Stock options

2000 Incentive Plan:

In July 2000, the Company approved the SMTC/SMTC Manufacturing Corporation of Canada 2000 Equity Incentive Plan (the “2000 Incentive Plan”). The plan permitted the issuance of up to 1,727,052 shares plus an additional number of shares determined by the Board of Directors but not to exceed 1% of the total number of shares outstanding per year. No options related to the 2000 Equity Incentive Plan were outstanding as at December 29, 2014.

2010 Incentive Plan:

The Company settles its stock options in equity. In July 2010, the Company approved a stock option plan, the 2010 SMTC Incentive Plan (the “2010 Incentive Plan”). The 2010 Incentive Plan permits the issuance of up to 350,000 shares plus an additional number of shares determined by the Board of Directors but not to exceed 1% of the total number of fully diluted shares outstanding per year. Options vest over a one to three-year period and expire five to 10 years from their respective date of grant.

In June of 2011 and 2012, the Company voted to increase the amount of shares available under the 2010 Incentive Plan by 670,000 and 652,000, respectively. There was no vote to increase the number of available shares of the 2010 Incentive Plan in 2013 and 2014. Based on the permitted annual increase described above, the 2013 and 2014 annual increases to the shares was 163,619 and 164,173, respectively based on 1% of the diluted outstanding common shares as at December 29, 2013 and December 28, 2014, respectively. Therefore, the total authorized shares authorized to issue are 1,999,791 under the 2010 Incentive Plan. There have been no exercises historically from the 2010 Incentive Plan. With the outstanding stock options and restricted stock units of 817,212 and 520,433, respectively there are 662,784 shares available for issuance as at December 28, 2014.

A summary of stock option activity under the 2000 and 2010 Incentive Plans for the periods ended December 30, 2012, December 29, 2013 and December 28, 2014 is as follows:

The estimated fair value of options is determined using the Black-Scholes option pricing model and is amortized over the vesting period on a straight line basis. The Company estimates the expected term of the 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 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 options used to compute stock-based compensation expenses:

During the years ended December 28, 2014, December 29, 2013 and December 30, 2012, the Company recorded stock-based compensation expense and a corresponding increase in additional paid in capital of $133, $248, and $379, respectively.

During the years ended December 28, 2014, December 29, 2013 and December 30, 2012, 95,002, 158,334 and 253,332 options vested, respectively. As at December 28, 2014, compensation expense of $463 related to non-vested stock options has not been recognized.

The following table presents information about stock options outstanding as of December 28, 2014:

Restricted StockUnits

Restricted Stock Units (“RSU”) are settled in equity. RSUs are issued under the 2010 Incentive Plan and have same terms and conditions as other equity compensation awards issued under the 2010 Incentive Plan. The RSUs are valued at the closing stock price on the date the units are granted. RSUs have vesting terms of one and three years. The compensation expense is recorded on a straight line basis over the vesting period.

During the periods ended December 28, 2014, December 29, 2013 and December 30, 2012, the Company recorded stock-based compensation expense and a corresponding increase in additional paid in capital of $131, $ nil, and $ nil, respectively, with respect to RSUs.