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SHARE-BASED PAYMENTS | 12 Months Ended
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Sep. 30, 2014
SHARE-BASED PAYMENTS |
SHARE-BASED PAYMENTS | 3.SHARE-BASED PAYMENTS The Company’s share-based compensation benefit and related income tax effects are as follows:
|  | Year ended September 30, |
|  | 2014 |  | 2013 |
Share-based compensation benefit |  |  | $ | (380,000 | ) |  |  | $ | (73,000 | ) |
Income tax effect |  |  | $ | - |  |  |  | $ | - |  |
Share-based compensation benefit recognized in earnings (loss) for the years ended September 30, 2014 and 2013 are reflected in “General and administrative” expenses in the Consolidated Statements of Operations. There was no impact on income taxes for the years ended September 30, 2014 and 2013 due to a full valuation allowance on the related deferred tax asset. Description of Share-Based Payment Arrangements The Company’s stock option plans are administered by the Compensation Committee of the Board of Directors. 1998 Stock Option Plan: Under the stockholder-approved 1998 Stock Option Plan, Barnwell was authorized to grant up to 780,000 shares of common stock to employees. Option shares are no longer available for grant under the 1998 Stock Option Plan. Stock options grants include qualified options that have an exercise price equal to the closing market price of Barnwell’s stock on the date preceding the date of grant (110% of the closing market price on the date preceding the date of grant for options granted to affiliates), vest annually over four years of continuous service, and expire ten years from the date of grant (five years from date of grant for options granted to affiliates). Non-qualified stock options: In December 2004, Barnwell granted non-qualified options with an exercise price equal to the closing market price of Barnwell’s stock on the date of grant, that vest annually over five years of continuous service, and that expire ten years from the date of grant. The non-qualified options have stock appreciation rights features that permit the holder to receive stock, cash or a combination thereof equal to the amount by which the fair market value, at the time of exercise of the option, exceeds the option price. 2008 Equity Incentive Plan: The stockholder-approved 2008 Equity Incentive Plan provides for the issuance of incentive stock options, nonstatutory stock options, stock options with stock appreciation rights, restricted stock, restricted stock units and performance units, qualified performance-based awards, and stock grants to employees, consultants and non-employee members of the Board of Directors. 800,000 shares of Barnwell common stock have been reserved for issuance and as of September 30, 2014, a total of 62,500 share options remain available for grant. Stock options grants include nonqualified stock options that have exercise prices equal to Barnwell’s stock price on the date of grant, vest annually over a service period of four years commencing one year from the date of grant and expire ten years from the date of grant. Certain options have stock appreciation rights that permit the holder to receive stock, cash or a combination thereof equal to the amount by which the fair market value, at the time of exercise of the option, exceeds the option price. Barnwell currently has a policy of issuing new shares to satisfy share option exercises under both the qualified plans and non-qualified plans when the optionee requests shares. As of September 30, 2014, there was $64,000 of total unrecognized compensation cost related to nonvested share options. That cost is expected to be recognized over 3.2 years. The weighted-average grant date fair value of employee options granted during the year ended September 30, 2014 was $2.04 (no options were granted during the year ended September 30, 2013). Equity-classified Awards Compensation cost for equity-classified awards is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period. The following assumptions were used in estimating fair value for equity-classified share options granted in the year ended September 30, 2014:
Expected volatility |  | 55.6 | %
Expected dividends |  | 0.0 | %
Expected term (in years) |  | 10.0 |
Risk-free interest rate |  | 3.0 | %
Expected forfeitures |  | None
The application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation, and consequently, the related costs reported in the Consolidated Statements of Operations. A summary of the activity in Barnwell’s equity-classified share options from October 1, 2013 through September 30, 2014 is presented below:
|  |  |  |  |  | Weighted- |  |  |
|  |  |  | Weighted- |  | Average |  |  |
|  |  |  | Average |  | Remaining |  | Aggregate |
|  |  |  | Exercise |  | Contractual |  | Intrinsic |
Options |  | Shares |  | Price |  | Term |  | Value |
Outstanding at October 1, 2013 |  |  | 60,000 |  |  |  | $ | 8.62 |  |  |  |  |  |  |  |  |  |
Granted |  |  | 30,000 |  |  |  | 3.01 |  |  |  |  |  |  |  |  |  |
Exercised |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expired/Forfeited |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at September 30, 2014 |  |  | 90,000 |  |  |  | $ | 6.75 |  |  |  | 3.2 |  |  |  | $ | - |  |
Exercisable at September 30, 2014 |  |  | 60,000 |  |  |  | $ | 8.62 |  |  |  | 0.2 |  |  |  | $ | - |  |
Total share-based compensation expense for equity-classified awards vested in the year ended September 30, 2014 was $26,000. There was no share-based compensation expense for equity-classified awards in the prior year period. Liability-classified Awards Compensation cost for liability-classified awards is remeasured to current fair value using a closed-form valuation model based on current values at each period end with the change in fair value recognized as an expense or benefit until the award is settled. The following assumptions were used in estimating fair value for all liability-classified share options outstanding:
|  | Year ended September 30, |
|  | 2014 |  | 2013 |
Expected volatility range |  | 29.0% to 57.2% |  | 47.6% to 64.3% |
Weighted-average volatility |  | 45.4% |  | 58.0% |
Expected dividends |  | 0.0% |  | 0.0% |
Expected term (in years) |  | 0.2 to 9.2 |  | 1.2 to 6.2 |
Risk-free interest rate |  | 0.1% to 2.5% |  | 0.1% to 1.7% |
Expected forfeitures |  | None |  | None |
The application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation, and consequently, the related costs reported in the Consolidated Statements of Operations. A summary of the activity in Barnwell’s liability-classified share options from October 1, 2013 through September 30, 2014 is presented below:
|  |  |  |  |  | Weighted- |  |  |
|  |  |  | Weighted- |  | Average |  |  |
|  |  |  | Average |  | Remaining |  | Aggregate |
|  |  |  | Exercise |  | Contractual |  | Intrinsic |
Options |  | Shares |  | Price |  | Term |  | Value |
Outstanding at October 1, 2013 |  |  | 717,250 |  |  |  | $ | 8.37 |  |  |  |  |  |  |  |  |  |
Granted |  |  | 30,000 |  |  |  | 3.01 |  |  |  |  |  |  |  |  |  |
Exercised |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expired/Forfeited |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at September 30, 2014 |  |  | 747,250 |  |  |  | $ | 8.15 |  |  |  | 3.6 |  |  |  | $ | - |  |
Exercisable at September 30, 2014 |  |  | 717,250 |  |  |  | $ | 8.37 |  |  |  | 3.4 |  |  |  | $ | - |  |
The following table summarizes the components of the total share-based compensation for liability-classified awards:
|  | Year ended September 30, |
|  | 2014 |  | 2013 |
Due to vesting |  |  | $ | 21,000 |  |  |  | $ | 46,000 |  |
Due to remeasurement |  |  | (427,000 | ) |  |  | (119,000 | ) |
Total share-based compensation benefit for liability-based awards |  |  | $ | (406,000 | ) |  |  | $ | (73,000 | ) |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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