SHARE-BASED PAYMENTS

The Company’s share-based compensation benefit and related income tax effects are as follows:



	Year ended September 30,
	2015			2014
Share-based compensation benefit	$	(140,000	)	$	(380,000	)
Income tax effect	$	—		$	—

Share-based compensation benefit recognized in earnings for the years ended September 30, 2015 and 2014 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, 2015 and 2014 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.

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, 2015, 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 when the optionee requests shares.

As of September 30, 2015, there was $24,000 of total unrecognized compensation cost related to nonvested share options. That cost is expected to be recognized over 2.2 years.

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.

A summary of the activity in Barnwell’s equity-classified share options from October 1, 2014 through September 30, 2015 is presented below:



Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at October 1, 2014	90,000		$	6.75
Granted	—
Exercised	—
Expired/Forfeited	(60,000	)	8.62
Outstanding at September 30, 2015	30,000		$	3.01	8.2	$	—
Exercisable at September 30, 2015	7,500		$	3.01	8.2	$	—

Total share-based compensation expense for equity-classified awards vested in the years ended September 30, 2015 and 2014 was $20,000 and $26,000, respectively.

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,
	2015	2014
Expected volatility range	51.5% to 61.6%	29.0% to 57.2%
Weighted-average volatility	52.4%	45.4%
Expected dividends	None	None
Expected term (in years)	2.2 to 8.2	0.2 to 9.2
Risk-free interest rate	0.6% to 1.9%	0.1% to 2.5%
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, 2014 through September 30, 2015 is presented below:



Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at October 1, 2014	747,250		$	8.15
Granted	—
Exercised	—
Expired/Forfeited	(156,000	)	8.80
Outstanding at September 30, 2015	591,250		$	7.98	3.6	$	—
Exercisable at September 30, 2015	568,750		$	8.18	3.4	$	—

The following table summarizes the components of the total share-based compensation for liability-classified awards:



	Year ended September 30,
	2015			2014
Due to vesting	$	10,000		$	21,000
Due to remeasurement	(170,000		)	(427,000		)
Total share-based compensation benefit for liability-based awards	$	(160,000	)	$	(406,000	)