareholders approved the DIRTT Environmental Solutions Ltd. Long-Term Incentive Plan (the “2020 LTIP”) at the annual and special meeting of shareholders. The 2020 LTIP gives the Company the ability to award options, share appreciation rights, restricted share units, restricted shares, dividend equivalent rights granted in connection with restricted share units, vested Share Awards (as defined below), 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 2020 LTIP, the sum of (i) 5,850,000 common shares plus (ii) the number of common shares subject to stock options previously granted under the Company’s Amended and Restated Incentive Stock Option Plan (the “Stock Option Plan”) that, following May 22, 2020, expire or are cancelled or terminated without having been exercised in full have been reserved for issuance under the 2020 LTIP. Upon vesting of certain LTIP awards, the Company may withhold and sell shares as a means of meeting DIRTT’s tax withholding requirements in respect of the withholding tax remittances required in respect of award holders. To the extent the fair value of the withheld shares upon vesting exceeds the grant date fair value of the instrument, the excess amount is credited to retained earnings or deficit.

Under the terms of the 2020 LTIP, the change of 100% of the Board of Directors combined with the prior Board declining to endorse the incoming board constituted a change of a control as of April 26, 2022. As a result, all outstanding and unvested LTIP awards granted under the 2020 LTIP plan for any holder terminated without cause within one year of the change of control vest immediately upon termination.

The Company also maintains the DIRTT Environmental Solutions Ltd. Deferred Share Unit Plan for Non-Employee Directors pursuant to which deferred share units (“DSUs”) are granted to the Company’s non-employee directors. DSUs are settled solely in cash.

Prior to the approval of the 2020 LTIP, the Company granted awards of options under the Stock Option Plan and awards of performance share units (“PSUs”) under the DIRTT Environmental Solutions Ltd. Performance Share Unit Plan (the “PSU Plan”). Following the approval of the 2020 LTIP, no further awards were made under either the Stock Option Plan or the PSU Plan, but both remain in place to govern the terms of any awards that were granted pursuant to such plans and remain outstanding.

Stock-based compensation expense

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2022		2021			2022		2021
Equity-settled awards		846		1,177			3,471		3,258
Cash-settled awards		72		(340	)		75		534
		918		837			3,546		3,792

The following summarizes RSUs (as defined below), Share Awards, PSUs, and DSUs activity during the periods:

	RSU Time-			RSU Performance-			Share
	Based			Based			Awards			PSU			DSU
	Number of			Number of			Number of			Number of			Number of
	units			units			units			units			units
Outstanding at December 31, 2020		2,414,066			200,000			-			197,471			363,664
Granted		1,919,102			878,601			-			-			88,880
Vested		(650,898	)		(2,294	)		-			(34,635	)		(55,802	)
Withheld to settle employee tax obligations		(174,103	)		(1,960	)		-			-			-
Forfeited		(237,910	)		(42,314	)		-			(5,636	)		-
Outstanding at September 30, 2021		3,270,257			1,032,033			-			157,200			396,742
Outstanding at December 31, 2021		3,216,536			1,021,739			-			157,200			361,577
Granted		2,303,287			863,279			162,682			-			890,832
Vested or settled		(2,019,550	)		(566,352	)		(94,528	)		-			(501,916	)
Withheld to settle employee tax obligations		(526,259	)		(242,460	)		(68,154	)		-			-
Forfeited		(734,855	)		(502,628	)		-			(157,200	)		-
Outstanding at September 30, 2022		2,239,159			573,578			-			-			750,493

Restricted share units (time-based vesting)

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. At the end of a three-year term, the RSUs will be settled by way of the provision of cash or shares to employees (or a combination thereof), at the discretion of the Company. The weighted average fair value of the RSUs granted was C$2.49 (2021 – C$3.14) which was determined using the closing price of the Company’s common shares on their respective grant dates.

Restricted share units (performance-based vesting)

During 2022 and 2021, restricted share units were granted to executives with service and performance-based conditions for vesting (the “PRSUs”). If the Company’s share price increases to certain values for 20 consecutive trading days, as outlined below, a percentage of the PRSUs will vest at the end of the three-year service period. PRSUs awarded in 2020 were forfeited in January 2022 upon the departure of an executive from the Company.

The grant date fair value of the 2022 and 2021 PRSUs were valued using the Monte Carlo valuation method and determined to have a weighted average grant date fair value of C$1.87 and C$3.27, respectively.

Based on share price performance since the date of grant, none of the 2022 PRSUs and 66.7% of the 2021 PRSUs will vest upon completion of the three-year service period.

	% of PRSUs Vesting
			33.3	%		66.7	%		100.0	%		150.0	%
2022 and 2021 PRSUs		$	3.00		$	4.00		$	5.00		$	7.00

Share awards

During the first quarter of 2022, certain executives were issued share awards in lieu of cash paid variable incentive compensation (“Share Awards”). These Share Awards vested upon grant. The fair value of the Share Awards granted was C$2.40 ($1.88), which was determined using the closing price of the Company’s common shares on the grant date.

During the third quarter of 2022, certain executives were provided a variable compensation plan for the achievement of certain financial targets payable partially in cash and partially in share awards. Based on the Company's performance to date relative to the financial targets, no share based awards have been recorded under this compensation plan for the quarter ended September 30, 2022. Under the plan, 1.2 million shares could have been awarded if the maximum targets were achieved based on the Company's share price at September 30, 2022.

Deferred share units

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 year. DSUs outstanding at September 30, 2022 had a fair value of $0.3 million which is included in other liabilities on the balance sheet (December 31, 2021 – $0.8 million).

Options

The following summarizes options granted, exercised, forfeited and expired during the periods:

	Number of			Weighted average
	options			exercise price C$
Outstanding at December 31, 2020		4,774,328			6.52
Forfeited		(39,094	)		7.07
Outstanding at September 30, 2021		4,735,234			6.51
Outstanding at December 31, 2021		4,064,489			6.64
Forfeited		(2,530,120	)		6.40
Outstanding at September 30, 2022		1,534,369			7.03
Exercisable at September 30, 2022		1,534,369			7.03

Range of exercise prices outstanding at September 30, 2022:

	Options outstanding						Options exercisable
			Weighted		Weighted				Weighted		Weighted
			average		average				average		average
	Number		remaining		exercise		Number		remaining		exercise
Range of exercise prices	outstanding		life		price C$		exercisable		life		price C$
C$4.01 – C$5.00		15,025		2.14		4.12		15,025		2.14		4.12
C$6.01 – C$7.00		784,367		1.31		6.33		784,367		1.31		6.33
C$7.01 – C$8.00		734,977		1.63		7.84		734,977		1.63		7.84
Total		1,534,369						1,534,369

Dilutive Instruments

For the three and nine months ended September 30, 2022, 1.5 million options (2021 – 4.7 million), 2.8 million RSUs and PRSUs (2021 – 4.4 million) and 127.5 million shares, which would be issued if the principal amount of the Debentures were settled in our common shares at the quarter end share price (2021 – 10.3 million), were excluded from the diluted weighted average number of common shares calculation as their effect would have been anti-dilutive to the net loss per share.

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REVENUE

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

REVENUE

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 September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Product		39,092		29,569		110,383		91,867
Transportation		5,022		3,294		13,878		9,277
License fees from Construction Partners		193		191		588		539
Total product revenue		44,307		33,054		124,849		101,683
Installation and other services		2,440		1,044		4,885		2,982
		46,747		34,098		129,734		104,665

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 is based upon agreed contractual terms with the customer and is not subject to variability.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
At a point in time		44,114		32,863		124,261		101,144
Over time		2,633		1,235		5,473		3,521
		46,747		34,098		129,734		104,665

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

Contract Liabilities

	As at
	September 30, 2022		December 31, 2021		December 31, 2020
Customer deposits		2,598		1,959		1,292
Deferred revenue		429		461		527
Contract liabilities		3,027		2,420		1,819

Contract liabilities primarily relate to deposits received from customers and deferred revenue from license subscriptions. The balance of contract liabilities was higher as at September 30, 2022 compared to December 31, 2021 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2021 and 2020 totaling $2.4 million and $1.7 million, respectively, were recognized as revenue during the nine months ended September 30, 2022 and 2021, respectively.

Sales by Industry

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Commercial		31,796		20,805		85,458		55,981
Healthcare		3,638		5,017		15,693		25,680
Government		3,358		3,149		11,680		11,579
Education		5,322		3,892		11,430		7,904
License fees from Construction Partners		193		191		588		539
Total product and transportation revenue		44,307		33,054		124,849		101,683
Installation and other services		2,440		1,044		4,885		2,982
		46,747		34,098		129,734		104,665

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SEGMENT REPORTING

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

SEGMENT REPORTING

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, with periodic international projects from North American Construction Partners. 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 September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Canada		7,191		4,405		19,859		11,860
U.S.		39,556		29,693		109,875		92,805
		46,747		34,098		129,734		104,665

Non-current assets (1)

	As at
	September 30, 2022		December 31, 2021
Canada		29,931		34,912
U.S.		55,310		60,723
		85,241		95,635

(1)Amounts include property, plant and equipment, capitalized software, operating lease right-of-use assets, and other assets.

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INCOME TAXES

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

13. INCOME TAXES

As at September 30, 2022, the Company had a valuation allowance of $28.1 million against deferred tax assets as the Company has experienced cumulative losses in recent years (December 31, 2021 – $17.3 million).

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COMMITMENTS

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS

14. COMMITMENTS

As at September 30, 2022, the Company had outstanding purchase obligations of approximately $2.1 million related to inventory and property, plant and equipment purchases (December 31, 2021 – $3.7 million). As at September 30, 2022, the Company had undiscounted operating lease liabilities of $53.1 million (December 31, 2021 – $49.7 million).

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2022

Subsequent Events [Abstract]

Subsequent Events [Text Block]

15. SUBSEQUENT EVENTS

On November 14, 2022, the Company entered into irrevocable subscription agreements with its two largest shareholders, 22 NW Fund, LP (“22NW”) and 726 BC LLC and 726 BF LLC (together “726”) and all the directors and officers of the Company to issue up to 8.8 million shares for gross proceeds of approximately $3.0 million, based on the higher of the Nasdaq closing price on November 14, 2022, and the volume weighted average trading price of the common shares on the Toronto Stock Exchange for the 5 days following the announcement (the “Private Placement”). In addition, in connection with the Private Placement, the two shareholders, or their principals, have irrevocably committed to backstopping any rights offering occurring by the Company in the next twelve months in the aggregate amount of $2.0 million and the shortfall, if any, between the maximum anticipated gross proceeds under the Private Placement, being $3.0 million, and the actual gross proceeds received by the Company.

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BASIS OF PRESENTATION (Policies)

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of consolidation

Principles of consolidation

The Financial Statements include the accounts of DIRTT 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

Basis of measurement

These Financial Statements have been prepared on the historical cost convention except for certain financial instruments 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

Seasonality

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

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REORGANIZATION (Tables)

9 Months Ended

Sep. 30, 2022

Restructuring and Related Activities [Abstract]

Restructuring Costs

On August 23, 2022, we announced the temporary suspension of operations at our Rock Hill Facility, shifting related manufacturing to our Calgary manufacturing facility.

Reorganization costs incurred:

	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
Termination benefits		2,843			6,870
Insurance costs on change of control		-			3,676
Phoenix Facility closure		-			853
Rock Hill temporary suspension of operations		144			144
Other costs		439			738
Total reorganization costs		3,426			12,281
	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
Opening reorganization costs in accounts payable and accrued liabilities		1,555			-
Reorganization expense		3,426			12,281
Reorganization costs paid		(3,228	)		(10,528	)
Reorganization costs in accounts payable and accrued liabilities at September 30, 2022		1,753			1,753

Phoenix Facility Restructuring Costs

the Company accelerated the depreciation of certain items of property, plant and equipment associated with the closure of the Phoenix Facility resulting in an additional $1.1 million of depreciation and amortization incurred in the first quarter of 2022.

These costs were included in cost of sales:

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2022		September 30, 2022
Accelerated depreciation and amortization associated with closure of the Phoenix Facility		-		1,054
Accelerated amortization associated with product line discontinuation		1,019		1,019
Provision for inventory of discontinued product lines		1,035		1,035
Incremental cost of sales		2,054		3,108

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TRADE AND OTHER RECEIVABLES (Tables)

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

Schedule of Accounts Receivable, Allowance for Credit Loss

The Company’s aged receivables were as follows:

	As at
	September 30,			December 31,
	2022			2021
Current		17,021			13,572
Overdue		2,658			621
		19,679			14,193
Less: expected credit losses		(126	)		(130	)
		19,553			14,063

Schedule of accounts, notes, loans and financing receivable

For the period ended September 30, 2022, the Company classified Other Receivables separately from Trade and Accrued Receivables on the balance sheet, as reconciled below:

	As at,
	September 30,			December 31,
	2022			2021
Trade and accrued receivables		19,679			14,193
Allowance for doubtful accounts		(126	)		(130	)
Accounts receivable		19,553			14,063
Sales tax receivable		289			196
Income taxes receivable		2			3,194
Government subsidies		7,141			-
Other receivables		577			87
Other receivables (reclassified on the balance sheet)		8,009			3,477
Total Trade and other receivables, as previously presented		27,562			17,540

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OTHER LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2022

Other Liabilities Disclosure [Abstract]

Summary of Other Liabilities

	As at,
	September 30, 2022		December 31, 2021
Warranty provisions(1)		1,275		1,451
DSU liability		329		785
Sublease deposits		138		-
Other provisions		45		143
Other liabilities		1,787		2,379

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

	September 30, 2022			December 31, 2021
As at January 1		1,451			1,763
Adjustments to timber provision		-			(500	)
Additions to warranty provision		726			1,019
Payments related to warranties		(902	)		(831	)
		1,275			1,451

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LONG-TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Summary of Long Term Debt Reconciliation

	Revolving Credit Facility		Leasing Facilities			Convertible Debentures			Total Debt
Balance on December 31, 2020		-		5,967			-			5,967
Issuances		-		9,805			55,107			64,912
Accretion of issue costs		-		-			352			352
Accrued interest		-		556			1,935			2,491
Interest payments		-		(556	)		(987	)		(1,543	)
Principal repayments		-		(1,808	)		-			(1,808	)
Exchange differences		-		(55	)		326			271
Balance at December 31, 2021		-		13,909			56,733			70,642
Current portion of long-term debt and accrued interest		-		2,386			937			3,323
Long-term debt		-		11,523			55,796			67,319
Balance on December 31, 2021		-		13,909			56,733			70,642
Issuances		-		647			-			647
Accretion of issue costs		-		-			505			505
Accrued interest		-		562			2,691			3,253
Interest payments		-		(562	)		(2,877	)		(3,439	)
Principal repayments		-		(1,852	)		-			(1,852	)
Exchange differences		-		(267	)		(4,271	)		(4,538	)
Balance at September 30, 2022		-		12,437			52,781			65,218
Current portion of long-term debt and accrued interest		-		2,520			701			3,221
Long-term debt		-		9,917			52,080			61,997

Revolving Credit

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Summary of stock-based compensation expense

Stock-based compensation expense

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2022		2021			2022		2021
Equity-settled awards		846		1,177			3,471		3,258
Cash-settled awards		72		(340	)		75		534
		918		837			3,546		3,792

Summary of RSUs, Share Awards, PSUs, DSUs Activity

The following summarizes RSUs (as defined below), Share Awards, PSUs, and DSUs activity during the periods:

	RSU Time-			RSU Performance-			Share
	Based			Based			Awards			PSU			DSU
	Number of			Number of			Number of			Number of			Number of
	units			units			units			units			units
Outstanding at December 31, 2020		2,414,066			200,000			-			197,471			363,664
Granted		1,919,102			878,601			-			-			88,880
Vested		(650,898	)		(2,294	)		-			(34,635	)		(55,802	)
Withheld to settle employee tax obligations		(174,103	)		(1,960	)		-			-			-
Forfeited		(237,910	)		(42,314	)		-			(5,636	)		-
Outstanding at September 30, 2021		3,270,257			1,032,033			-			157,200			396,742
Outstanding at December 31, 2021		3,216,536			1,021,739			-			157,200			361,577
Granted		2,303,287			863,279			162,682			-			890,832
Vested or settled		(2,019,550	)		(566,352	)		(94,528	)		-			(501,916	)
Withheld to settle employee tax obligations		(526,259	)		(242,460	)		(68,154	)		-			-
Forfeited		(734,855	)		(502,628	)		-			(157,200	)		-
Outstanding at September 30, 2022		2,239,159			573,578			-			-			750,493

Schedule of Percentage of PRSUs Vest upon Increases of Share Price

	% of PRSUs Vesting
			33.3	%		66.7	%		100.0	%		150.0	%
2022 and 2021 PRSUs		$	3.00		$	4.00		$	5.00		$	7.00

Summary of options granted, exercised, surrendered, forfeited and expired

The following summarizes options granted, exercised, forfeited and expired during the periods:

	Number of			Weighted average
	options			exercise price C$
Outstanding at December 31, 2020		4,774,328			6.52
Forfeited		(39,094	)		7.07
Outstanding at September 30, 2021		4,735,234			6.51
Outstanding at December 31, 2021		4,064,489			6.64
Forfeited		(2,530,120	)		6.40
Outstanding at September 30, 2022		1,534,369			7.03
Exercisable at September 30, 2022		1,534,369			7.03

Summary of options outstanding by range of exercise prices

Range of exercise prices outstanding at September 30, 2022:

	Options outstanding						Options exercisable
			Weighted		Weighted				Weighted		Weighted
			average		average				average		average
	Number		remaining		exercise		Number		remaining		exercise
Range of exercise prices	outstanding		life		price C$		exercisable		life		price C$
C$4.01 – C$5.00		15,025		2.14		4.12		15,025		2.14		4.12
C$6.01 – C$7.00		784,367		1.31		6.33		784,367		1.31		6.33
C$7.01 – C$8.00		734,977		1.63		7.84		734,977		1.63		7.84
Total		1,534,369						1,534,369

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REVENUE (Tables)

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Disaggregation of revenue by major products and services lines and timing of revenue recognition

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 September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Product		39,092		29,569		110,383		91,867
Transportation		5,022		3,294		13,878		9,277
License fees from Construction Partners		193		191		588		539
Total product revenue		44,307		33,054		124,849		101,683
Installation and other services		2,440		1,044		4,885		2,982
		46,747		34,098		129,734		104,665

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
At a point in time		44,114		32,863		124,261		101,144
Over time		2,633		1,235		5,473		3,521
		46,747		34,098		129,734		104,665

Summary of contract liabilities

Contract Liabilities

	As at
	September 30, 2022		December 31, 2021		December 31, 2020
Customer deposits		2,598		1,959		1,292
Deferred revenue		429		461		527
Contract liabilities		3,027		2,420		1,819

Schedule of sales by industry

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Commercial		31,796		20,805		85,458		55,981
Healthcare		3,638		5,017		15,693		25,680
Government		3,358		3,149		11,680		11,579
Education		5,322		3,892		11,430		7,904
License fees from Construction Partners		193		191		588		539
Total product and transportation revenue		44,307		33,054		124,849		101,683
Installation and other services		2,440		1,044		4,885		2,982
		46,747		34,098		129,734		104,665

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SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Schedule of revenue from external customers

Revenue from external customers

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Canada		7,191		4,405		19,859		11,860
U.S.		39,556		29,693		109,875		92,805
		46,747		34,098		129,734		104,665

Schedule of non-current assets

Non-current assets (1)

	As at
	September 30, 2022		December 31, 2021
Canada		29,931		34,912
U.S.		55,310		60,723
		85,241		95,635

(1)Amounts include property, plant and equipment, capitalized software, operating lease right-of-use assets, and other assets.

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BASIS OF PRESENTATION - (Additional Information) (Detail) - ASU 2021-10	Sep. 30, 2022
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Change in Accounting Principle, Accounting Standards Update, Adopted [true false]	true
Accounting standards adopted date	Jan. 01, 2022
Change in Accounting Principle, Accounting Standards Update, Immaterial Effect [true false]	true

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LIQUIDITY (Additional Information) (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Cash	$ 6.8	$ 60.3
Borrowings	$ 9.0	$ 10.4

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COVID-19 - (Additional Information) (Detail) $ in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($)	Sep. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2022 CAD ($)
Unusual or Infrequent Items, or Both [Abstract]
Subsidies expected to be repaid upon finalization of compensation to specified executives			$ 0.4	$ 0.5
Reversal of incremental provision	$ 0.6
Government subsidies receivable		$ 7.3
Subsidy receivable net of expenses		$ 7.1

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REORGANIZATION - Reorganization costs (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	$ 3,426	$ 12,281
Reorganization costs payable, Beginning Balance	1,555
Reorganization costs paid	(3,228)	(10,528)
Reorganization costs payable, Ending Balance	1,753	1,753
Termination Benefits
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	2,843	6,870
Insurance costs on change of control
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	0	3,676
Phoenix Facility closure
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	0	853
Rock Hill temporary suspension of operations
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	144	144
Other Costs
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	$ 439	$ 738

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REORGANIZATION - Closure of the Phoenix Facility (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2022
Incremental Cost of Sales [Abstract]
Accelerated depreciation and amortization associated with closure of the Phoenix Facility	$ 0	$ 1,100	$ 1,054
Accelerated amortization associated with product line discontinuation	1,019		1,019
Provision for inventory of discontinued product lines	1,035		1,035
Incremental cost of sales	$ 2,054		$ 3,108

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REORGANIZATION - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Aug. 31, 2022	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2022	Jun. 30, 2022
Restructuring Cost And Reserve [Line Items]
Acceleration of amortization expense	$ 1,000
Inventory write-down	$ 1,000
Reorganization costs payable		$ 1,753		$ 1,753	$ 1,555
Accelerated depreciation		0	$ 1,100	1,054
Termination Benefits
Restructuring Cost And Reserve [Line Items]
Termination benefits		$ 1,500		1,500
Other Costs
Restructuring Cost And Reserve [Line Items]
Further anticipated reorganization costs				$ 300

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ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS - (Additional Information) (Detail) - ASU 2021-10	Sep. 30, 2022
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Change in Accounting Principle, Accounting Standards Update, Adopted [true false]	true
Accounting standards adopted date	Jan. 01, 2022
Change in Accounting Principle, Accounting Standards Update, Immaterial Effect [true false]	true

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TRADE AND OTHER RECEIVABLES (Additional Information) (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2022 USD ($) Constructionpartner	Sep. 30, 2021 USD ($) Constructionpartner	Sep. 30, 2022 USD ($) Constructionpartner	Sep. 30, 2021 USD ($) Constructionpartner
Percent of trade accounts receivable insured	83.00%		83.00%
Revenues	$ 46,747,000	$ 34,098,000	$ 129,734,000	$ 104,665,000
Collection On Sales Deposit Percentage			50.00%
Provision for credit losses	$ 100,000		$ 100,000
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Significant Customer [Member]
Percentage of Total Account Receivable	10.00%	10.00%		10.00%
Sales Revenue [Member] | Customer Concentration Risk [Member] | Significant Customer [Member]
Number of construction partner | Constructionpartner	0	0	0	1
Percentage of Total Account Receivable			10.00%
Revenues				$ 13,500

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TRADE AND OTHER RECEIVABLES - Schedule of accounts, notes, loans and financing receivable (Detail) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Receivables [Abstract]
Current	$ 17,021	$ 13,572
Overdue	2,658	621
Accounts Receivables	19,679	14,193
Less: expected credit losses	(126)	(130)
Accounts receivable	$ 19,553	$ 14,063

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TRADE AND OTHER RECEIVABLES- Schedule of Accounts Receivable, Allowance for Credit Loss (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Receivables [Abstract]
Trade and accrued receivables	$ 19,679	$ 14,193
Allowance for doubtful accounts	126	130
Accounts receivable	19,553	14,063
Sales tax receivable	289	196
Income Taxes Receivable	2	3,194
Government Subsidies	7,141	0
Other receivables	577	87
Other Receivables, Net, Current, Total	8,009	3,477
Total Trade and other receivables, as previously presented	$ 27,562	$ 17,540

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OTHER LIABILITIES - Summary of Other Liabilities (Detail) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021	Dec. 31, 2020
Other Liabilities, Current [Abstract]
Warranty provisions(1)	$ 1,275	$ 1,451	$ 1,763
DSU liability	329	785
Sublease deposits	138
Other provisions	45	143
Other liabilities	$ 1,787	$ 2,379

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OTHER LIABILITIES - Reconciliation of Warranty and Other Provisions Balance (Detail) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Other Liabilities, Current [Abstract]
Balance	$ 1,451	$ 1,763
Adjustments to timber provision		(500)
Additions to warranty provision	726	1,019
Payments related to warranties	(902)	(831)
Balance	$ 1,275	$ 1,451

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LONG-TERM DEBT - Summary of Long Term Debt Reconciliation (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Debt Instrument [Line Items]
Long term debt			$ 70,642	$ 5,967	$ 5,967
Issuances	$ 0	$ 0	647	37,952	64,912
Accretion Expense			505		352
Accrued interest	3,253		3,253		2,491
Interest payments			(3,439)		(1,543)
Principal repayments	(616)	$ (457)	(1,852)	(1,217)	(1,808)
Exchange differences			(4,538)		271
Long term debt	65,218		65,218		70,642
Current portion of long-term debt and accrued interest	3,221		3,221		3,323
Long-term debt	61,997		61,997		67,319
Leasing Facilities [Member]
Debt Instrument [Line Items]
Long term debt			13,909	5,967	5,967
Issuances			647		9,805
Accretion Expense			0		0
Accrued interest	562		562		556
Interest payments			(562)		(556)
Principal repayments			(1,852)		(1,808)
Exchange differences			(267)		(55)
Long term debt	12,437		12,437		13,909
Current portion of long-term debt and accrued interest	2,520		2,520		2,386
Long-term debt	9,917		9,917		11,523
Convertible Debentures [Member]
Debt Instrument [Line Items]
Long term debt			56,733	$ 0	0
Issuances			0		55,107
Accretion Expense			505		352
Accrued interest	2,691		2,691		1,935
Interest payments			(2,877)		(987)
Principal repayments			0		0
Exchange differences			(4,271)		326
Long term debt	52,781		52,781		56,733
Current portion of long-term debt and accrued interest	701		701		937
Long-term debt	$ 52,080		$ 52,080		$ 55,796

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LONG-TERM DEBT - (Additional Information) (Detail)							1 Months Ended		3 Months Ended	9 Months Ended	12 Months Ended
	Dec. 01, 2021 USD ($) shares	Dec. 01, 2021 CAD ($) $ / shares shares	Jan. 29, 2021 USD ($)	Jan. 29, 2021 CAD ($)	Jan. 25, 2021 USD ($) shares	Jan. 25, 2021 CAD ($) $ / shares shares	Apr. 30, 2022 USD ($)	Apr. 30, 2022 CAD ($)	Sep. 30, 2022 USD ($) Days	Sep. 30, 2022 USD ($) Days	Dec. 31, 2021 USD ($)	Sep. 30, 2022 CAD ($) Days	Feb. 12, 2021 CAD ($)
Debt Instrument [Line Items]
Cash balance									$ 6,800,000	$ 6,800,000	$ 60,300,000
Amortized term										6 years
Convertible Debentures [Member]
Debt Instrument [Line Items]
Issuance of convertible debentures	$ 27,400,000	$ 35,000,000.0	$ 4,100,000	$ 5,250,000	$ 27,500,000	$ 35,000,000.0
Convertible debentures, maturity date	Dec. 31, 2026	Dec. 31, 2026			Jan. 31, 2026	Jan. 31, 2026
Convertible debentures, interest rate	6.25%	6.25%			6.00%	6.00%
Convertible debentures, frequency of interest payment	semi-annually	semi-annually			semi-annually	semi-annually
Convertible debentures, conversion price | $ / shares		$ 4.20				$ 4.65
Convertible debentures, common shares issued | shares	238.0952	238.0952			215.0538	215.0538
Convertible debentures, principal amount		$ 1,000				$ 1,000
Convertible debentures, transaction cost		$ 2,300,000				$ 2,700,000
Canadian Dollar Advances [Member]
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity												$ 5,000,000.0
Revolving credit facility, term										7 years
Cash consideration received under leasing facility							$ 700,000	$ 900,000
US Dollar Advances [Member]
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity									14,000,000.0	$ 14,000,000.0
Revolving credit facility, term										5 years
Cash consideration received under leasing facility									0	$ 0	$ 9,800,000
Maximum [Member]
Debt Instrument [Line Items]
Revolving credit facility, basis spread on variable rate										5.59%
Minimum [Member]
Debt Instrument [Line Items]
Revolving credit facility, basis spread on variable rate										4.25%
Revolving Credit Facility [Member] | New RBC Facility [Member]
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity													$ 25,000,000.0
Revolving credit facility, maximum borrowing capacity, description										Under the RBC Facility, the Company is able to borrow up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of (i) 75% of the book value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims (the “Borrowing Base”).
Line of credit available borrowing capacity									9,000,000.0	$ 9,000,000.0		12,400,000
Debt instrument covenant terms										the Company is subject to a fixed charge coverage ratio (“FCCR”) covenant of 1.10:1 on a trailing twelve-month basis until such time the borrowing availability net of unrestricted cash exceeds C$5.0 million for at least thirty consecutive calendar days. Additionally, if the FCCR has been below 1.10:1 for the three immediately preceding months, the Company is required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Leasing Facilities
Revolving credit facility, aggregate excess availability												$ 5,000,000.0
Cash balance									$ 3,600,000	$ 3,600,000
Number of consecutive business days | Days									5	5		5
Revolving Credit Facility [Member] | New RBC Facility [Member] | Maximum [Member]
Debt Instrument [Line Items]
Revolving credit facility, aggregate excess availability												$ 6,250,000
Revolving Credit Facility [Member] | New RBC Facility [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Revolving credit facility, basis spread on variable rate										30.00%
Revolving Credit Facility [Member] | New RBC Facility [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Revolving credit facility, basis spread on variable rate										155.00%

XML

STOCK-BASED COMPENSATION - (Additional Information) (Detail) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended			12 Months Ended
	Sep. 30, 2022 $ / shares shares	Sep. 30, 2021 $ / shares shares	Sep. 30, 2022 $ / shares shares	Sep. 30, 2022 $ / shares $ / shares shares	Sep. 30, 2021 $ / shares shares	Dec. 31, 2021 USD ($) $ / shares	Sep. 30, 2022 USD ($)	May 31, 2020 shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for future issuance								5,850,000
Securities excluded from calculation of net income (loss) per share	1,500,000	4,700,000	1,500,000	1,500,000	4,700,000
Restricted Stock Units Time Based
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award requisite service period			3 years	3 years
Weighted average fair value of the RSUs granted | $ / shares	$ 2.49	$ 3.14	$ 2.49	$ 2.49	$ 3.14
Share Awards [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation other than option grant date fair value | (per share)			$ 2.40	$ 1.88
Share-Based Compensation Arrangement by Share-Based Payment Award, Maximum Number of Shares			1.2	1.2
Deferred Share Units ("DSUs") [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Deferred Compensation Liability, Current and Noncurrent | $						$ 0.8	$ 0.3
Shares Issuable on Principal Amount Settled in Common Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Securities excluded from calculation of net income (loss) per share	127,500,000	10,300,000	127,500,000	127,500,000	10,300,000
Performance Based Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award requisite service period			3 years	3 years
Performance Based Restricted Stock Units [Member] | 2022 PRSUs [ Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
% of PRSUs vesting			0.00%	0.00%
Performance Based Restricted Stock Units [Member] | 2021 PRSUs [ Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
% of PRSUs vesting					66.70%
Performance Based Restricted Stock Units [Member] | Monte Carlo Valuation Method [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation other than option grant date fair value | $ / shares			$ 1.87			$ 3.27
RSUs and PRSUs [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Securities excluded from calculation of net income (loss) per share	2,800,000	4,400,000	2,800,000	2,800,000	4,400,000

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STOCK-BASED COMPENSATION - Summary of Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	$ 918	$ 837	$ 3,546	$ 3,792
Equity-settled Awards [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	846	1,177	3,471	3,258
Cash-settled Awards [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	$ 72	$ (340)	$ 75	$ 534

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STOCK-BASED COMPENSATION - Summary of RSUs, Share Awards, PSUs, DSUs Activity (Detail) - shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Restricted Stock Units Time Based
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of units, Outstanding at the beginning	3,216,536	2,414,066
Granted	2,303,287	1,919,102
Vested	(2,019,550)	(650,898)
Withheld to settle employee tax obligations	(526,259)	(174,103)
Forfeited	(734,855)	(237,910)
Number of units, Outstanding at the end	2,239,159	3,270,257
Restricted Share Units ("RSUs") Performance-Based [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of units, Outstanding at the beginning	1,021,739	200,000
Granted	863,279	878,601
Vested	(566,352)	(2,294)
Withheld to settle employee tax obligations	(242,460)	(1,960)
Forfeited	(502,628)	(42,314)
Number of units, Outstanding at the end	573,578	1,032,033
Share Awards [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted	162,682
Vested	(94,528)
Withheld to settle employee tax obligations	(68,154)
Performance Share Units ("PSUs") [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of units, Outstanding at the beginning	157,200	197,471
Vested		(34,635)
Forfeited	(157,200)	(5,636)
Number of units, Outstanding at the end		157,200
Deferred Share Units ("DSUs") [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of units, Outstanding at the beginning	361,577	363,664
Granted	890,832	88,880
Vested	(501,916)	(55,802)
Number of units, Outstanding at the end	750,493	396,742

XML

STOCK-BASED COMPENSATION - Schedule of Percentage of PRSUs Vest upon Increases of Share Price (Detail) - 2022 and 2021 PRSUs [Member] - PRSUs [Member]	9 Months Ended
	Sep. 30, 2022 $ / shares
Share-based Payment Arrangement, Tranche One [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
% of PRSUs vesting	33.30%
Weighted average fair value of the RSUs granted	$ 3.00
Share-based Payment Arrangement, Tranche Two [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
% of PRSUs vesting	66.70%
Weighted average fair value of the RSUs granted	$ 4.00
Share-based Payment Arrangement, Tranche Three
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
% of PRSUs vesting	100.00%
Weighted average fair value of the RSUs granted	$ 5.00
Share Based Compensation Award Tranche Four
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
% of PRSUs vesting	150.00%
Weighted average fair value of the RSUs granted	$ 7.00

XML

STOCK-BASED COMPENSATION - Summary of Options Granted, Exercised, Surrendered, Forfeited and Expired (Detail) - Employee Stock Option [Member] - $ / shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options, Outstanding at the beginning	4,064,489	4,774,328
Number of options, Forfeited	(2,530,120)	(39,094)
Number of options, Outstanding at the end	1,534,369	4,735,234
Number of options, Exercisable	1,534,369
Weighted average exercise price, Outstanding at the beginning	$ 6.64	$ 6.52
Weighted average exercise price, Forfeited	6.40	7.07
Weighted average exercise price, Outstanding at the end	7.03	$ 6.51
Weighted average exercise price, Exercisable	$ 7.03

XML

STOCK-BASED COMPENSATION - Summary of Options Outstanding by Range of Exercise Prices (Detail)	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Options outstanding, Number | shares	1,534,369
Options exercisable, Number | shares	1,534,369
Exercise Price Range $4.01 to $5.00 [Member]
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of exercise prices, Minimum	$ 4.01
Range of exercise prices, Maximum	$ 5.00
Options outstanding, Number | shares	15,025
Options outstanding, Weighted average remaining life	2 years 1 month 20 days
Options outstanding	$ 4.12
Options exercisable, Number | shares	15,025
Options exercisable, Weighted average remaining life	2 years 1 month 20 days
Exercise Price Range $6.01 to $7.00 [Member]
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of exercise prices, Minimum	$ 6.01
Range of exercise prices, Maximum	$ 7.00
Options outstanding, Number | shares	784,367
Options outstanding, Weighted average remaining life	1 year 3 months 21 days
Options outstanding	$ 6.33
Options exercisable, Number | shares	784,367
Options exercisable, Weighted average remaining life	1 year 3 months 21 days
Exercise Price Range $7.01 to $8.00 [Member]
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of exercise prices, Minimum	$ 7.01
Range of exercise prices, Maximum	$ 8.00
Options outstanding, Number | shares	734,977
Options outstanding, Weighted average remaining life	1 year 7 months 17 days
Options outstanding	$ 7.84
Options exercisable, Number | shares	734,977
Options exercisable, Weighted average remaining life	1 year 7 months 17 days

XML

REVENUE - Disaggregation of Revenue by Major Products and Services Lines (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation Of Revenue [Line Items]
Revenues	$ 46,747	$ 34,098	$ 129,734	$ 104,665
Product [Member]
Disaggregation Of Revenue [Line Items]
Revenues	39,092	29,569	110,383	91,867
Transportation [Member]
Disaggregation Of Revenue [Line Items]
Revenues	5,022	3,294	13,878	9,277
License fees from Construction Partners [Member]
Disaggregation Of Revenue [Line Items]
Revenues	193	191	588	539
Total product revenue [Member]
Disaggregation Of Revenue [Line Items]
Revenues	44,307	33,054	124,849	101,683
Installation and other services [Member]
Disaggregation Of Revenue [Line Items]
Revenues	$ 2,440	$ 1,044	$ 4,885	$ 2,982

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REVENUE - Disaggregation of Revenue by Timing of Revenue Recognition (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation Of Revenue [Line Items]
Revenues	$ 46,747	$ 34,098	$ 129,734	$ 104,665
At a point in time [Member]
Disaggregation Of Revenue [Line Items]
Revenues	44,114	32,863	124,261	101,144
Over time [Member]
Disaggregation Of Revenue [Line Items]
Revenues	$ 2,633	$ 1,235	$ 5,473	$ 3,521

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REVENUE - Summary of Contract Liabilities (Detail) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021	Dec. 31, 2020
Revenue from Contract with Customer [Abstract]
Customer deposits	$ 2,598	$ 1,959	$ 1,292
Deferred revenue	429	461	527
Contract liabilities	$ 3,027	$ 2,420	$ 1,819

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REVENUE - (Additional Information) (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Revenue from Contract with Customer [Abstract]
Contract liabilities recognized as revenue	$ 2.4	$ 1.7

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REVENUE - Schedule of Sales by Industry (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation Of Revenue [Line Items]
Revenues	$ 46,747	$ 34,098	$ 129,734	$ 104,665
Commercial [Member]
Disaggregation Of Revenue [Line Items]
Revenues	31,796	20,805	85,458	55,981
Healthcare [Member]
Disaggregation Of Revenue [Line Items]
Revenues	3,638	5,017	15,693	25,680
Government [Member]
Disaggregation Of Revenue [Line Items]
Revenues	3,358	3,149	11,680	11,579
Education [Member]
Disaggregation Of Revenue [Line Items]
Revenues	5,322	3,892	11,430	7,904
License fees from Construction Partners [Member]
Disaggregation Of Revenue [Line Items]
Revenues	193	191	588	539
Total product and transportation revenue [Member]
Disaggregation Of Revenue [Line Items]
Revenues	44,307	33,054	124,849	101,683
Installation and other services [Member]
Disaggregation Of Revenue [Line Items]
Revenues	$ 2,440	$ 1,044	$ 4,885	$ 2,982

XML

SEGMENT REPORTING - (Additional Information) (Detail)	9 Months Ended
	Sep. 30, 2022 Country Segment
Segment Reporting [Abstract]
Number of reportable segments	1
Number of operating segments	1
Number of principal geographic locations | Country	2

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SEGMENT REPORTING - Schedule of Revenue from External Customers (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue from external customers	$ 46,747	$ 34,098	$ 129,734	$ 104,665
Canada [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue from external customers	7,191	4,405	19,859	11,860
U.S. [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue from external customers	$ 39,556	$ 29,693	$ 109,875	$ 92,805

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SEGMENT REPORTING - Schedule of Non-current Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Revenues from External Customers and Long-Lived Assets [Line Items]
Non-current assets	$ 85,241	$ 95,635
Canada [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Non-current assets	29,931	34,912
U.S. [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Non-current assets	$ 55,310	$ 60,723

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INCOME TAXES - (Additional Information) (Detail) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Schedule Of Income Tax [Line Items]
Valuation allowance against Deferred Tax Assets	$ 28.1	$ 17.3

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COMMITMENTS - (Additional Information) (Detail) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Long Term Purchase Commitment [Line Items]
Undiscounted operating lease liabilities	$ 53.1	$ 49.7
Inventory And Property Plant And Equipment [Member]
Long Term Purchase Commitment [Line Items]
Purchase obligation, outstanding	$ 2.1	$ 3.7

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Subsequent Event (Additional Information) (Details) - Subsequent Event [Member] $ in Millions	Nov. 14, 2022 USD ($) shares
Shareholder Two member | Directors
Subsequent Event [Line Items]
Irrevocable commitment amount	$ 2.0
Maximum [Member] | Private Placement [Member]
Subsequent Event [Line Items]
Proceeds from Issuance of Private Placement	$ 3.0
Maximum [Member] | Private Placement [Member] | Directors
Subsequent Event [Line Items]
Maximum Possible Shares Issued | shares	8.8
Maximum [Member] | Private Placement [Member] | Shareholder Two member
Subsequent Event [Line Items]
Gross Proceed From Possible Shares To be issued Maximum	$ 3.0