SMTC Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 6 - Stock-based Compensation

Note 6 - Stock-based Compensation

12 Months Ended

Jan. 03, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

6.	Stock - based compensation

Stock options

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 2011, the Company voted to increase the amount of shares available under the 2010 Plan by 670,000 and in June 2012 the Company voted to increase the number of shares available under the 2010 Plan by 652,000. There was no vote to increase the number of shares available under the plan in 2013, 2014 and 2015 and as such the authorized increase to the number of shares was calculated as 163,619, 164,173 and 176,197 respectively based on 1% of the fully diluted common shares as at December 29, 2013, December 28, 2014 and January 3, 2016 respectively. In 2015, 67,779 restricted stock units were converted into common shares and therefore, there are 2,108,210 shares authorized to issue under the 2010 Incentive Plan.

A summary of stock option activity under the Incentive Plans for the years ended December 29, 2013, December 28, 2014 and January 3, 2016 is as follows:

	Total Outstanding options			Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term (years)
Outstanding balance at December 30, 2012		1,400,807		$	2.82
Options granted		235,000		$	2.06
Options expired		(1,127,744	)	$	2.90
Options exercised		(73,063	)	$	0.93
Outstanding balance at December 29, 2013		435,000		$	2.50
Options granted		498,879		$	1.80
Options forfeited		(116,667	)	$	2.48
Options exercised		—		$	—
Outstanding balance at December 28, 2014		817,212		$	2.07
Options granted		—		$	—
Options expired		(66,667	)	$	3.11
Options forfeited		(95,431	)	$	2.03
Options exercised		—			—

Outstanding balance at January 3, 2016		655,114		$	1.98	$	—		6.5

Exercisable balance at January 3, 2016		394,098		$	2.07	$	—		5.6

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:

	Year ended January 3, 2016 (1)		Year ended December 28, 2014			Year ended December 29, 2013
Black-Scholes weighted-average assumptions

Expected dividend yield		N/A		0.0	%		0.0	%
Expected volatility		N/A		57.0	%		69.1	%
Expected forfeiture		N/A		18.0	%		16.0	%
Risk-free interest rate		N/A		1.22	%		0.4	%
Expected option life in years		N/A		4.2			3.7

Weighted-average stock option fair value per option granted	$	N/A	$	0.82		$	1.03

(1)

No stock options were granted in 2015

During the years ended January 3, 2016, December 28, 2014 and December 29, 2013, the Company recorded stock-based compensation expense and a corresponding increase in additional paid in capital of $175, $133 and $248, respectively.

During the years ended January 3, 2016, December 28, 2014 and December 29, 2013, 257,430, 95,002 and 158,334 options vested, respectively. As at January 3, 2016, compensation expense of $217 related to non-vested stock options has not been recognized.

The following table presents information about stock options outstanding as of January 3, 2016:

Outstanding options	Weighted average exercise price		Exercisable options		Weighted average exercise price

420,114	$	1.80		195,763	$	1.80
25,000	$	1.96		25,000	$	1.96
100,000	$	2.02		66,668	$	2.02
10,000	$	2.17		6,667	$	2.17
50,000	$	2.19		50,000	$	2.19
50,000	$	3.11		50,000	$	3.11

655,114	$	1.98		394,098	$	2.07

Restricted Stock Units

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 to three years. The compensation expense is recorded on a straight line basis over the vesting period.

	Outstanding options			Weighted average stock price		Weighted average remaining contractual term (years)

Outstanding balance at December 29, 2013		—		$	—
RSU granted under the 2010 Incentive Plan		520,433		$	1.94
RSU forfeited		—		$	—
RSU converted into common shares		—		$	—

Outstanding balance at December 28, 2014		520,433		$	1.94		2.5

RSU granted under the 2010 Incentive Plan		91,818		$	1.47
RSU forfeited		(64,908	)	$	1.89
RSU converted into common shares		(67,779	)	$	1.80

Outstanding balance at January 3, 2016		479,564		$	1.88		1.51

During the periods ended January 3, 2016, December 28, 2014 and December 29, 2013, the Company recorded stock-based compensation expense and a corresponding increase in additional paid in capital of $335, $131, and $ nil, respectively, with respect to RSUs.