Note 11 - Stock Based Compensation Plans

12 Months Ended

Dec. 31, 2014

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

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

11. Stock Based Compensation Plans

The Company believes that it is desirable to align the interests of its directors, executives, employees and consultants with those of its stockholders through their ownership of shares of Common Stock issued by SGRP ("SGRP Shares").  Although the Company does not require its directors, executives, employees or consultants to own SGRP Shares, the Company believes that it can help achieve this objective by providing long term equity incentives through the issuance to its eligible directors, executives, employees or consultants of options to purchase SGRP Shares and other stock-based awards pursuant to the 2008 Plan (as defined below) and facilitating the purchase of SGRP Shares at a modest discount by all of its eligible executives, employees and consultants who elect to participate in its Employee or Consultant Stock Purchase Plans (as defined below).  In particular, the Company believes that granting stock based awards (including restricted stock and options to purchase SGRP Shares) to such directors, executives, employees and consultants encourages growth in their ownership of SGRP Shares, which in turn leads to the expansion of their stake in the long-term performance and success of the Company.

SGRP has granted stock option and restricted stock awards to its eligible directors, officers and employees and certain employees of its affiliates to purchase SGRP Shares pursuant to the 2008 Stock Compensation Plan (as amended, the "2008 Plan").  SGRP's stockholders approved and adopted the 2008 Plan in May 2008, as the successor to various predecessor stock option plans (each a "Prior Plan") with respect to all new awards issued, and an amendment to the 2008 Plan in May 2009, permitting the discretionary repricing of existing awards. SGRP also has granted stock options that continue to be outstanding under the Prior Plans.  Each Prior Plan will continue to be active for the purposes of any remaining outstanding options issued under it for so long as such options are outstanding.

The 2008 Plan provides for the granting of restricted SGRP Shares, stock options to purchase SGRP Shares (either incentive or nonqualified), and restricted stock units, stock appreciation rights and other awards based on SGRP Shares ("Awards") to SGRP Directors and the Company's specified executives, employees and consultants (which are employees of certain of its affiliates), although to date SGRP has not issued any permissible form of Award other than stock options and restricted shares.  Unless terminated sooner as provided therein, the 2008 Plan will terminate on May 28, 2018, which is ten years from the 2008 Plan Effective Date, and no further Awards may be made under it.  However, any existing Awards made prior to such termination will continue in accordance with their respective terms and will continue to be governed by the 2008 Plan.  Stock options granted under the 2008 Plan have a maximum term of ten years, except in the case of incentive stock options granted to greater than 10% stockholders (whose terms are limited to a maximum of five years), and SGRP has generally issued options having those maximum terms.

The 2008 Plan limits the number of SGRP Shares that may be covered by Awards ("Outstanding Covered Shares") to 5,600,000 SGRP Shares in the aggregate (the "Maximum Covered Shares"), which Outstanding Covered Shares for this purpose consist of the sum of (i) the SGRP Shares covered by all Awards issued under the 2008 Plan on or after May 29, 2008 ("New Awards"), plus (ii) and the SGRP Shares covered by all stock options issued at any time under the prior Plans to the extent they were still outstanding on May 29, 2008 ("Continuing Awards").  SGRP Shares covered by New Awards or Continuing Awards that expire, lapse, terminate, are forfeited, become void or otherwise cease to exist (other than as a result of exercise) are no longer Outstanding Covered Shares, are added back to remaining availability under the Maximum Covered Shares and thus become available for new Award grants, while those SGRP Shares covered by exercised New Awards or Continuing Awards continue to be Outstanding Covered Shares and are not added back to, and thus continue to reduce, the remaining availability under the Maximum Covered Shares under the 2008 Plan.  The Outstanding Covered Shares and Maximum Covered Shares (as well as the SGRP Shares covered by a particular Award) are all subject to certain adjustments that may be made by the Compensation Committee upon the occurrence of certain changes in SGRP's capitalization or structure as provided in the 2008 Plan.  Except for the adjustments described above, an increase in the Maximum Covered Shares requires the consent of the SGRP stockholders under the terms of the 2008 Plan, Nasdaq rules and applicable law.

As of December 31, 2014, approximately 1.2 million shares were available for grant under the amended 2008 Plan.

The 2008 Plan (as amended in 2009) gives SGRP's Compensation Committee the full authority and complete flexibility from time to time to designate and modify (in its discretion) one or more of the outstanding Awards (including their exercise and base prices and other components and terms) to (among other things) restore their intended values and incentives to their holders. However, the exercise price, base value or similar component (if equal to SGRP's full stock price at issuance) of any Award cannot be lowered to an amount that is less than the Fair Market Value (as defined in the 2008 Plan) on the date of the applicable modification, and no modification can adversely affect an awardee's rights or obligations under an award without the awardee's consent. No further consent of SGRP's stockholders is required for any repricing or other modification of any outstanding or other aware under the 2008 Plan, including those previously issued under the Prior Plans. To date, Awards have only been repriced once (in 2009) pursuant to this authority. 

Restricted stock, stock options and other stock based awards under the 2008 Plan may be issued from time to time by SGRP in its discretion to the Company's executives and other employees and generally are included in the annual incentive plans of SGRP's executives.  Each year the Compensation Committee establishes (with recommendations from management) a budget for the maximum number of SGRP Shares that may be awarded in the applicable year (although Awards to new employees may not be covered by such budget in the Committee's discretion). The Company's management may present recommendations for such awards to the Compensation Committee at any of its regular quarterly meetings, although recently most recommendations have been made at the August meeting other than those for new employees.  The Chairman of the Board or the Compensation Committee may make those recommendations respecting the Company's Chief Executive Officer, and the Chief Executive Officer makes those recommendations respecting the Company's other executive and senior officers, as well as for any new officer or employee, and each of those executive officers in turn are allocated potential award shares for their departments and make recommendations respecting those under their supervision (subject to review and approval by the Chief Executive Officer).  In recommending to the Compensation Committee the actual number of restricted stock, stock options (and options shares covered) or other stock based Award to be granted to each individual, the person making the recommendation makes an assessment of the individual's contribution to these or decrease in the participant's abilities, responsibilities and performance of his or her duties.  The Compensation Committee reviews and discusses managements' recommendations at its meeting and determines whether and to what extent to approve and grant the proposed restricted stock, stock options (and options shares covered) or other stock based Awards to executives, employees and consultants of the Company pursuant to the 2008 Plan.

Stock Options

The stock option Awards issued under the 2008 Plan are typically "nonqualified" (as a tax matter), have a ten (10) year maximum life (term) and vest during the first four years following issuance at the rate of 25% on each anniversary date of their issuance so long as the holder continues to be employed by the Company.  Stock-based compensation cost is measured on the grant date, based on the fair value of the stock options Award calculated at that date, and is recognized as compensation expense over the requisite service period, which generally is the options' vesting period. Fair value is calculated using the Black-Scholes option pricing model.

Following are the specific valuation assumptions used for options granted in 2013:

Weighted-average
Expected volatility	91.36	%
Expected dividend yields	0.0	%
Expected terms (in years)	6.0
Risk-free interest rate	1.62	%
Expected forfeiture rate	5.0	%

Stock option Award activity for the years ended December 31, 2014 and 2013 is summarized below:

						Weighted-
				Weighted-		Average		Aggregate
				Average		Remaining		Intrinsic
	Covered			Exercise		Contractual		Value
Option Awards	Shares			Price		Term (Years)		(thousands)
Outstanding at January 1, 2013		3,061,393		$	0.71		6.50	$	3,169
Granted in 2013 (1)		793,000			2.02		–		36
Exercised/cancelled		(202,233	)		0.61		–		286
Forfeited or expired		(101,561	)		1.19		–		–
Outstanding at December 31, 2013		3,550,599		$	0.99		6.64	$	3,577
Exercised/cancelled		(453,522	)		0.53		–		445
Forfeited or expired		(1,750	)		1.01		–		–
Outstanding at December 31, 2014		3,095,327		$	1.07		6.39	$	1,322
Exercisable at December 31, 2014		2,448,788		$	0.84		5.62	$	1,259
Vested and expected to vest at December 31, 2014		3,037,422		$	1.05		5.84	$	1,576

(1)      Includes a stock option Award covering 300,000 SGRP Shares issued on December 2, 2013, to Ms. Jill M. Blanchard in connection with her employment on that date as the Company's Chief Executive Officer and President.

The following table summarizes information about stock options outstanding at December 31, 2014:

		Option Awards Outstanding						Option Awards Exercisable
				Weighted
				Average		Weighted				Weighted
		Covered		Remaining		Average		Covered		Average
Range of		Shares		Contractual		Exercise		Shares		Exercise
Exercise Prices		Outstanding		Life		Price		Exercisable		Price
Less than $1.00			1,519,623		4.58		0.55		1,671,623	$	0.55
$	1.00-$2.00		1,121,204		6.74		1.40		639,774	$	1.32
$	2.01-$4.00		454,500		8.58		2.13		137,391	$	2.12
Outstanding at December 31, 2014			3,095,327				1.07		2,448,788	$	0.84

The weighted-average grant-date fair value of stock option Awards granted during the year ended December 31, 2013 was $1.80. The total intrinsic value of stock option Awards exercised during the year ended December 31, 2014 and 2013 was $445,000 and $286,000, respectively. The tax benefit, available to the Company, from stock options exercised during the years ended December 31, 2014 and 2013 was approximately $169,000 and $109,000, respectively. However, since the Company has NOL's available for the next several years, these tax benefits have not been realized as of this report.

The Company recognized $511,000 and $486,000 in stock-based compensation expense relating to stock option Awards during the years ended December 31, 2014 and 2013, respectively. The recognized tax benefit on stock based compensation expense related to stock options during the years ended December 31, 2014 and 2013, was approximately $197,000 and $185,000, respectively.

As of December 31, 2014, total unrecognized stock-based compensation expense related to stock options was $956,974. This expense is expected to be recognized over a weighted average period of approximately 2.4 years, and will be adjusted for changes in estimated forfeitures.

Restricted Stock

The restricted stock Awards previously issued under the 2008 Plan vested during the first four years following issuance at the rate of 25% on each anniversary date of their issuance so long as the holder continues to be employed by the Company. Restricted stock granted under the 2008 Plan is measured at fair value on the date of the grant, based on the number of shares granted and the quoted price of the Company's common stock. The shares of stock are issued and value is recognized as compensation expense ratably over the requisite service period which generally is the Award's vesting period. In 2014, the Company issued 91,400 restricted stock Awards to employees and consultants of the company and 16,000 restricted stock Awards to its Directors.

The following table summarizes the activity for restricted stock Awards during the years ended December 31, 2014 and 2013:

				Weighted-
				Average
				Grant Date
				Fair Value
	Shares			per Share
Unvested at January 1, 2013		105,000		$	2.04
Granted		–			–
Vested		(25,000	)		2.09
Forfeited		–			–
Unvested at December 31, 2013		80,000			2.03
Granted		107,400			1.51
Vested		(80,000	)		2.03
Forfeited		–			–
Unvested at December 31, 2014		107,400		$	1.51

During the years ended December 31, 2014 and 2013, the Company recognized approximately $144,000 and $52,000, respectively, of stock-based compensation expense related to restricted stock. The recognized tax benefit on stock based compensation expense related to restricted stock during the years ended December 31, 2014 and 2013 was approximately $55,000 and $20,000, respectively. 

During the years ended December 31, 2014 and 2013, the total fair value of restricted stock vested was $162,400 and $49,350, respectively.

As of December 31, 2014, total unrecognized stock-based compensation expense related to unvested restricted stock Awards was $145,705, which is expected to be expensed over a weighted-average period of 3.4 years.

Stock Purchase Plans

In 2001, SGRP adopted its 2001 Employee Stock Purchase Plan (the "ESP Plan"), which replaced its earlier existing plan, and its 2001 Consultant Stock Purchase Plan (the "CSP Plan"). These plans were each effective as of June 1, 2001. The ESP Plan allows employees of the Company, and the CSP Plan allows employees of the affiliates of the Company to purchase SGRP's Common Stock from SGRP without having to pay any brokerage commissions. On August 8, 2002, SGRP's Board approved a 15% discount for employee purchases of Common Stock under the ESP Plan and recommended that its affiliates pay 15% of the value of the stock purchased as a cash bonus for affiliate consultant purchases of Common Stock under the CSP Plan.