SHARE-BASED PAYMENTS

9 Months Ended

Jun. 30, 2012

SHARE-BASED PAYMENTS

SHARE-BASED PAYMENTS

3.SHARE-BASED PAYMENTS

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

	Three months ended								Nine months ended
	June 30,								June 30,
	2012				2011				2012				2011
Share-based compensation (benefit) expense		$	(124,000	)		$	(945,000	)		$	(192,000	)		$	972,000
Income tax effect		$	-			$	-			$	-			$	-

Share-based compensation (benefit) expense recognized in (loss) earnings for the three and nine months ended June 30, 2012 and 2011 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, 2012 and 2011 due to a full valuation allowance on the related deferred tax asset.

Equity-classified Awards

A summary of the activity in Barnwell’s equity-classified share options from October 1, 2011 through June 30, 2012 is presented below:

								Weighted-
								Average
			Weighted-					Remaining
			Average					Contractual		Aggregate
			Exercise					Term		Intrinsic
Options	Shares		Price					(in years)		Value
Outstanding at October 1, 2011		60,000		$	8.62
Granted		-
Exercised		-
Expired/Forfeited		-
Outstanding at June 30, 2012		60,000		$		8.62			2.4		$		–
Exercisable at June 30, 2012		60,000		$			8.62		2.4		$	–

There was no share-based compensation expense for equity-classified awards in the three and nine months ended June 30, 2012 and 2011.

Liability-classified Awards

As of June 30, 2012, there was $66,000 of total unrecognized compensation cost related to nonvested liability-classified share options.  That cost is expected to be recognized over 1.4 years.

The following assumptions were used in estimating fair value for all liability-classified share options outstanding:

	Nine months ended June 30,
	2012	2011
Expected volatility range	60.1% to 65.2%	36.4% to 70.9%
Weighted-average volatility	61.9%	62.2%
Expected dividends	0.0%	0.0%
Expected term (in years)	2.4 to 7.5	0.3 to 8.5
Risk-free interest rate	0.4% to 1.1%	0.0% to 2.8%
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, 2011 through June 30, 2012 is presented below:

						Weighted-
						Average
			Weighted-			Remaining
			Average			Contractual		Aggregate
			Exercise			Term		Intrinsic
Options	Shares		Price			(in years)		Value
Outstanding at October 1, 2011		755,375		$	8.40
Granted		-
Exercised		-
Expired/Forfeited		-
Outstanding at June 30, 2012		755,375		$	8.40		5.7		$	-
Exercisable at June 30, 2012		591,625		$	9.53		5.2		$	-

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,
	2012			2011			2012			2011
Due to vesting	$	20,000		$	76,000		$	76,000		$	293,000
Due to remeasurement	(144,000		)	(1,021,000		)	(268,000		)	679,000
Total share-based compensation (benefit) expense for liability-based awards	$	(124,000	)	$	(945,000	)	$	(192,000	)	$	972,000

No liability-classified options were exercised during the three and nine months ended June 30, 2012.  In the three and nine months ended June 30, 2011, the cash feature of 3,750 and 43,125 shares, respectively, of non-qualified options were exercised.  The total intrinsic value of the liability-classified options exercised during the three and nine months ended June 30, 2011 was $12,000 and $130,000, respectively.  There was no estimated tax benefit related to the options exercised during the three and nine months ended June 30, 2011 due to a full valuation allowance on the related deferred tax asset.