SHARE-BASED PAYMENTS

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



	Year ended September 30,
	2017		2016
Share-based expense (benefit)	$	15,000	$	(22,000	)
Income tax effect	$	—	$	—

Share-based compensation expense (benefit) recognized in earnings (loss) for the years ended September 30, 2017 and 2016 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, 2017 and 2016 due to a full valuation allowance on the related deferred tax asset. As of September 30, 2017, there was $1,000 of total unrecognized compensation cost related to nonvested share options. That cost is expected to be recognized over 0.2 years.

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, 2017, 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.

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, 2016 through September 30, 2017 is presented below:



Options	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at October 1, 2016	30,000	$	3.01
Granted	—	—
Exercised	—	—
Expired/Forfeited	—	—
Outstanding at September 30, 2017	30,000	$	3.01	6.2	$	—
Exercisable at September 30, 2017	22,500	$	3.01	6.2	$	—

Total share-based compensation expense for equity-classified awards vested in the years ended September 30, 2017 and 2016 was $5,000 and $10,000, 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,
	2017	2016
Expected volatility range	53.1% to 69.5%	56.7% to 72.7%
Weighted-average volatility	64.6%	63.6%
Expected dividends	None	None
Expected term (in years)	0.2 to 6.2	1.2 to 7.2
Risk-free interest rate	1.1% to 2.1%	0.6% to 1.4%
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, 2016 through September 30, 2017 is presented below:



Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at October 1, 2016	591,250		$	7.98
Granted	—		—
Exercised	—		—
Expired/Forfeited	(27,500	)	8.18
Outstanding at September 30, 2017	563,750		$	7.97	1.6	$	—
Exercisable at September 30, 2017	556,250		$	8.04	1.5	$	—

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



	Year ended September 30,
	2017		2016
Due to vesting	$	2,000	$	4,000
Due to remeasurement	8,000		(36,000		)
Total share-based compensation expense (benefit) for liability-based awards	$	10,000	$	(32,000	)