DIRTT Announces CAD$35 Million Convertible Debenture Bought Deal Financing

DIRTT Environmental Solutions Ltd. (“DIRTT” or the “Company”) (TSX:DRT, NASDAQ:DRTT), an interior construction company that uses proprietary software to design, manufacture and install fully customizable environments, is pleased to announce that it has entered into a C$35 million bought-deal financing (the "Offering") of 6.25% convertible unsecured subordinated debentures (the "Debentures") with a syndicate of underwriters (the "Underwriters") led by National Bank Financial Inc. The Company has also granted the Underwriters an over-allotment option to purchase up to an additional C$5.25 million aggregate principal amount of Debentures on the same terms, exercisable in whole or in part at any time up to the 30th day following the closing of the Offering.

The Company intends to use a portion of the net proceeds of the Offering, together with cash reserves on hand, to fund its anticipated 2022 capital expenditure program of approximately US$7.0 million, comprised of approximately US$2.5 million related to refreshes of DIRTT Experience Centers, continued enhancement of the Company’s customer relationship management system and website redesign, approximately US$2.5 million on software development and approximately US$2.0 million on manufacturing and other capital upgrades. The remaining net proceeds of the Offering are expected to be used, initially, to support the continued funding of the Company’s manufacturing and commercial activities as the COVID-19 pandemic recovery occurs, and to provide incremental liquidity to support the Company’s operations and growth objectives.

The Debentures will mature and be repayable on December 31, 2026 (the "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 Maturity Date of the Debentures.

The Debentures will be convertible into common shares of DIRTT (“Common Shares”), at the option of the holder, at any time prior to the close of business on the earlier of the Maturity Date and the business day immediately preceding the date specified by the Company for redemption of the Debentures at a conversion price of C$4.20 per Common Share (the “Conversion Price”), being a ratio of approximately 238.0952 Common Shares per C$1,000 principal amount of Debentures. The Conversion Price represents a conversion premium of approximately 35% to the closing price of the Common Shares on November 15, 2021, on the Toronto Stock Exchange ("TSX") subject to adjustment in accordance with a second supplemental indenture to the base indenture dated January 25, 2021 to be entered into on or before closing of the Offering that will govern the Debentures. Holders converting their Debentures will receive accrued and unpaid interest thereon to but excluding the date of conversion.

The Debentures will not be redeemable before December 31, 2024. On or after December 31, 2024 and prior to December 31, 2025, the Company may at its option redeem Debentures, in whole or in part from time to time, at par plus accrued and unpaid interest, if any, to but excluding the date of redemption, provided that the volume weighted average trading price of the Common Shares on the TSX for the 20 consecutive trading days ending five trading days preceding the date on which notice of redemption is given is not less than 125% of the Conversion Price. On or after December 31, 2025, the Company may at its option redeem the Debentures, in whole or in part from time to time, at par plus accrued and unpaid interest, if any, to but excluding the date of redemption. The Company shall provide not more than 60 nor less than 30 days’ prior notice of redemption.

The Company has the option to satisfy its obligation to repay the principal amount of the Debentures, in whole or in part, plus accrued and unpaid interest, due upon redemption or on the maturity date, upon at least 30 days' and not more than 60 days' prior notice, by delivering a number of freely tradable Common Shares obtained by a formula relating to the then-current market price of the Common Shares.

The Debentures will be direct unsecured obligations of the Company ranking subordinate to all liabilities, except liabilities which by their terms rank in right of payment equally with or subordinate to the Debentures. The Debentures will rank pari passu with all subordinate debentures issued by the Company.

The Debentures will be offered in Canada (excluding Quebec) pursuant to a short form prospectus under Canadian law and in the United States pursuant to a shelf registration statement on Form S-3 (File No. 333-251660) previously filed with the U.S. Securities and Exchange Commission (the “SEC”), and in certain other jurisdictions as may be agreed by the Underwriters and the Company. The Offering is expected to close on or about December 1, 2021, and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals and consents, including the approval of the TSX. Offers, solicitations and sales of the Debentures or Common Shares is made only by means of the prospectus supplement to the shelf registration statement on Form S-3 in the United States and the short form prospectus in Canada (excluding Quebec). The preliminary U.S. prospectus supplement and preliminary Canadian short form prospectus relating to, and describing the terms of, the Offering will be filed with and available on the SEC’s website at www.sec.gov and SEDAR at sedar.com, as applicable. Electronic copies of the preliminary U.S. prospectus supplement and preliminary Canadian short form prospectus, may also be obtained, when available, by contacting National Bank Financial Inc. at 130 King Street West, Suite 3200, Toronto, ON M5X 1J9, by telephone at (416)-869-6534 or e-mail at ECM-Origination@nbc.ca.

This press release does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

FORWARD LOOKING STATEMENTS:

This news release contains forward-looking information within the meaning of applicable securities legislation, which reflects the Company's current expectations regarding future events, including statements about the Offering and the proposed use of proceeds. In some cases forward-looking information can be identified by such terms as "will" and "expected". Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. The Company's estimates, beliefs and assumptions, which may prove to be incorrect, including those relating to the Company's ability to complete the Offering or its use of proceeds from the Offering. The risks and uncertainties that may affect forward-looking information include, but are not limited to, market conditions, the effect of COVID-19 on the Company's operations, business and financial results, and other factors discussed under "Risks Factors" in the Company’s management's discussion and analysis for the three and nine months ended September 30, 2021 and in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, both of which are available on SEDAR (www.sedar.com) and on the SEC’s website (www.sec.gov). The Company does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks only as of the date of this news release.