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 following tables illustrate the Company’s stock based compensation, unamortized stock-based compensation, and remaining weighted average period for the three and six months ended June 30, 2017 and 2016.

	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, 2017
Incentive Stock Options	$	86	$	170	$	193		0.5
Restricted Stock		777		1,433		5,198		1.4
Performance Based Restricted Stock		321		621		2,157		2.3
Performance Based Options		58		98		117		0.5
Total	$	1,242	$	2,322	$	7,665

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

Stock Options—During the three and six months ended June 30, 2017, 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, 2016		541,905		$	9.33	$	7.97
Options exercised		(15,000	)		7.50		—
Options forfeited		(3,919	)		11.49		—
Balance outstanding, March 31, 2017		522,986			9.37		7.99
Options exercised		(21,300	)		7.50		—
Options forfeited		(3,183	)		11.49		—
Balance outstanding, June 30, 2017		498,503		$	9.43	$	8.03

Information relating to stock options at June 30, 2017, 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		262,050		41	$	7.5		262,050	$	7.50
$11.32—$14.49		236,453		86	$	11.57		34,334	$	12.07
		498,503			$	9.43		296,384	$	8.03

The weighted average exercise prices for options granted, and exercisable, and the weighted average remaining contractual life for options outstanding as of June 30, 2017, were as follows:

As of June 30, 2017	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
Incentive Stock Option Plan:
Outstanding		498,503	$	9.43		63	$	3,897
Expected to Vest		495,757	$	9.42		62	$	3,881
Exercisable		296,384	$	8.03		44	$	2,733

During the three months ended June 30, 2017 and 2016, the Company recognized stock-based compensation related to stock options of $86 and $92, respectively. During the six months ended June 30, 2017 and 2016, the Company recognized stock-based compensation related to stock options of $170 and $181, respectively.

As of June 30, 2017, the Company had approximately $193 of unamortized stock-based compensation related to unvested stock options outstanding. This amount will be recognized over the weighted-average period of 0.5 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.

Common stock grants — A summary of non-vested shares as of, and for, the three months ended June 30, 2017 and 2016 is presented below:

	Six Months Ended June 30, 2017					Six Months Ended June 30, 2016
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested shares at December 31^st		324,756		$	14.75		362,841		$	20.43
Granted		251,475			16.10		—			—
Vested		(10,100	)		12.95		(127,274	)		31.29
Forfeited		(6,544	)		15.26		(16,008	)		23.67
Nonvested shares at March 31^st		559,587			15.38		219,559			14.59
Granted		38,502			17.08		140,541			15.08
Vested		(188,400	)		15.22		(22,639	)		15.63
Forfeited		(6,593	)		15.55		(6,457	)		14.98
Nonvested shares at June 30th		403,096		$	15.61		331,004		$	14.72

Common stock grants — During the six months ended June 30, 2017, the Company issued a total of 289,977 shares of common stock to employees and directors. 24,312 shares vested immediately, 3,900 shares will vest in three equal tranches on the employee’s anniversary, 1,000 shares will cliff vest after one year of service, 2,500 shares will cliff vest after two years of service, and the remaining shares will cliff vest after three years of service. The shares granted in 2017 were average fair valued at $16.23 per share. The fair value was 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.

During the six months ended June 30, 2016, the Company issued 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 the grant was approved. The Company will recognize as expense the value of restricted shares over the required service period.

During the three months ended June 30, 2017 and 2016, the Company recognized stock-based compensation related to restricted shares of $777 and $368, respectively. During the six months ended June 30, 2017 and 2016, the Company recognized stock-based compensation related to restricted shares of $1,433 and $694, respectively.

As of June 30, 2017, the Company had approximately $5,198 of unamortized stock-based compensation related to unvested restricted shares. This amount will be recognized over the weighted-average period of 1.4 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 six months ended June 30, 2017 and 2016, respectively is presented below:

	Six Months Ended June 30, 2017					Six Months Ended June 30, 2016
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested shares at December 31^st		119,022		$	14.18		104,403		$	17.05
Granted		121,194			15.40		—			—
Forfeited		—			—		(9,395	)		17.65
Nonvested shares at March 31^st		240,216			14.80		95,008			16.99
Granted		7,400			15.88		52,170			14.39
Vested		(48,046	)		14.92		—			—
Forfeited		(12,560	)		12.92		(19,612	)		28.25
Nonvested shares at June 30th		187,010		$	14.93		127,566		$	14.20

Performance Based Shares — During the six months ended June 30, 2017, the Company issued a total of 128,594 performance based shares to employees. The shares granted during the six months of 2017 have an average fair value of $15.43. The fair value was 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 February 8, 2020 with a measurement period commencing January 1, 2017 and ending December 31, 2019. Eighty percent of these performance based shares are based upon the financial performance of the Company, specifically, an earnings before income taxes (“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 2016 Proxy Statement. All parts of these awards vest in three years, but are subject to reduction to a minimum (or even zero) for recording less than the targeted performance and to increase to a maximum of 200% for achieving in excess of the targeted performance.

During the six months ended June, 2016, the Company conditionally granted a total of 52,170 performance based shares that will cliff vest on January 6, 2019 with a measurement period commencing January 1, 2016 and ending December 31, 2018. The shares granted to management during the first quarter of 2016, were subject to stockholder approval to extend the term of the Company’s stock incentive plan. That approval was received at the stockholder meeting on June 8, 2016. At that point the shares were given a fair value of $14.39. The fair value was determined by using publically traded share price on the date that the stockholders approved the grant. Eighty percent of these performance based shares are based upon the financial performance of the Company, specifically, 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 recording less than the targeted performance and to increase to a maximum of 200% for achieving in of the targeted performance. As the shares were subject to stockholder approval at the time the shares were issued to management, no expense was recorded during the first quarter of 2016.

As of June 30, 2017, performance based shares related to EBIT and net sales have an average fair value of $16.10 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 $12.60 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 June 30, 2017 and 2016, the Company recognized stock-based compensation related to performance based shares of $321 and $107, respectively. During the six months ended June 30, 2017 and 2016, the Company recognized stock-based compensation related to performance based shares of $621 and $140, respectively.

As of June 30, 2017, the Company had approximately $2,157 of unamortized stock-based compensation expense related to unvested performance based shares. This amount will be recognized over the weighted-average period of 2.3 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 six months ended June 30, 2017 and 2016, 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, 2016		82,334		$	11.49	$	—
Options forfeited		—			—		—
Balance outstanding, March 31, 2017		82,334			11.49		—
Options forfeited		(50	)		11.49		—
Balance outstanding, June 30, 2017		82,284		$	11.49	$	—

Information relating to stock options at June 30, 2017 summarized by exercise price is as follows:

Outstanding Weighted

Average

Exercisable Weighted

Average

Exercise Price Per Share

Remaining

Life

(Months)

Exercise

Price

Exercise

Price

Performance Incentive Stock Option Plan:

82,284

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, 2017 are as follows:

As of June 30, 2017	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
Performance Incentive Stock Option Plan:
Outstanding		82,284	$	11.49		6	$	474
Expected to Vest		78,672	$	11.49		6	$	453
Exercisable		—	$	—		—	$	—

During the three months ended June 30, 2017 and 2016, the Company recognized stock-based compensation related to performance stock options of $58 and $45, respectively. During the six months ended June 30, 2017 and 2016, the Company recognized stock-based compensation related to performance stock options of $98 and $53, respectively.

As of June 30, 2017, the Company had approximately $117 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 0.5 and 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.

In March 2016, FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718). The new standard changes the accounting for certain aspects of share-based payments to employees. The standard requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital (“APIC”) pools. The standard also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. Cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity in the statement of cash flows. In addition, the standard allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The new standard is effective for fiscal years beginning after December 15, 2016 with early adoption permitted. The Company assessed the impact of the adoption of this new standard and determined there was no material impact on the 2016 consolidated financial statements. The Company has considered the different options for treatment of forfeitures in accounting for stock compensation and has elected to continue to account for such adjustments on the estimated basis. The Company adopted this new standard as of January 1, 2017 on a prospective basis. The impact of this adoption was not material.