STOCKHOLDERS’ EQUITY

Repurchase of Common Shares

On February 8, 2013, the Company's board of directors approved a stock repurchase plan which authorizes the repurchase of up to $5 million

of the Company's common stock. The authorization remains open through August 8, 2014. Purchases may be made from time to time by the

Company in the open market at prevailing market prices or in privately negotiated transactions. As of September 30, 2013, 123,100 shares of

common stock at a weighted average price per share of $2.01 had been repurchased by the Company under the plan.

Stock Option Plans

1997 Stock Incentive Plan

In 1997, the Company’s board of directors adopted and the Company's shareholders' approved the 1997 Stock Incentive Plan, as amended (the “1997 Plan”). Under the 1997 Plan, SGI has granted options and other equity awards as a means of attracting and retaining officers, employees, non-employee directors and consultants, to provide incentives to such persons, and to align the interests of such persons with the interests of stockholders by providing compensation based on the value of SGI's stock. Awards under the 1997 Plan may be granted in the form of non-qualified stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, dividend equivalent rights and other stock-based awards (which may include outright grants of shares). The 1997 Plan currently is administered by the Board of Directors, which may in its discretion select officers and other employees, directors (including non-employee directors) and consultants to SGI and its subsidiaries to receive grants of awards.

Under the 1997 Plan, the exercise price of options and base price of SARs may be set at the discretion of the Board, and stock options and SARs may have any term. The majority of the stock options granted through June 30, 2008 under the 1997 Plan have been granted with an exercise price equal to market value on the date of grant. The 1997 Plan limits the number of stock options and SARs that may be granted to any one employee to 550,000 in any year. The 1997 Plan will terminate when no shares remain available for issuance and no awards remain outstanding. At September 30, 2013, there were no shares remaining available for future awards under the 1997 Plan, and on December 13, 2012, the 2012 Stock Award and Incentive Plan (the “2012 Plan”), which was previously approved by the Board of Directors, was approved by the Company's shareholders. The 2012 Plan replaces the 1997 Plan for new grants, but any outstanding awards under the 1997 Plan continue in accordance with the 1997 Plan terms.

2012 Stock Award and Incentive Plan

In 2012, the Company’s Board of Directors adopted and the Company's shareholders approved the 2012 Plan. Under the 2012 Plan, SGI may grant options and other equity awards as a means of attracting and retaining officers, employees, non-employee directors and consultants, to provide incentives to such persons, and to align the interests of such persons with the interests of stockholders by providing compensation based on the value of SGI's stock. Awards under the 2012 Plan may be granted in the form of incentive or non-qualified stock options, SARs, restricted stock, restricted stock units, dividend equivalent rights and other stock-based awards (which may include outright grants of shares). The 2012 Plan currently is administered by the Compensation Committee of the Board of Directors, which may in its discretion select officers and other employees, directors (including non-employee directors) and consultants to SGI and its subsidiaries to receive grants of awards.

Under the 2012 Plan, the exercise price of options and base price of SARs may be set at the discretion of the Board, but generally may not be less than the fair market value of the shares on the date of grant, and the maximum term of stock options and SARs is ten years. The 2012 Plan limits the number of share-denominated awards that may be granted to any one employee to 750,000 in any year. The 2012 Plan will terminate when no shares remain available for issuance and no awards remain outstanding. At September 30, 2013, there were 1,192,500 shares remaining available for future awards under the 2012 Plan.

Employee Stock Options. During the three months ended September 30, 2013 and 2012, the Company recorded expense of $52,000 and $0 in the condensed consolidated statements of operations related to the vesting of issued employee stock options. The Company estimates the fair value of its options on the date of grant using the Black-Scholes option-pricing model, which takes into account assumptions such as dividend yield, the risk-free interest rate, the expected stock price volatility and the expected life of the options.

No stock options vested during the three months ended September 30, 2013. Also during the three months ended September 30, 2013 and 2012, no stock options were granted.

The following table summarizes the stock option activity for the three months ended September 30, 2013:



	Options			Weighted Average Exercise Price		Intrinsic Value (in thousands)		Weighted Average per share Grant Date Fair Value
Outstanding at June 30, 2013	1,278,750			$	3.95	$	—	$	1.75
Exercised	(12,000		)	2.80		—		0.44
Cancellations, expirations and forfeitures	(134,000		)	2.81		—		0.63
Outstanding at September 30, 2013	1,132,750			4.10		$	—	1.90
Shares exercisable at September 30, 2013	$	602,750		5.93		$	—	2.07

Following is a summary of the status of stock options outstanding at September 30, 2013:



Options Outstanding								Options Exercisable
Exercise Price Ranges				Number of Shares Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number of Shares Exercisable	Weighted Average Exercise Price
From		To		Number of Shares Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number of Shares Exercisable	Weighted Average Exercise Price
$	0.01	$	4.99	960,000	9.04	$	2.37	430,000	$	2.82
5.00		9.99		7,750	0.10	8.97		7,750	8.97
10.00		14.99		165,000	0.51	13.90		165,000	13.90
				1,132,750	7.74	$	4.10	602,750	5.93

Restricted Stock Units. The Company has issued restricted stock to certain members of management, key employees, and directors. During the three months ended September 30, 2013 and 2012, the Company granted 200,000 and 79,168 restricted shares at a weighted average issuance price of $2.25 and $1.64, respectively. Such shares generally vest after 2 years from the date of grant. Total compensation expense recorded for restricted shares for the three months ended September 30, 2013 and 2012 was $92,000 and $72,000, respectively. The remaining compensation expense that will be recorded under restricted stock grants totals $839,000, which will be recorded over a weighted average period of approximately 2.25 years.

The following table summarizes the restricted stock activity for the three months ended September 30, 2013:



	Shares	Weighted Average Share Price at Grant Date
Outstanding at June 30, 2013	362,500	$	2.36
Shares granted	200,000	2.25
Outstanding at September 30, 2013	562,500	2.32
Vested but unissued at September 30, 2013	2,500	1.68

No tax benefit was recognized in the condensed consolidated statements of operations related to share-based compensation for the three months ended September 30, 2013 and 2012. No share-based compensation was capitalized for the three months ended September 30, 2013 and 2012.

Stock Appreciation Rights

The Company, from time to time, enters into separate share-based payment arrangements with certain key employees and executive officers. The number of shares to be received under these awards ultimately depends on the appreciation in the Company’s common stock over a specified period of time, generally three years. At the end of the stated appreciation period, the number of shares of common stock issued will be equal in value to the appreciation in the shares of the Company’s common stock, as measured from the stocks closing price on the date of grant to the average price in the last month of the third year of vesting. As of September 30, 2013 and June 30, 2013, there were 37,500 stock appreciation rights outstanding with an exercise price of $12.06. At September 30, 2013 and June 30, 2013, there was no intrinsic value associated with these arrangements. The Company recorded the awards as a component of equity using the Black-Scholes valuation model. These awards are amortized on a straight-line basis over the vesting period. For the three months ended September 30, 2013 and 2012, the Company recognized no pre-tax compensation expense related to these grants. There is no remaining compensation expense that will be recorded for these awards.

Certain Anti-Takeover Provisions

The Company’s Certificate of Incorporation and by-laws contain certain anti-takeover provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company without negotiating with its Board of Directors. Such provisions could limit the price that certain investors might be willing to pay in the future for the Company’s securities. Certain of such provisions provide for a Board of Directors with staggered terms, allow the Company to issue preferred stock with rights senior to those of the common stock, or impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions.