Note 14 - 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 112,500 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 common stock, at semi-annual intervals, with their accumulated payroll deductions. A total of 3,423 shares of 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 the lesser of (1) 1% of the total number of outstanding shares of common stock on December 31 in the prior year, (2) 2,083 shares, or (3) such number as determined by the Board.

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

SCHEDULE OF OPTION ACTIVITY AND RELATED INFORMATION  

During the three and nine months ended September 30, 2026, the Company issued 0 and 14,589 stock options, respectively.

During the three and nine months ended September 30, 2025, the Company did not issue any stock options.

Share-based compensation expense for options and RSUs totaling $243 and $168 was recognized in the Company’s consolidated statements of operations for the three months ended September 30, 2026 and 2025, respectively. Share-based compensation expense for options and RSUs totaling $717 and $578 was recognized in the Company’s consolidated statements of operations for the nine months ended September 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 14 - STOCK-BASED COMPENSATION (CONTINUED)

Of the $243 of share-based compensation incurred during the three months ended September 30, 2026, $4 is allocated to cost of goods sold, $11 to research and development, $68 to selling and marketing, and $160 to general and administrative expenses. Of the $168 of share-based compensation incurred during the three months ended September 30, 2025, $11 is allocated to cost of goods sold, $9 to research and development, $55 to selling and marketing, and $93 to general and administrative expenses.

Of the $717 of share-based compensation incurred during the nine months ended September 30, 2026, $14 is allocated to cost of goods sold, $36 to research and development, $244 to selling and marketing, and $423 to general and administrative expenses. Of the $578 of share-based compensation incurred during the nine months ended September 30, 2025, $45 is allocated to cost of goods sold, $36 to research and development, $179 to selling and marketing, and $318 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 47 and 11 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 an immaterial amount was recorded as compensation expense during the nine months ended September 30, 2026. During the nine months ended September 30, 2025, $1 was recorded as compensation expense.

In March 2026, members of the Board were granted an aggregate of 1,671 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 and $6 was recorded as compensation expense during the three and nine months ended September 30, 2026, respectively.

On April 1, 2026, the Company granted 79,848 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 employees’ continued employment as of each vesting date. The fair value of the RSUs was $1,105 and $111 and $304 was recorded as compensation expense during the three and nine months ended September 30, 2026, respectively.

On May 28, 2026, the Company granted 283 RSUs that vested immediately on the date of issuance. The fair value of the RSUs was $5 and $0 and $5 was recorded as compensation expense during the three and nine months ended September 30, 2026, respectively.

DRAGONFLY ENERGY HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

Note 14 - STOCK-BASED COMPENSATION (CONTINUED)

On June 18, 2026, the Board authorized the issuance of 1,250 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 $5 and $6 was recorded as compensation expense during the three and nine months ended September 30, 2026, respectively.

On July 13, 2026, the Company granted 1,250 RSUs. The RSUs will vest in two equal annual installments, with the first vesting occurring immediately on July 13, 2026 and the following vesting date on the subsequent anniversary of the date of issuance, subject to each employees’ continued employment. The fair value of the RSUs was $17 and $2 was recorded as compensation expense during the three and nine months ended September 30, 2026, respectively.

On August 3, 2026, the Company granted 1,875 RSUs. The RSUs will vest in three equal annual installments, with the first vesting occurring immediately on August 3, 2026 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 $18 and $1 was recorded as compensation expense during the three and nine months ended September 30, 2026, respectively.

 DRAGONFLY ENERGY HOLDINGS CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

Note 14 - STOCK-BASED COMPENSATION (CONTINUED)

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

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY  

As of September 30, 2026 and 2025 there were 116,352 and 14,603 shares, respectively, of unissued authorized and available for future awards under the 2022 Equity Incentive Plan and Employee Stock Purchase Plan.