GOVERNMENT

In a 10Q regulatory document filed Wednesday to the US Securities and Exchange Commission (SEC), SGI warned investors that a restructuring plan and recent loans totalling US$50m may not be enough to save it. "If we are unable to achieve our objectives, we would consider alternatives for ensuring the continued operation of our business. These alternatives could include further reductions in headcount and in the scope of our operations, generating cash from selling or licensing our intellectual property and seeking funding from marketing partners and government customers," said SGI in its filing. SGI valued its current assets at $452.1 million as of June 2005. By Decembr 2005, the value of the assets had sunk to $397.3 million, a decrease of 12 percent. The company retained AlixPartners LLC during the fourth quarter of 2005 to help oversee a turnaround plan, which involves corporate layoffs, estimated to have totaled about 1,000 employees; a reduction in procurement costs; closing one building of its corporate headquarters; and tight spending controls. In January, Dennis McKenna was also named chairman of the board, chief executive officer and president, succeeding Robert Bishop, who remains on the board of directors and serves as vice chairman. In its filing, however, SGI warned that "the new funds and our current sources of liquidity will only be adequate for our fiscal 2006 operating needs if our restructuring plan yields its anticipated savings and we meet the goals of our credit agreement for fiscal 2006. If we fail to achieve these objectives, we will likely consume additional cash in our operations, which would further impair our liquidity. If we are unable to achieve our objectives, we would consider alternatives for ensuring the continued operation of our business." "Alternatives include pursuing our current strategy as an independent public company, seeking a strategic partner or acquirer, seeking a financial partner to make a substantial equity investment, divesting additional technologies or products, or some combination of the foregoing," the company said. "We cannot assure that any acquisition or other change in control transaction will occur, or that if such a transaction does occur that it would result in stockholders realizing value equal to or greater than the current trading price of our common stock," SGI added. "If we fail to implement one or more of these alternatives successfully and we have a significant shortfall against our fiscal 2006 operating plan, we could be forced to seek protection under bankruptcy laws." For the quarter ending Dec. 31, 2005, SGI reported a net loss of $31.4 million on total revenues of $144.4 million, versus a loss of $11.1 million on revenues of $223.1 million for the same quarter in 2004.