SHARE BASED COMPENSATION

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 9. SHARE BASED COMPENSATION

On June 15, 2015, our stockholders approved the Superior Drilling Company, Inc. 2015 Long Term Incentive Plan (the “2015 Incentive Plan”). The purpose of the 2015 Incentive Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and its affiliates and by motivating such persons to contribute to the growth and profitability of the Company and our affiliates. Subject to adjustment as provided in the 2015 Incentive Plan, the maximum aggregate number of shares of the Company’s common stock that may be issued with respect to awards under the 2015 Incentive Plan is 1,592,878.

Restricted Stock Units - As of September 30, 2015, there were 131,250 shares outstanding with respect to awards granted under the Company’s 2014 Incentive Plan. The Board of Directors has frozen the 2014 Incentive Plan, such that no future grants of awards will be made and the 2014 Incentive Plan shall only remain in effect with respect to awards under that plan outstanding as of June 15, 2015 until they expire according to their terms.

On August 10, 2015, the Board of Directors granted 71,202 restricted stock units from the Company’s 2015 Incentive Plan to the Directors based on the closing price of the Company’s common stock on the date of the grant. These restricted stock units will vest over a three-year period.

On August 10, 2015, the Board of Directors granted 366,000 restricted stock units from the Company’s 2015 Incentive Plan to officers and employees based on the closing price of the Company’s common stock on the date of the grant. These restricted stock units vested 33% on the grant date, 33% on the first anniversary of the grant date and 34% on second anniversary of the grant date.

Compensation expense recognized for grants vesting under the 2014 Incentive Plan was $52,578 and $157,734 for the three and nine months ended September 30, 2015, respectively. Compensation expense recognized for grants of restricted stock vesting under the 2015 Incentive Plan was $263,902 for the three and nine months ended September 30, 2015. The Company recognized compensation expense and recorded it as share-based compensation in the consolidated condensed statement of operations.

Total unrecognized compensation expense related to unvested restricted stock units expected to be recognized over the remaining weighted vesting period of 2.1 years equaled $973,634 at September 30, 2015. These shares vest over a three-year time period.

Stock Options - Also, on August 10, 2015, the Board of Directors granted 87,500 stock options from the Company’s 2015 Incentive Plan to officers and employees based on the closing price of the Company’s common stock on the date of the grant. These restricted stock units and options vested 33% on the grant date, 33% on the first anniversary of the grant date and 34% on second anniversary of the grant date.

Compensation expense recognized for option grants vesting under the 2015 Incentive Plan was $15,016 for the three and nine months ended September 30, 2015. The Company recognized compensation expense and recorded it as share-based compensation in the consolidated condensed statement of operations.

The fair value of the stock option grants was calculated using the Black-Scholes formula and is included in the valuation assumptions table below:

	Three Months Ended September 30, 2015
Stock option grants:
Discount rate		1.09	%
Expected lives in years		3
Expected volatility		49.19	%
Estimated forfeiture rate		25 - 30	%
Average fair value of options granted	$	2.16