Note 11 - STOCK-BASED COMPENSATION

On October 15, 2025 at the 2025 Annual Meeting of Stockholders (the “Annual Meeting”) of the Company, the Company’s stockholders approved an amendment (the “Plan Amendment”) to the Company’s 2022 Equity Incentive Plan (the “2022 Plan”) increasing the number of shares available for issuance under the 2022 Plan by 900,000 shares. The Plan Amendment became effective following its approval by the Company’s stockholders.

The Company maintains the Dragonfly Energy Holdings Corp. Employee Stock Purchase Plan (the “ESPP”) which is designed to allow eligible employees and the eligible employees of the Company’s participating subsidiaries to purchase shares of the Company’s common stock, at semi-annual intervals, with their accumulated payroll deductions. A total of 27,382 shares of the Company’s common stock were initially available for issuance under the ESPP. The share limit will automatically increase on the first trading day in January of each year by an amount equal to lesser of (1) 1% of the total number of outstanding shares of the Company’s common stock on December 31 in the prior year, (2) 16,667 shares, or (3) such number as determined by the Company’s Board of Directors.

A summary of the Company’s option activity and related information follows:

SCHEDULE OF OPTION ACTIVITY AND RELATED INFORMATION  

During the six months ended June 30, 2026, the Company issued 116,713 stock options. During the six months ended June 30, 2025, the Company did not issue any stock options.

Share-based compensation expense for options and RSUs totaling $461 and $190 was recognized in the Company’s consolidated statements of operations for the three months ended June 30, 2026 and 2025, respectively. Share-based compensation expense for options and RSUs totaling $561 and $410 was recognized in the Company’s consolidated statements of operations for the six months ended June 30, 2026 and 2025, respectively.

Dragonfly Energy Holdings Corp.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

Note 11 - Stock-Based Compensation (continued)

Of the $461 of share-based compensation incurred during the three months ended June 30, 2026, $7 is allocated to cost of goods sold, $20 to research and development, $156 to selling and marketing, and $278 to general and administrative expenses. Of the $190 of share-based compensation incurred during the three months ended June 30, 2025, $17 is allocated to cost of goods sold, $12 to research and development, $63 to selling and marketing, and $98 to general and administrative expenses.

Of the $561 of share-based compensation incurred during the six months ended June 30, 2026, $10 is allocated to cost of goods sold, $25 to research and development, $176 to selling and marketing, and $350 to general and administrative expenses. Of the $410 of share-based compensation incurred during the six months ended June 30, 2025, $35 is allocated to cost of goods sold, $26 to research and development, $124 to selling and marketing, and $225 to general and administrative expenses.

The valuation methodology used to determine the fair value of the options issued during the year was the Black Scholes option pricing model. The Black Scholes model requires the use of a number of assumptions including volatility of the stock price, the fair value of the underlying stock, the average risk free interest rate, and the weighted average expected life of the options. The expected term was estimated using the simplified method due to lack of sufficient history of option exercises.

SCHEDULE OF WEIGHTED AVERAGE FAIR VALUE OF OPTIONS 

Restricted Stock Units

On April 1, 2025 and May 19, 2025, the Company granted 376 and 88 RSUs, respectively. The RSUs will vest in three equal annual installments, with the first vesting date on the one (1) year anniversary of the date of issuance and the following two vesting dates on each subsequent anniversary of the date of issuance, subject to each employees’ continued employment as of each vesting date. The fair value of the RSUs was $4 and no expense was recorded as compensation expense during the six months ended June 30, 2026 or 2025.

In March 2026, the members of the Board of Directors were granted an aggregate of 13,364 RSUs. The RSUs will vest in three equal annual installments, with the first vesting occurring on April 1, 2026 and the following two vesting dates on each subsequent anniversary of the grant date, subject to continued Board service. The fair value of the RSUs was $23 and $3 was recorded as compensation expense during the six months ended June 30, 2026.

On April 1, 2026, the Company granted 638,785 RSUs. The RSUs will vest in three equal annual installments, with the first vesting occurring immediately on April 1, 2026 and the following two vesting dates on each subsequent anniversary of the date of issuance, subject to each employee’s continued employment as of each vesting date. The fair value of the RSUs was $1,105, and $193 was recorded as compensation expense during the six months ended June 30, 2026.

On May 28, 2026, the Company granted 2,263 RSUs that vested immediately on the date of issuance. The fair value of the RSUs was $5, and $5 was recorded as compensation expense during the six months ended June 30, 2026.

Dragonfly Energy Holdings Corp.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

Note 11 - Stock-Based Compensation (continued)

Restricted Stock Units (Continued)

On June 18, 2026, the Board of Directors authorized the issuance of 10,000 RSUs to the newly appointed board member. The RSUs will vest in two equal installments, with one-half vesting immediately upon the date of grant and one-half vesting on the one-year anniversary of the date of the grant, subject to continued service to the Company. The fair value of the RSUs was $20 and $1 was recorded as compensation expense during the six months ended June 30, 2026.

The following table presents the restricted stock units activity for the six months ended June 30, 2026:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY  

As of June 30, 2026 and 2025 there were 928,596 and 118,925 shares, respectively, of unissued authorized and available for future awards under the 2022 Equity Incentive Plan and Employee Stock Purchase Plan.

Employee Stock Purchase Plan

The Company maintains the ESPP which permits eligible employees to purchase shares at not less than 85% of the market value of the Company’s common stock on the offering date or the purchase date of the applicable offering period, whichever is lower. The plan was adopted by the Company’s Board of Directors on May 13, 2022.

During the six months ended June 30, 2025, the Company issued 87,506 shares of common stock in connection with the ESPP for a total consideration of approximately $73. The ESPP allows employees to purchase shares at a 15% discount to the lesser of the stock price at the beginning or the end of the offering period, which was October 1, 2024, and April 1, 2025, respectively. The discount resulted in an exercise price of $0.83 per share.

During the six months ended June 30, 2026, the Company issued 17,469 shares of common stock in connection with the ESPP for a total consideration of approximately $26. The ESPP allows employees to purchase shares at a 15% discount to the lesser of the stock price at the beginning or the end of the offering period, which was October 1, 2025, and April 1, 2026, respectively. The discount resulted in an exercise price of $1.48 per share.

Dragonfly Energy Holdings Corp.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)