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

The LTIP gives the Company the ability to award options, share appreciation rights, restricted share units, deferred share units, restricted shares, dividend equivalent rights, and other share-based awards and cash awards to eligible employees, officers, consultants

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

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

Stock-based compensation expense


	For the Year Ended December 31,
	2025			2024		2023
Equity-settled awards		3,138			2,466		2,331
Cash-settled awards		(101	)		499		(25	)
		3,037			2,965		2,306

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


	RSU Time-			RSU Performance-
	Based			Based			PSU			DSU
	Number of			Number of			Number of			Number of
	units			units			units			units
Outstanding at December 31, 2023		3,530,564			64,029			1,845,608			3,086,172
Granted		8,612,553			-			-			1,689,028
Vested or settled		(1,350,754	)		(12,574	)		-			(741,306	)
Withheld to settle employee tax obligations		(351,672	)		-			-			-
Forfeited or expired		(179,900	)		(6,278	)		-			-
Outstanding at December 31, 2024		10,260,791			45,177			1,845,608			4,033,894
Granted		735,000			-			1,262,000			1,013,209
Vested or settled		(1,883,839	)		-			-			(1,582,115	)
Withheld to settle employee tax obligations		(421,185	)		-			-			-
Forfeited or expired		(509,182	)		(45,177	)		(510,000	)		-
Outstanding at December 31, 2025		8,181,585			-			2,597,608			3,464,988

Except as noted below, outstanding restricted share units (“RSUs”) that vest based on time have an aggregate time-based vesting period of three years and generally one-third of the RSUs vest every year over a three-year period from the date of grant. The RSUs will be settled following vesting by way of the provision of cash or shares to employees (or a combination thereof), at the discretion of the Company. The weighted average fair value of the RSUs granted in 2025 and 2024 was C$0.90 and C$0.68, respectively, which was determined using the closing price of the Company’s common shares on their respective grant dates.

During 2023, 150,000 RSUs were granted to each of the chief executive officer, president and chief operating officer and chief financial officer which vested in the first and third quarters of 2024. During the third quarter of 2024, certain of the Company’s executives were granted (i) 5 million RSUs which will cliff vest on August 14, 2026 and (ii) 975,000 RSUs, one-third of which will vest every year over a three-year period from the date of grant, at a weighted average fair value of C$0.75 which was determined using the closing price of the Company’s common shares on their respective grant dates. Subsequent to year-end, the president and chief operating officer

departed the Company. Under his executive employment contract, 2,866,667 RSUs will vest on an accelerated basis on March 3, 2026. These RSUs, net of tax, will be settled in common shares.

During the fourth quarter of 2025, 200,000 RSUs were granted to the chief transformation officer, which vested immediately and were settled in common shares. The weighted average fair value of the RSUs granted was C$1.01.

During 2022 and 2021, RSUs were granted to executives with service and performance-based conditions for vesting based on the Company’s share price performance (the “PRSUs”). Based on share price performance since the date of grant, 66.7% of the 2021 PRSUs vested on March 1, 2024, but none of the 2022 PRSUs vested upon completion of the three-year service period. As at December 31, 2024, the Company had 45,177 PRSUs outstanding. All PRSUs were expired as of December 31, 2025.

During the second quarter of 2023, certain executives were issued a strategic equity grant through performance share units (“PSUs”). The performance period of the PSUs is from January 1, 2023, to December 31, 2026, with a cliff vesting term for December 31, 2026. 2,584,161 PSUs were granted and depending on the level of performance, the PSUs will vest 100%, 160% or 190% up to a maximum of 4,909,907 PSUs. Settlement will be made in the form of shares issued from treasury. The performance measures are a combination of Revenue and Earnings Before Interest, Taxes, Depreciation and Amortization and both targets have to be achieved. As of December 31, 2025, the fair value of these PSUs have been deemed to be nil based on the likelihood of achieving the targets compared to current results. During the third quarter of 2023, 738,553 PSUs with a $nil value were forfeited as a result of an executive departure. There are 1,845,608 PSUs with a $nil value outstanding as at December 31, 2025. Subsequent to year-end, the president and chief operating officer departed from the Company and 922,804 PSUs and were forfeited.

During the fourth quarter of 2025, 752,000 PSUs were granted to the chief transformation officer. The performance period is from November 26, 2025 until June 30, 2026 with a cliff vesting term for June 30, 2026. The performance measures relate to success of cost savings targets tied to transformation efforts by the Company. As of December 31, 2025, the PSUs have been deemed to have a value of $0.6 million.

During the fourth quarter of 2025, 510,000 PSUs were granted to employees. The performance period ended December 31, 2025. The performance measure was for the Company to reach a share price of C$1.85 and Adjusted EBITDA greater than $20 million. At of the end of the performance period, the conditions were not met and all PSUs related to this grant were forfeited. The fair value of the PSUs were deemed to be $nil at the time of the grant based on the likelihood of achieving the target.

The fair value of the DSU liability and the corresponding expense is charged to profit or loss at the grant date. Subsequently, at each reporting date between the grant date and settlement date, the fair value of the liability is remeasured with any changes in fair value recognized in profit or loss for the period. During 2025, the Company settled 0.3 million DSUs (nil in 2024) to departed directors with a fair value of $0.2 million ($nil in 2024). DSUs outstanding at December 31, 2025 had a fair value of $0.5 million which is included in other liabilities on the balance sheet (December 31, 2024 – $0.7 million).

DSUs granted after May 30, 2023 (the “New DSUs”) will be settled by way of the provision of cash or shares (or a combination thereof) to the directors, at the discretion of the Company. The Company intends to settle these DSUs through issuances of common shares. The weighted average fair value of the DSUs granted in 2025 and 2024 was C$0.89 ($0.64) and C$0.69 ($0.50), respectively, which was determined using the closing price of the Company’s common shares on the grant date. During 2025, the Company settled 1.2 million New DSUs (nil in 2024) to departed directors with a fair value of $0.6 million ($nil in 2024). New DSUs outstanding at December 31, 2025 had a fair value of $1.4 million which is included in other liabilities on the balance sheet (December 31, 2024 – $1.3 million).

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


	Number of			Weighted average
	options			exercise price C$
Outstanding at December 31, 2023		209,409			7.71
Forfeited		(2,000	)		7.84
Expired		(207,409	)		7.70
Outstanding and exercisable at December 31, 2024		-			-
Outstanding and exercisable at December 31, 2025		-			-

Range of exercise prices outstanding at December 31, 2023:


	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$6.01 – C$7.00		16,350		0.71	$	6.12		16,350		0.71	$	6.12
C$7.01 – C$8.00		193,059		0.38	$	7.84		193,059		0.38	$	7.84
Total		209,409						209,409

For the years ended December 31, 2025 and December 31, 2023, respectively, 5.5 million and 3.6 million RSUs (including PRSUs), 2.3 million and 1.8 million New DSUS, 1.8 million PSUs, nil and 0.2 million options, and 34.5 million and 156.8 million shares would be issued if the principal amount of the Debentures were settled in our common shares at the year-end share price were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net loss per share.

For the year ended December 31, 2024, 2.3 million RSUs and PRSUs, 2.0 million New DSUs and 45.1 million shares which would have been issued if the principal amount of the Debentures were settled in common shares at the year-end price were included in the diluted earnings per share calculation (Note 19). 1.8 million PSUs and 0.2 million RSUs and PRSUs were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net income per share.