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 and six months ended June 30, 2016 and 2015.


	Stock-Based Compensation for the Three months ended		Stock-Based Compensation for the Six months ended		Unamortized Stock-Based Compensation		Remaining Weighted Average Period (years)
June 30, 2016
Incentive Stock Options	$	92	$	181	$	627		1.5
Restricted Stock		368		694		3,119		2.0
Performance Based Restricted Stock		107		140		1,079		2.8
Performance Based Options		45		53		226		1.5

Total	$	612	$	1,068	$	5,051

June 30, 2015
Incentive Stock Options	$	116	$	231	$	1,204		2.5
Restricted Stock		790		1,962		3,521		1.5
Performance Based Restricted Stock		107		205		811		2.0
Performance Based Options		45		87		454		2.5

Total	$	1,058	$	2,485	$	5,990

Stock Options—During the six months ended June 30, 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
Options exercised		(12,900	)		7.50
Options forfeited		(5,000	)		11.49

Balance outstanding, June 30, 2016		573,632		$	9.31	$	7.85

Information relating to stock options at June 30, 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		318,850		53	$	7.50		318,850	$	7.50
$11.32—$14.49		254,782		98	$	11.57		25,507	$	12.28

		573,632			$	9.31		344,357	$	7.85

The weighted average exercise prices for options granted and exercisable and the weighted average remaining contractual life for options outstanding as of June 30, 2016 was as follows:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
As of June 30, 2016:
Incentive Stock Option Plans:
Outstanding		573,632	$	9.31		73	$	3,329
Expected to Vest		565,767	$	9.28		73	$	3,300
Exercisable		344,357	$	7.85		54	$	2,499

During the three months ended June 30, 2016 and 2015, the Company recognized stock-based compensation related to stock options of $92 and $116, respectively. During the six months ended June 30, 2016 and 2015, the Company recognized stock-based compensation related to stock options of $181 and $231, respectively.

As of June 30, 2016, the Company had approximately $627 of unamortized stock-based compensation related to unvested stock options outstanding. This amount will be recognized over the weighted-average period of 1.5 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 for the six months ended June 30, 2016 and 2015 is presented below:


	Six Months Ended June 30, 2016					Six Months Ended June 30, 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

Granted		140,541		$	15.08		21,005		$	14.28
Vested		(22,639	)		15.63		(28,505	)		13.53
Forfeited		(6,457	)		14.98		(1,201	)		14.92

Nonvested shares at June 30^th		331,004		$	14.72		389,453		$	21.37

Restricted Shares—During the six months ended June 30, 2016, the Company granted a total of 140,541 shares of restricted common stock to employees. Of these, 21,139 shares vested immediately and the remaining 119,402 shares will cliff vest after three years of service. The shares granted in 2016 were average fair valued at $15.08 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 six months ended June 30, 2015, the Company granted a total of 51,005 shares of common stock. Of these, 21,005 shares vest immediately, 7,500 shares will vest after 90 days and the balance will cliff vest after three years of service. The shares granted in 2015 were average fair valued at $12.60 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 June 30, 2016 and 2015, the Company recognized stock-based compensation related to restricted shares of $368 and $790, respectively. During the six months ended June 30, 2016 and 2015, the Company recognized stock-based compensation related to restricted shares of $694 and $1,962, respectively.

As of June 30, 2016, the Company had approximately $3,119 of unamortized stock-based compensation related to unvested restricted shares. This amount will be recognized over the weighted-average period of 2.0 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 Restricted Shares—A summary of non-vested performance based shares for the six months ended June 30, 2016 and 2015 is presented below:


	Six Months Ended June 30, 2016					Six Months Ended June 30, 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
Granted		52,170			14.39		—		—
Forfeited		(19,612	)		28.25		—		—

Nonvested shares at June 30^th		127,566		$	14.20		111,407	$	17.31

Performance Based Shares—During the six months ended June 30, 2016, the Company granted a total of 52,170 performance based shares that will cliff vest on January 6, 2019, provided that the recipients are individually continuously employed by the Company during the vesting period. These shares have 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.

During the six months ended June 30, 2015, the Company granted a total of 7,500 performance based shares that will cliff vest on January 5, 2018, provided that the recipient is continuously employed by the Company during the vesting period. Eighty percent of these performance based shares are based upon financial performance of the Company, specifically, an earnings before income tax (“EBIT”) goal weighted at 50% and a net sales goal weighted at 30% for the period commencing January 1, 2015 and ending December 31, 2017. 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 June 30, 2016, performance based shares related to net income and net sales have an average fair value of $15.08 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 $11.63 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 when the Company believes it is probable that the performance targets, as defined in the agreements, will be achieved.

During the three months ended June 30, 2016 and 2015, the Company recognized stock-based compensation related to performance based shares of $107 and $107, respectively. During the six months ended June 30, 2016 and 2015, the Company recognized stock-based compensation related to performance based shares of $140 and $205, respectively.

As of June 30, 2016 the Company had approximately $1,079 of unamortized stock-based compensation related to unvested performance based shares. This amount will be recognized over the weighted-average period of 2.8 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 Based Stock Options—During the six months ended June 30, 2016 and 2015, the Company did not grant any employees performance incentive stock options to acquire shares of common stock.

Performance based 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	$	—

Balance outstanding, June 30, 2016		89,464		$	11.49	$	—

Information relating to outstanding stock options at June 30, 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		18	$	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 June 30, 2016 are as follows:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
As of June 30, 2016:
Incentive Stock Option Plans:
Outstanding		89,464	$	11.49		18	$	324
Expected to Vest		81,546	$	11.49		18	$	295
Exercisable		—	$	—		—	$	—

During the three months ended June 30, 2016 and 2015, the Company recognized stock-based compensation related to performance stock options of $45 and $45, respectively. During the six months ended June 30, 2016 and 2015 the Company recognized stock-based compensation related to performance stock options of $53 and $87, respectively.

As of June 30, 2016, the Company had approximately $226 of unamortized stock-based compensation related to unvested performance incentive stock options outstanding. This amount will be recognized over the weighted-average period of 1.5 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.