11. Stock Based Compensation—The Company accounts for stock-based awards to employees and directors in accordance with FASB ASC 718, “Share-Based Payment,” which requires the measurement and recognition of compensation for all share-based payment awards made to employees and directors including shares of common stock granted for services, employee stock options, and employee stock purchases related to the Employee Stock Purchase Plan (“employee stock purchases”) based on estimated fair values.

The below tables illustrate the Company’s stock based compensation, unamortized stock-based compensation, and remaining weighted average period for the three months ended March 31, 2016 and 2015.


	Stock-Based Compensation for the Three months ended		Unamortized Stock-Based Compensation		Remaining Weighted Average Period (years)
March 31, 2016
Incentive Stock Options	$	89	$	746		1.7
Restricted Stock		326		1,462		1.4
Performance Based Restricted Stock		33		441		1.3
Performance Based Options		8		263		1.7

Total	$	456	$	2,912

March 31, 2015
Incentive Stock Options	$	115	$	1,336		2.7
Restricted Stock		1,172		4,010		1.3
Performance Based Restricted Stock		98		917		1.9
Performance Based Options		42		499		2.8

Total	$	1,427	$	6,762

Stock Options—During the three months ended March 31, 2016, the Company did not grant any employees options to acquire shares of common stock.

Option activity within each plan is as follows:


	Incentive Stock Option Plans			Weighted Average Price Per Share		Exercisable Weighted Average Price Per Share
Balance outstanding, December 31, 2015		626,845		$	9.25	$	7.73
Options exercised		(25,500	)		7.50
Options forfeited		(9,813	)		11.49

Balance outstanding, March 31, 2016		591,532		$	9.29	$	7.84

Information relating to stock options at March 31, 2016 summarized by exercise price is as follows:


	Outstanding Weighted Average						Exercisable Weighted Average
Exercise Price Per Share	Shares		Remaining Life (Months)		Exercise Price		Shares		Exercise Price
Incentive Stock Option Plan:
$7.50		331,750		56	$	7.5		331,750	$	7.50
$11.32—$14.49		259,782		101	$	11.57		25,507	$	12.28

		591,532			$	9.29		357,257	$	7.84

The weighted average exercise prices for options granted, and exercisable and the weighted average remaining contractual life for options outstanding as of March 31, 2016 were as follows:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
As of March 31, 2016:
Incentive Stock Option Plans:
Outstanding		591,532	$	9.29		76	$	3,841
Expected to Vest		582,606	$	9.25		76	$	3,803
Exercisable		357,257	$	7.84		57	$	2,836

During the three months ended March 31, 2016 and 2015, the Company recognized stock-based compensation related to stock options of $89 and $115, respectively.

As of March 31, 2016 and 2015, the Company had approximately $746 and $1,336, respectively, of unamortized stock-based compensation related to unvested stock options outstanding. This amount will be recognized over the weighted-average period of 1.7 and 2.7 years. This projected expense will change if any stock options are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures.

Restricted Shares — A summary of non-vested shares as of and for the three months ended March 31, 2016 and 2015 is presented below:


	Three Months Ended March 31, 2016					Three Months Ended March 31, 2015
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested shares at January 1^st		362,841		$	20.43		560,842		$	21.44
Granted		—			—		30,000			11.42
Vested		(127,274	)		31.29		(192,266	)		20.47
Forfeited		(16,008	)		23.67		(422	)		14.92

Nonvested shares at March 31^st		219,559		$	14.59		398,154		$	21.17

Restricted Shares — During the three months ended March 31, 2016, the Company issued a total of 119,402 shares of restricted common stock to employees. The issued shares are subject to stockholder approval at which point the shares will be fair valued. The shares will cliff vest after three years of service. The fair value will be determined by using the publicly traded share price as of the date of grant. The Company will recognize as expense the value of restricted shares over the required service period from grant date. These shares have been excluded from the table above.

During the three months ended March 31, 2015, the Company granted a total of 30,000 shares of common stock. Of these, 7,500 shares vested after 90 days from the date of grant and the balance will cliff vest after three years of services. The shares granted in 2015 were average fair valued at $11.42 per share. The fair value was determined by using the publicly traded share price as of the date of grant. The Company is recognizing as expense the value of restricted shares over the required service period.

During the three months ended March 31, 2016 and 2015, the Company recognized stock-based compensation related to restricted shares of $326 and $1,172, respectively.

As of March 31, 2016 and 2015, the Company had approximately $1,462 and $4,010, respectively, of unamortized stock-based compensation related to unvested restricted shares. This amount will be recognized over the weighted-average period of 1.4 and 1.3 years. This projected expense will change if any restricted shares are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures.

Performance Based Shares—A summary of non-vested performance based shares as of and for the three months ended March 31, 2016 and 2015 is presented below:


	Three Months Ended March 31, 2016					Three Months Ended March 31, 2015
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Nonvested shares at January 1^st		104,403		$	17.05		103,907	$	17.77
Granted		—			—		7,500		10.96
Forfeited		(9,395	)		17.65		—		—

Nonvested shares at March 31^st		95,008		$	16.99		111,407	$	17.31

Performance Based Shares — During the three months ended March 31, 2016, the Company issued a total of 52,170 performance based shares to employees. The issued shares are subject to stockholder approval at which point the shares will be fair valued. The fair value will be determined by using the publicly traded share price as of the date of grant. The Company will recognize as expense the value of the performance based shares over the required service period from grant date.

The shares will cliff vest on January 6, 2019 with a measurement period commencing January 1, 2016 and ending December 31, 2018. Eighty percent of these performance based shares are based upon the financial performance of the Company, specifically, an earnings before income tax (“EBIT”) goal weighted at 50% and a net sales goal weighted at 30%. The remaining 20% of performance based shares are based upon AVD stock price appreciation over the same performance measurement period. The EBIT and net sales goals measure the relative growth of the Company’s EBIT and net sales for the performance measurement period, as compared to the median growth of EBIT and net sales for an identified peer group. The stockholder return goal measures the relative growth of the fair market value of the Company’s stock price over the performance measurement period, as compared to that of the Russell 2000 Index and the median fair market value of the common stock of the comparator companies, identified in the Company’s 2015 Proxy Statement. All parts of these awards vest in three years, but are subject to reduction to a minimum (or even zero) for meeting less than the targeted performance and to increase to a maximum of 200% for meeting in excess of the targeted performance. These shares have been excluded from the table above.

During the three months ended March 31, 2015, the Company granted a total of 7,500 performance based shares that will cliff vest on January 5, 2018. Eighty percent of these performance based shares are based upon the financial performance of the Company, specifically, an earnings before income tax (“EBIT”) goal weighted at 50% and a net sales goal weighted at 30%. The remaining 20% of performance based shares are based upon AVD stock price appreciation over the same performance measurement period. The EBIT and net sales goals measure the relative growth of the Company’s EBIT and net sales for the performance measurement period, as compared to the median growth of EBIT and net sales for an identified peer group. The stockholder return goal measures the relative growth of the fair market value of the Company’s stock price over the performance measurement period, as compared to that of the Russell 2000 Index and the median fair market value of the common stock of the comparator companies, identified in the Company’s 2014 Proxy Statement. All parts of these awards vest in three years, but are subject to reduction to a minimum (or even zero) for meeting less than the targeted performance and to increase to a maximum of 200% for meeting in excess of the targeted performance.

As of March 31, 2015, performance based shares related to net income and net sales have an average fair value of $11.42 per share. The fair value was determined by using the publicly traded share price as of the date of grant. The performance based shares related to the Company’s stock price have an average fair value of $9.13 per share. The fair value was determined by using the Monte Carlo valuation method. For awards with performance conditions, the Company recognizes share-based compensation cost on a straight-line basis for each performance criteria over the implied service period.

During the three months ended March 31, 2016 and 2015, the Company recognized stock-based compensation related to performance based shares of $33 and $98, respectively.

As of March 31, 2016 and 2015, the Company had approximately $441 and $917, respectively, of unamortized stock-based compensation expense related to unvested performance based shares. This amount will be recognized over the weighted-average period of 1.3 and 1.9 years. This projected expense will change if any performance based shares are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures.

Performance Incentive Stock Options—During the three months ended March 31, 2016 and 2015, the Company did not grant any employees performance incentive stock options to acquire shares of common stock.

Performance option activity is as follows:


	Incentive Stock Option Plans			Weighted Average Price Per Share		Exercisable Weighted Average Price Per Share
Balance outstanding, December 31, 2015		98,410		$	11.49	$	—
Options forfeited		(8,946	)		11.49		—

Balance outstanding, March 31, 2016		89,464		$	11.49	$	—

Information relating to stock options at March 31, 2016 summarized by exercise price is as follows:


	Outstanding Weighted Average						Exercisable Weighted Average
Exercise Price Per Share	Shares		Remaining Life (Months)		Exercise Price		Shares		Exercise Price
Performance Incentive Stock Option Plan:
$11.49		89,464		21	$	11.49		—	$	—

		89,464			$	11.49		—	$	—

The weighted average exercise prices for options granted and exercisable and the weighted average remaining contractual life for options outstanding as of March 31, 2016 are as follows:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
As of March 31, 2016:
Incentive Stock Option Plans:
Outstanding		89,464	$	11.49		21	$	384
Expected to Vest		53,603	$	11.49		21	$	230
Exercisable		—	$	—		—	$	—

During the three months ended March 31, 2016 and 2015 the Company recognized stock-based compensation related to performance stock options of $8 and $42, respectively.

As of March 31, 2016 and 2015, the Company had approximately $263 and $499, respectively, of unamortized stock-based compensation expenses related to unvested performance incentive stock options outstanding. This amount will be recognized over the weighted-average period of 1.7 and 2.8 years. This projected expense will change if any performance incentive stock options are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures.