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. 01, 2017

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

6.	Stock-based compensation

2010

Incentive Plan:

July

2010,

the Company approved a stock incentive plan, the

2010

SMTC Incentive Plan (the

“2010

Plan”). The

2010

Plan permitted the issuance of up to

350,000

shares plus an additional number of shares determined by the Board of Directors but not to exceed

of the total number of fully diluted shares outstanding per year. Options vest over a

one

three

-year period and expire

five

years from their respective date of grant.

In the years

2011

2015,

the authorized number of shares increased by

1,944,022

under the

2010

Plan as approved by the Board of Directors and the stockholders in addition to annual increases authorized based on the formula of the

2010

Plan. In

2016,

the Company’s stockholders approved an increase in the number of shares available for issuance under the

2010

Plan by

1,500,000

shares and the annual increase based on the evergreen formula of the

2010

Plan was

182,171

shares. The total number of shares remaining available for future issuance under the

2010

Plan as at

January

2017

2,176,396.

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

28,

2014,

January

2016

and

January

2017

is as follows:

	Total Outstanding options			Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term (years)
Outstanding balance at December 29, 2013		435,000		$	2.50
Options granted		498,879		$	1.80
Options expired		—		$	—
Options exercised		(116,667	)	$	2.48
Outstanding balance at December 28, 2014		817,212		$	2.07
Options granted		—		$	—
Options forfeited		(95,431	)	$	2.03
Options expired		(66,667	)	$	3.11
Options exercised		—		$	—
Outstanding balance at January 3, 2016		655,114		$	1.98
Options granted		387,255		$	1.33
Options expired		(61,756	)	$	3.46
Options forfeited		(363,847	)	$	1.46
Options exercised		—			—

Outstanding balance at January 1, 2017		616,766		$	1.82	$	8		5.6

Exercisable balance at January 1, 2017		445,080		$	1.90	$	—		4.4

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 1 , 201 7			Year ended January 3, 2016 (1)		Year ended December 28, 2014
Black-Scholes weighted-average assumptions

Expected dividend yield		0.0	%		N/A		0.0	%
Expected volatility		43.8	%		N/A		57.0	%
Expected forfeiture		29.0	%		N/A		18.0	%
Risk-free interest rate		1.33	%		N/A		1.22	%
Expected option life in years		4.0			N/A		4.2

Weighted-average stock option fair value per option granted	$	0.48		$	N/A	$	0.82

(1)

stock options were granted in

2015

During the years ended

January

2017,

January

2016

and

December

28,

2014,

the Company recorded stock-based compensation expense and a corresponding increase in additional paid in capital of

$78,

$175

and

$133,

respectively.

During the years ended

January

2017,

January

2016

and

December

28,

2014,

112,739,

257,430

and

95,002

options vested, respectively. As at

January

2017,

compensation expense of

$131

related to non-vested stock options has not been recognized.

The following table presents information about stock options outstanding as of

January

2017:

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

370,610	$	1.80		270,080	$	1.80
25,000	$	1.96		25,000	$	1.96
100,000	$	2.02		100,000	$	2.02
50,000	$	2.19		50,000	$	2.19
71,156	$	1.33		—	$	—
616,766	$	1.82		445,080	$	1.90

Restricted Stock Units

Restricted Stock Units (“RSU”) are settled in shares of common stock. RSUs are issued under the

2010

Plan and have same terms and conditions as other equity compensation awards issued under the

2010

Plan. RSUs are valued at the closing stock price on the date the RSUs are granted. RSUs have vesting terms of

one

three

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

Certain RSUs granted during

2014

and

2016

have performance conditions such that the awards vest and are issuable only if the market price of the Company’s common stock meets or exceeds a specified target during the vesting period as defined by the administrator of the

2010

Plan. If the performance condition is not met, the RSUs will not vest and will be forfeited. The RSUs with performance conditions have been valued using the Cox, Ross and Rubenstein binomial model (“Binomial Model”). The following weighted average assumptions were used in calculating the estimated fair value of awards with performance conditions used to compute stock-based compensation expenses:

	Year ended January 1 , 201 7			Year ended January 3, 2016 (1)		Year ended December 28, 2014
Binomial Model weighted-average assumptions

Stock Price		1.34			N/A		1.80
Expected volatility		42.2	%		N/A		41.6	%
Expected forfeiture		29.0	%		N/A		18.0	%
Risk-free interest rate		0.60	%		N/A		1.05	%
RSU term		3.0			N/A		3.0

Weighted-average RSU fair value per award granted	$	0.42		$	N/A	$	0.63

(1)

RSU’s with performance conditions were granted in

2015.

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

Outstanding balance at December 29, 2013		—		$	—
RSU granted		520,433		$	1.94
RSU forfeited		—		$	—
RSU converted into common shares		—		$	—

Outstanding balance at December 28, 2014		520,433		$	1.94		2.50

RSU granted		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

RSU granted		987,764		$	0.84
RSU forfeited		(352,077	)	$	0.87
RSU converted into common shares		(25,125	)	$	1.99

Outstanding balance at January 1, 2017		1,090,126		$	1.22		1.01

During the periods ended

January

2017,

January

2016

and

December

28,

2014,

the Company recorded stock-based compensation expense and a corresponding increase in additional paid in capital of

$345,

$335,

and

$131,

respectively, with respect to RSUs. As at

January

2017,

compensation expense of

$783

related to non-vested RSUs has not been recognized.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References + Details