22NW Fund Ups DIRTT Stake to 15.7%

TL;DR

22NW Fund now owns 15.7% of DIRTT, filing an amendment. Big moves coming?

AI Summary

On March 26, 2024, 22NW Fund, LP filed Amendment No. 12 to its Schedule 13D regarding DIRTT Environmental Solutions Ltd. The filing indicates a change in beneficial ownership, with 22NW Fund, LP now holding 15.7% of the outstanding common shares, totaling 25,511,800 shares. This amendment reflects an update to their holdings and potentially their strategy concerning DIRTT.

Why It Matters

This filing signals a significant stake by an activist investor in DIRTT Environmental Solutions, potentially leading to changes in company strategy or management.

Risk Assessment

Risk Level: medium — The filing indicates a substantial ownership stake by an investment fund, which could lead to activist actions or strategic shifts impacting the company's stock.

Key Numbers

• 25,511,800 — Shares Held (Total common shares beneficially owned by 22NW Fund, LP)
• 15.7% — Ownership Stake (Percentage of DIRTT Environmental Solutions Ltd. common shares held by 22NW Fund, LP)

Key Players & Entities

• 22NW Fund, LP (company) — Filing entity
• DIRTT Environmental Solutions Ltd. (company) — Subject company
• Aron R. English (person) — Contact person for 22NW Fund, LP
• RYAN NEBEL OLSHAN FROME WOLOSKY LLP (company) — Legal counsel
• 25,511,800 (dollar_amount) — Number of shares held
• 15.7% (dollar_amount) — Percentage of shares held

FAQ

Key Financial Figures

• $44,335,026 — gregate purchase price of approximately $44,335,026, excluding brokerage commissions, (ii)
• $0.40 — reholder approval, at a deemed price of $0.40 per Share as reimbursement for legal fe
• $30.0 million — iption rights under the Issuer’s C$30.0 million rights offering (the “Rights Offe
• $0.35 — ing”) at a subscription price of C$0.35 per Share, and (iv) 8,440,252 of such S
• $17,262,885 — regate purchase price of approximately C$17,262,885. Of the 7,492,943 Shares directly owne
• $994,199 — gregate purchase price of approximately $994,199, excluding brokerage commissions, and (
• $1,763 — gregate purchase price of approximately $1,763, excluding brokerage commissions, and (
• $2,780 — gregate purchase price of approximately $2,780, excluding brokerage commissions, and (

Filing Documents

• sc13da1210680012_03262024.htm (SC 13D/A) — 209KB
• 0000921895-24-000717.txt ( ) — 211KB

Source and Amount of Funds or Other Consideration

Item 3. Source and Amount of Funds or Other Consideration .

is hereby amended

Item 3 is hereby amended and restated to read as follows: Of the 58,395,297 Shares beneficially owned by 22NW Fund, (i) 21,981,043 of such Shares were purchased with working capital (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) and have an aggregate purchase price of approximately $44,335,026, excluding brokerage commissions, (ii) 3,899,745 of such Shares were granted by the Issuer, following shareholder approval, at a deemed price of $0.40 per Share as reimbursement for legal fees and other expenses incurred by 22NW Fund in connection with the contested director election at the Issuer’s 2022 annual and special meeting, (iii) 24,074,257 1 of such Shares were purchased pursuant to the exercise of 22NW Fund’s subscription rights under the Issuer’s C$30.0 million rights offering (the “Rights Offering”) at a subscription price of C$0.35 per Share, and (iv) 8,440,252 of such Shares are currently issuable upon the conversion of certain of the Issuer’s outstanding 6.00% convertible unsecured subordinated debentures (the “January 2026 Convertible Debentures”) and 6.25% convertible unsecured subordinated debentures (the “December 2026 Convertible Debentures,” and, together with the January 2026 Convertible Debentures, the “Convertible Debentures”), which Convertible Debentures have an aggregate purchase price of approximately C$17,262,885. Of the 7,492,943 Shares directly owned by Mr. English, (i) 1,777,369 were purchased with personal funds (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) and have an aggregate purchase price of approximately $994,199, excluding brokerage commissions, and (ii) 5,715,574 2 of such Shares were purchased pursuant to the exercise of Mr. English’s subscription rights under the Rights Offering at a subscription price of C$0.35 per Share. Of

Purpose

Item 4. Purpose of Transaction .

is hereby amended

Item 4 is hereby amended to add the following: On March 17, 2024, 22NW Fund entered into a binding term sheet (the “Term Sheet”) with the Issuer to enter into a subsequent definitive Support and Standstill Agreement (the “Support Agreement”). On March 22, 2024, 22NW Fund entered into the Support Agreement with the Issuer. Pursuant to the Support Agreement, the Issuer agreed to nominate Aron R. English (or a replacement director identified by 22NW Fund, the “Shareholder Director”) for election as a member of the Issuer’s Board of Directors (the “Board”) and to recommend, support and solicit proxies for the election of the Shareholder Director in the same manner as the other DIRTT Nominees (as defined in the Support Agreement) at each of the Issuer’s 2024 annual general meeting of shareholders (the “2024 Meeting”) and 2025 annual general meeting of shareholders (the “2025 Meeting”), and outstanding Shares and 38,222,077 Shares (subject in each case to adjustment for stock splits, reclassifications, combinations and similar adjustments). Pursuant to the Support Agreement, 22NW Fund has agreed to vote all of its Shares in favor of recommendations of the Board on director election proposals and certain other proposals, subject to certain exceptions, at the 2024 Meeting and the 2025 Meeting (and any other meeting of the Issuer’s shareholders held prior to the Termination Date (as defined below)). Further under the terms of the Support Agreement, 22NW Fund has also agreed (i) provided the Rights Plan (as defined in the Support Agreement) is approved by the Issuer’s shareholders, not to initiate an unsolicited take-over bid for the Shares prior to the Termination Date, subject to certain exceptions, and (ii) to certain customary standstill

Interest in Securities of the Issuer

Item 5. Interest in Securities of the Issuer . Items 5(a) and (c) are hereby amended and restated as follows: (a) The aggregate percentage of Shares reported owned by each person named herein is based upon 191,110,385 Shares outstanding as of February 16, 2024, which is the total number of Shares outstanding as reported in the Issuer’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 21, 2024, plus the number of Shares underlying the Convertible Debentures as reported herein, as applicable. As of the date hereof, 22NW Fund directly beneficially owned 58,395,297 Shares, constituting approximately 29.3% of the Shares outstanding, including 8,440,252 Shares issuable upon conversion of the Convertible Debentures owned by 22NW Fund. 10 CUSIP No. 25490H106 As of the date hereof, Mr. English directly beneficially owned 7,492,943 Shares, constituting approximately 3.9% of the Shares outstanding. As of the date hereof, Mr. Hirai-Hadley directly beneficially owned 2,272 Shares, constituting less than 1% of the Shares outstanding. As of the date hereof, Mr. Jones directly beneficially owned 2,181 Shares, constituting less than 1% of the Shares outstanding. 22NW, as the investment manager of 22NW Fund, may be deemed to beneficially own the 58,395,297 Shares beneficially owned by 22NW Fund, constituting approximately 29.3% of the Shares outstanding. 22NW GP, as the general partner of 22NW Fund, may be deemed to beneficially own the 58,395,297 Shares beneficially owned by 22NW Fund, constituting approximately 29.3% of the Shares outstanding. 22NW Inc., as the general partner of 22NW, may be deemed to beneficially own the 58,395,297 Shares beneficially owned by 22NW Fund, constituting approximately 29.3% of the Shares outstanding. Mr. English, as the Portfolio Manager of 22NW, Manager of 22NW GP and President and sole shareholder of 22NW Inc., may be deemed to beneficially own the 58,395,297 Shares beneficially owned by 22NW

Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

is hereby amended

Item 6 is hereby amended to add the following: On March 17, 2024, 22NW Fund and the Issuer entered into the Term Sheet as defined and described in Item 4 above and attached as Exhibit 99.1 hereto. On March 22, 2024, 22NW Fund and the Issuer entered into the Support Agreement as defined and described in Item 4 above and attached as Exhibit 99.2 hereto.

Material to be Filed as Exhibits

Item 7. Material to be Filed as Exhibits.

is hereby amended

Item 7 is hereby amended to add the following exhibits: 99.1 Term Sheet, dated as of March 17, 2024 (incorporated by reference to Exhibit 10.1 to the Issuer’s Current Report on Form 8-K filed on March 25, 2024). 99.2 Support and Standstill Agreement, dated as of March 22, 2024 (incorporated by reference to Exhibit 10.2 to the Issuer’s Current Report on Form 8-K filed on March 25, 2024). 11 CUSIP No. 25490H106

SIGNATURES

SIGNATURES After reasonable inquiry and to the best of his knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: March 26, 2024 22NW FUND, LP By: 22NW Fund GP, LLC General Partner By: /s/ Aron R. English Name: Aron R. English Title: Manager 22NW, LP By: 22NW GP, Inc. General Partner By: /s/ Aron R. English Name: Aron R. English Title: President and Sole Shareholder 22NW FUND GP, LLC By: /s/ Aron R. English Name: Aron R. English Title: Manager 22NW GP, INC. By: /s/ Aron R. English Name: Aron R. English Title: President and Sole Shareholder /s/ Aron R. English ARON R. ENGLISH Individually and as attorney-in-fact for Bryson O. Hirai-Hadley and Alexander B. Jones 12

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