12. 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, 2018 and 2017.

	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, 2018
Restricted Stock	$	988	$	1,750	$	7,424		2.2
Performance Based Restricted Stock		481		1,028		3,336		2.2
Total	$	1,469	$	2,778	$	10,760

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

Stock Options—During the three and six months ended June 30, 2018, 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, 2017		473,641		$	9.38	$	9.38
Options exercised		(40,923	)		11.49		—
Balance outstanding, March 31, 2018		432,718			9.19		9.19
Options exercised		(38,360	)		10.02		—
Balance outstanding, June 30, 2018		394,358		$	9.12	$	9.12

Information relating to stock options at June 30, 2018, 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		233,545		29	$	7.5		233,545	$	7.50
$11.32—$14.49		160,813		76	$	11.48		160,813	$	11.48
		394,358			$	9.12		394,358	$	9.12

The weighted average exercise prices for options granted, and exercisable, and the weighted average remaining contractual life for options outstanding as of June 30, 2018, were as follows:

As of June 30, 2018	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
Incentive Stock Option Plan:
Outstanding		394,358	$	9.12		48	$	5,452
Expected to Vest		394,358	$	9.12		48	$	5,452
Exercisable		394,358	$	9.12		48	$	5,452

Common stock grants — A summary of non-vested shares as of, and for, the three and six months ended June 30, 2018 and 2017 is presented below:

	Six Months Ended June 30, 2018					Six Months Ended June 30, 2017
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested shares at December 31^st		391,753		$	15.61		324,756		$	14.75
Granted		254,972			19.97		251,475			16.10
Vested		(8,800	)		12.07		(10,100	)		12.95
Forfeited		(5,265	)		16.51		(6,544	)		15.26
Nonvested shares at March 31^st		632,660			17.41		559,587			15.38
Granted		22,308			23.66		38,502			17.08
Vested		(20,313	)		22.82		(188,400	)		15.22
Forfeited		(6,424	)		17.25		(6,593	)		15.55
Nonvested shares at June 30th		628,231		$	17.40		403,096		$	15.61

Common stock grants — During the six months ended June 30, 2018, the Company issued a total of 277,280 shares of common stock to employees and directors of which 19,313 shares vested immediately, 19,760 shares will vest between a range of 178 days to 1,060 days, and the remaining shares will cliff vest after three years of service. The shares granted in 2018 were average fair valued at $20.27 per share. The fair value was determined by using the publicly traded share price as of the market close on the date of grant. The Company will recognize as expense the fair value of restricted shares over the required service period.

During the six months ended June 30, 2017, the Company issued a total of 289,977 shares of common stock to employees and directors of which 24,312 shares vested immediately, 3,900 shares will vest in three equal tranches on the employee’s anniversary, 1,000 shares vested 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 market close on the date of grant. The Company will recognize as expense the fair value of restricted shares over the required service period.

During the three months ended June 30, 2018 and 2017, the Company recognized stock-based compensation related to restricted shares of $988 and $777, respectively. During the six months ended June 30, 2018 and 2017, the Company recognized stock-based compensation related to restricted shares of $1,750 and $1,433, respectively.

As of June 30, 2018, the Company had approximately $7,424 of unamortized stock-based compensation related to unvested restricted shares. This amount will be recognized over the weighted-average period of 2.2 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, 2018 and 2017, respectively is presented below:

	Six Months Ended June 30, 2018					Six Months Ended June 30, 2017
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested shares at December 31^st		186,057		$	14.93		119,022		$	14.18
Granted		122,446			18.79		121,194			15.40
Vested		(14,625	)		11.01		—			—
Forfeited		(1,765	)		15.40		—			—
Nonvested shares at March 31^st		292,113			16.74		240,216			14.80
Granted		3,850			22.69		7,400			15.88
Vested		—			—		(48,046	)		14.92
Forfeited		(2,179	)		17.67		(12,560	)		12.92
Nonvested shares at June 30th		293,784		$	16.81		187,010		$	14.93

Performance Based Shares — During the six months ended June 30, 2018, the Company issued a total of 126,296 performance-based shares to employees. The shares granted have an average fair value of $18.91. The fair value was determined by using the publicly traded share price as of the market close on the date of grant. The Company will recognize as expense, the fair value of the performance based shares over the required service period from grant date. The majority of the shares will cliff vest on March 9, 2021 with a measurement period commencing January 1, 2018 and ending December 31, 2020. 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 2017 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.

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 market close on the date of grant. The Company will recognize as expense the fair 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.

As of June 30, 2018, performance based shares related to EBIT and net sales have an average fair value of $18.88 per share. The fair value was determined by using the publicly traded share price as of the market close on the date of grant. The performance based shares related to the Company’s stock price have an average fair value of $15.85 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, 2018 and 2017, the Company recognized stock-based compensation related to performance based shares of $481 and $321, respectively. During the six months ended June 30, 2018 and 2017, the Company recognized stock-based compensation related to performance based shares of $1,028 and $621, respectively.

As of June 30, 2018, the Company had approximately $3,336 of unamortized stock-based compensation expense related to unvested performance based shares. This amount will be recognized over the weighted-average period of 2.2 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, 2018 and 2017, the Company did not grant any employees performance incentive stock options to acquire shares of common stock. As of June 30, 2018, the Company has concluded that the performance measure based on EBIT and net sales for the performance stock options granted in 2014, when compared to the peer group, was met at 200% of targeted performance and all related additional expenses were recorded as of December 31, 2017. The performance options based on market price was met at 175%, however, the market condition is reflected in the grant date fair value valuation and no additional expenses were recognized as of December 31, 2017. As a result, 77,598 shares were earned through additional vesting based on performance. The balance outstanding as of June 30, 2018 is increased by the additional options issued based on performance.

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, 2017 and March 31, 2018		81,666		$	11.49	$	11.49
Additional vesting based on performance		77,598			11.49		—
Options exercised		(17,839	)		11.49		—
Balance outstanding, June 30, 2018		141,425		$	11.49	$	11.49

Information relating to stock options at June 30, 2018 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:

141,425

11.49

141,425

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, 2018 are as follows:

As of June 30, 2018	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
Performance Incentive Stock Option Plan:
Outstanding		141,425	$	11.49		78	$	1,621
Expected to Vest		141,425	$	11.49		78	$	1,621
Exercisable		141,425	$	11.49		78	$	1,621

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 condensed consolidated statements 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 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.