2019 Incentive Plan:

The Company maintains the SMTC Corporation 2019 Incentive Plan (the “2019 Plan”), which was adopted by the Board of Directors and approved by the stockholders of the Company in May 2019, which superseded the SMTC Corporation 2010 Incentive Plan. The total number of shares remaining available for future issuance under the 2019 Plan as at January 3, 2021 is 1,889,174. 

Stock options

The Company settles its stock options in shares of common stock. A summary of stock option activity under the Incentive Plans for the years ended December 30, 2018, December 29, 2019 and January 3, 2021 is as follows:

The estimated fair value of stock options is determined using the Black-Scholes option pricing model (excluding stock options that contain performance vesting conditions) and are amortized over the vesting period on a straight line basis. The Company estimates the expected term of the stock options based on evaluating historical exercise data. The Company considers exercise data based on employee behavior when developing the expected term assumptions. The computation of expected volatility is based on the Company’s historical volatility from its traded common stock over the expected term of the stock option grants. The interest rate for periods within the expected term of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The following weighted average assumptions were used in calculating the estimated fair value of stock options used to compute stock-based compensation expenses:

All stock options granted during 2019 and 2018 have market-based performance conditions such that tranches of stock awards vest and are issuable only if the Company’s common stock meets or exceeds specified

target market prices during the vesting period as defined by the administrator of the 2019 Plan and 2010 Plan, respectively. If the market-based performance conditions are not met during the option life (10 years), the stock options will not vest and will expire. These stock options with market-based performance conditions have been valued using the Binomial Model. The following weighted average assumptions were used in calculating the estimated fair value of awards with market-based performance conditions used to compute stock-based compensation expenses:

No stock awards were issued for the fiscal year ended January 3, 2021.

During the years ended January 3, 2021, December 29, 2019 and December 30, 2018, the Company recorded stock-based compensation expense and a corresponding increase in additional paid in capital of $328, $275 and $157, respectively.

During the years ended January 3, 2021, December 29, 2019 and December 30, 2018, 383,058, 312,494 and 629,893 options vested, respectively. As at January 3, 2021, compensation expense of $425 related to non-vested stock options has not been recognized.

The following table presents information about stock options outstanding as of January 3, 2021:

Restricted Stock Units and Restricted Stock Awards

Restricted Stock Units (“RSU”) are settled in shares of common stock. RSUs are issued under the 2019 Plan and have same terms and conditions as other equity compensation awards issued under the 2019 Plan. RSUs are valued at the closing stock price on the date the RSUs are granted. RSUs typically have vesting terms of one to three years. The compensation expense is recorded on a straight line basis over the vesting period. Restricted Stock Awards (“RSA”) may be issued which typically vest upon grant, however may include certain forfeiture conditions. RSAs are issued under the 2019 Plan and have the same terms and conditions as other equity compensation awards issued under the 2019 Plan.

When assessing the fair value of the RSU, a forfeiture rate of 30% is utilized when computing the stock-based compensation expenses.

No RSU’s with market-based performance conditions were granted in 2020, 2019 or 2018. RSU’s issued and outstanding include time-based vesting conditions.

During the periods ended January 3, 2021, December 29, 2019 and December 30, 2018, the Company recorded stock-based compensation expense and a corresponding increase in additional paid in capital of $433, $501, and $250, respectively, with respect to RSUs and RSAs.