Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Capital stock

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Note 5 - Capital stock
 9 Months Ended
Oct. 02, 2011
Stockholders' Equity Note Disclosure [Text Block]
5.
Capital stock

Common shares

Authorized share capital:

The authorized share capital of the Company at October 2, 2011 and January 2, 2011 consisted of:

 
(i)
26,000,000 shares of common stock, par value $0.01 per share: Holders are entitled to one vote per share and the right to share in dividends pro rata subject to any preferential dividend rights of any then outstanding preferred stock.

 
(ii)
5,000,000 shares of special voting stock, par value $0.01 per share: From time to time the Company may issue special voting stock in one or more series and will fix the terms of that series at the time it is created.

Issued and outstanding:

The issued and outstanding number of common shares included in shareholders’ equity consisted of the following as of October 2, 2011:

   
Number
of shares
      $  
Common Stock
             
Exchangeable shares:
             
Balance at beginning of the nine month period
    583,848     $ 5,524  
Shares retired pursuant to:
               
Conversion to common stock
    (11,700 )     (110 )
Balance at end of the period
    572,148     $ 5,414  
Common shares:
               
Balance at beginning of the nine month period
    15,329,732     $ 379  
Shares issued pursuant to:
               
Exercise of stock options
    286,994       3  
Conversion of exchangeable shares
    11,700       —  
Balance at end of the period
    15,628,426     $ 382  
Special voting stock:
               
Balance at beginning of the nine month period
    1     $ —  
Balance at end of the period
    1     $ —  
Total Common stock
    16,200,575     $ 5,796  

Exchangeable shares:

Exchangeable shares of SMTC Manufacturing Corporation of Canada (“SMTC Canada”), an indirect subsidiary of the Company, can be exchanged on a one-for-one basis for one share of the common stock of the Company. Each exchangeable share of SMTC Canada, as nearly as practicable, is intended to be the economic equivalent of a share of common stock of the Company and holders of the exchangeable shares of SMTC Canada are able to exercise essentially the same voting rights with respect to the Company as they would have if they had exchanged their exchangeable shares of SMTC Canada for common stock of the Company. Upon the earlier of July 27, 2015, or the number of outstanding exchangeable shares falling below 500,000, subject to certain adjustment and acceleration provisions, SMTC Canada will have the right to redeem all of the outstanding exchangeable shares by delivering common shares of the Company on a one-for-one basis.

    
Stock options

For information regarding the Company’s stock option arrangements, see Note 6 of Form 10-K. 547,000 stock options were granted during the three and nine month periods ended October 2, 2011. The Company generally issues new shares when options are exercised. A summary of stock option activity for the nine month period ended October 2, 2011 is as follows:

   
Number
of options
   
Weighted
average
exercise
price
   
Aggregate
intrinsic
value
   
Weighted
average
remaining
contractual
term (years)
 
Outstanding at January 2, 2011
    662,752     $ 2.00              
Options granted
    547,000     $ 3.20              
Options forfeited
    (106,399 )   $ 2.55              
Options exercised
    (286,994 )   $ 1.08              
Outstanding at October 2, 2011
    816,359     $ 3.06     $ 89       4.1  
Exercisable at October 2, 2011
    156,362     $ 4.44     $ 10       2.1  

The following weighted average assumptions were used in calculating the estimated fair value of options granted in the period used to compute stock-based compensation expenses:

   
Period ended
October 2,
2011
 
Black-Scholes weighted-average assumptions
     
Expected dividend yield
    0.0 %
Expected volatility
    93.3 %
Risk-free interest rate
    0.73 %
Expected option life in years
    4.4  
         
Weighted-average stock option fair value per option granted
  $ 0.84  

During the three month periods ended October 2, 2011 and October 3, 2010, the Company recorded stock-based compensation expense and a corresponding increase in additional paid-in capital of $27 and $42, respectively. For the nine month periods ended October 2, 2011 and October 3, 2010, the Company recorded stock-based compensation expense and a corresponding increase in additional paid-in capital of $117 and $139, respectively. At October 2, 2011, compensation expense of $484 related to non-vested stock options had not been recognized.

Deferred share units

In previous periods, Deferred Share Units were granted to directors and the former Chief Executive Officer of the Company as remuneration. No deferred share units were granted in the three or nine months ended October 2, 2011 or October 3, 2010. As at January 2, 2011, 46,688 deferred share units were outstanding, and none as at October 2, 2011. Cash payments of $128 were made for 46,688 deferred share units during the nine months ended October 2, 2011. There were no cash payments made during the three months ended October 2, 2011, or the three and nine months ended October 3, 2010.

Deferred Share Unit compensation recovery for the three and nine months ended October 2, 2011 was nil and $21, respectively, compared to expense of $175 and $726 for the three and nine months ended October 3, 2010, reflecting mark-to-market adjustments.   There will be no further Deferred Share Unit compensation recoveries or expenses since there are no deferred share units outstanding.