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SHARE-BASED PAYMENTS | 9 Months Ended
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Jun. 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:
|  | Three months ended |  |  | Nine months ended |  |
|  | June 30, |  |  | June 30, |  |
|  |  | 2014 |  |  |  | 2013 |  |  |  | 2014 |  |  |  | 2013 |  |
Share-based compensation benefit |  |  | $ | (19,000 | ) |  |  | $ | (77,000 | ) |  |  | $ | (209,000 | ) |  |  | $ | (118,000 | ) |
Income tax effect |  |  | $ | - |  |  |  | $ | - |  |  |  | $ | - |  |  |  | $ | - |  |
Share-based compensation benefit recognized in losses for the three and nine months ended June 30, 2014 and 2013 are reflected in “General and administrative” expenses in the Condensed Consolidated Statements of Operations. There was no impact on income taxes for the three and nine months ended June 30, 2014 and 2013 due to a full valuation allowance on the related deferred tax asset. As of June 30, 2014, there was $89,000 of total unrecognized compensation cost related to nonvested share options. That cost is expected to be recognized over 3.4 years. The weighted-average grant date fair value of employee options granted during the nine months ended June 30, 2014 was $2.04 (no options were granted during the three months ended June 30, 2014 or during the three and nine months ended June 30, 2013). Equity-classified Awards In December 2013, 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 four years of continuous service, and that expire ten years from the date of grant. The following assumptions were used in estimating fair value for equity-classified share options in the nine months ended June 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 Condensed Consolidated Statements of Operations. A summary of the activity in Barnwell’s equity-classified share options from October 1, 2013 through June 30, 2014 is presented below:
|  |  |  |  |  |  |  |  |  |  | Weighted- |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Average |  |  |  |  |
|  |  |  |  |  |  | Weighted- |  |  |  | Remaining |  |  |  |  |
|  |  |  |  |  |  | Average |  |  |  | Contractual |  |  |  | Aggregate |
|  |  |  |  |  |  | Exercise |  |  |  | Term |  |  |  | Intrinsic |
Options |  | Shares |  | Price |  |  | (in years) |  |  |  | Value |
Outstanding at October 1, 2013 |  |  | 60,000 |  |  |  | $ | 8.62 |  |  |  |  |  |  |  |  |
Granted |  |  | 30,000 |  |  |  | 3.01 |  |  |  |  |  |  |  |  |
Exercised |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Expired/Forfeited |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at June 30, 2014 |  |  | 90,000 |  |  |  | $ | 6.75 |  |  |  |  | 3.4 |  |  |  |  | $ | - |
Exercisable at June 30, 2014 |  |  | 60,000 |  |  |  | $ | 8.62 |  |  |  |  | 0.4 |  |  |  |  | $ | - |
Total share-based compensation expense for equity-classified awards vested in the three and nine months ended June 30, 2014 was $8,000 and $18,000, respectively. There was no share-based compensation expense for equity-classified awards in the prior year periods. Liability-classified Awards In December 2013, 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 four 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. The following assumptions were used in estimating fair value for all liability-classified share options outstanding:
|  | Nine months ended June 30, |
|  | 2014 |  | 2013 |
Expected volatility range |  | 34.1% to 57.1% |  | 49.8% to 64.4% |
Weighted-average volatility |  | 50.1% |  | 60.0% |
Expected dividends |  | 0.0% |  | 0.0% |
Expected term (in years) |  | 0.4 to 9.5 |  | 1.4 to 6.5 |
Risk-free interest rate |  | 0.1% to 2.5% |  | 0.3% to 1.9% |
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 Condensed Consolidated Statements of Operations. A summary of the activity in Barnwell’s liability-classified share options from October 1, 2013 through June 30, 2014 is presented below:
|  |  |  |  |  |  |  |  |  |  | Weighted- |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Average |  |  |  |  |
|  |  |  |  |  |  | Weighted- |  |  |  | Remaining |  |  |  |  |
|  |  |  |  |  |  | Average |  |  |  | Contractual |  |  |  | Aggregate |
|  |  |  |  |  |  | Exercise |  |  |  | Term |  |  |  | Intrinsic |
Options |  | Shares |  | Price |  |  | (in years) |  |  |  | Value |
Outstanding at October 1, 2013 |  |  | 717,250 |  |  |  | $ | 8.37 |  |  |  |  |  |  |  |  |
Granted |  |  | 30,000 |  |  |  | 3.01 |  |  |  |  |  |  |  |  |
Exercised |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Expired/Forfeited |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at June 30, 2014 |  |  | 747,250 |  |  |  | $ | 8.15 |  |  |  |  | 3.9 |  |  |  |  | $ | - |
Exercisable at June 30, 2014 |  |  | 717,250 |  |  |  | $ | 8.37 |  |  |  |  | 3.7 |  |  |  |  | $ | - |
The following table summarizes the components of the total share-based compensation for liability-classified awards:
|  |  | Three months ended |  |  | Nine months ended
|  |  | June 30, |  |  | June 30,
|  |  | 2014 |  |  |  | 2013 |  |  |  | 2014 |  |  |  | 2013 |
Due to vesting |  |  | $ | 8,000 |  |  |  | $ | 8,000 |  |  |  | $ | 18,000 |  |  |  | $ | 32,000 |
Due to remeasurement |  |  | (35,000 | ) |  |  | (85,000 | ) |  |  | (245,000 | ) |  |  | (150,000 | )
Total share-based compensation benefit for liability-based awards |  |  | $ | (27,000 | ) |  |  | $ | (77,000 | ) |  |  | $ | (227,000 | ) |  |  | $ | (118,000 | )

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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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