UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-K


(Mark
One)




x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
Fiscal Year Ended December 31,
2009




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
transition period from __________________ to __________________




Commission
file number: 001-33700




GLOBALOPTIONS GROUP,
INC


(Exact
Name of Registrant as Specified in Its Charter)





Delaware
                  
                  30-0342273(State or Other Jurisdiction of Incorporation or Organization)
                  
                  (I.R.S. Employer Identification No.)75 Rockefeller Plaza, 27th Floor
                    New York, New York
                  
                  10019(Address of Principal Executive Offices)
                  
                  (Zip Code)





Registrant’s
telephone number, including area code: (212) 445-6262





(Former
name and former address, if changed since last report)




Securities registered pursuant to Section 12(b) of the Act:Title of Each Class
                
                Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per share
                
                The NASDAQ Stock Market LLC





Securities
registered pursuant to Section 12 (g) of the Act:  None




Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes  ̈   No
x




Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. Yes  ̈  No
x




Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.  Yes x  No
 ̈




Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.   ̈




Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.  See definitions of "large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.  (Check one):




Large accelerated filer  ̈
              Accelerated filer  ̈Non-accelerated filer  ̈ (Do not check if a smaller reportingcompany)
              Smaller reporting company x




Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Act):  Yes  ̈  No
x




The aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference
to the price at which the common equity was last sold, or the average bid and
asked price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter ($2.00) was
$15,997,186.  Solely for the purposes of this calculation, shares held
by directors, executive officers and 10% owners of the registrant have been
excluded.  Such exclusion should not be deemed a determination or an
admission by the registrant that such individuals are, in fact, affiliates of
the registrant.




As of March 16, 2010, there were
14,357,254 shares of the registrant’s common stock outstanding.











GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Form
10-K


December
31, 2009


TABLE
OF CONTENTS





PART I
                  
                  1FORWARD-LOOKING
      STATEMENTS
                  1ITEM
      1.
                  Business.
                  1ITEM
      1A.
                  Risk
      Factors.
                  10ITEM
      1B.
                  Unresolved
      Staff Comments.
                  16ITEM
      2.
                  Properties.
                  17ITEM
      3.
                  Legal
      Proceedings.
                  17ITEM
      4.
                  (Removed
      and Reserved)
                  17PART
      II
                  
                  18ITEM
      5.
                  Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
                  18ITEM
      6.
                  Selected
      Financial Data.
                  20ITEM
      7.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                  20ITEM
      7A.
                  Quantitative
      and Qualitative Disclosures About Market Risk.
                  28ITEM
      8.
                  Financial
      Statements and Supplementary Data.
                  28ITEM
      9.
                  Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.
                  29ITEM
      9A
                  Controls
      and Procedures.
                  29ITEM
      9B.
                  Other
      Information.
                  30PART
      III
                  
                  31ITEM
      10.
                  Directors,
      Executive Officers and Corporate Governance.
                  31ITEM
      11.
                  Executive
      Compensation.
                  36ITEM
      12.
                  Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
                  45ITEM
      13.
                  Certain
      Relationships and Related Transactions, and Director
      Independence.
                  47ITEM
      14.
                  Principal
      Accountant Fees and Services.
                  48PART
      IV
                  
                  49ITEM
      15.
                  Exhibits
      and Financial Statement Schedules.
                  49EXHIBIT
      21.1EXHIBIT
      23.1EXHIBIT
      31.1EXHIBIT
      31.2EXHIBIT
      32.1EXHIBIT
      32.2










PART
I





FORWARD-LOOKING
STATEMENTS





This
Annual Report on Form 10-K contains forward-looking statements (as defined in
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).  To the extent that any
statements made in this Annual Report on Form 10-K contain information that is
not historical, these statements are essentially
forward-looking.  Forward-looking statements may be identified by the
use of words such as “expects,” “plans,” “will,” “may,” “anticipates,”
“believes,” “should,” “intends,” “estimates” and other words or phrases of
similar meaning.  Although we believe that the expectations reflected
in these forward-looking statements are reasonable and achievable, these
statements are subject to a number of risks and uncertainties discussed under
the headings “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and elsewhere in this Annual
Report on Form 10-K.  All forward-looking statements attributable to
us are expressly qualified by these and other factors.  We cannot
assure you that actual results will be consistent with these forward-looking
statements.




Information
regarding market and industry statistics contained in this Annual Report on Form
10-K is included based on information available to us that we believe is
accurate.  Forecasts and other forward-looking information obtained
from this available information is subject to the same qualifications and the
additional uncertainties accompanying any estimates of future market size,
revenue and market acceptance of products and services.  The
forward-looking statements made in this Annual Report on Form 10-K relate only
to events as of the date on which the statements are made.  We do not
undertake any obligation to publicly update any forward-looking
statements.  As a result, you should not place undue reliance on these
forward-looking statements.





Item
1. Business




GlobalOptions
Overview




GlobalOptions
is an integrated provider of risk mitigation and management services to
government entities, Fortune 1,000 corporations and high net-worth and
high-profile individuals. We enable clients to identify, assess and prevent
natural and man-made threats to the well-being of individuals and the operations
of governments and corporations. In addition, we assist our clients in
recovering from the damages or losses resulting from the occurrence of acts of
terror, natural disasters, fraud and other risks. Our strategy is to
continue to develop a comprehensive risk mitigation solutions company through
both organic growth and acquisitions. In pursuit of our strategy, we have
acquired and integrated nine complementary risk mitigation businesses since
August 2005 that contributed an aggregate of approximately $103 million, $103
million, and $84 million, respectively, in revenues to our business during the
years ended December 31, 2009, 2008 and 2007.




We
believe our reputation, credentials and personal relationships provide us with a
competitive advantage in securing new business opportunities. Our senior
management team and advisory boards have extensive industry backgrounds and
include former generals in the military, top government officials and corporate
officers, intelligence and law enforcement officers, professional investigators
and legal and crisis communications specialists.




We
deliver risk mitigation and management services through four business units:
Preparedness Services; Fraud and Special Investigative Unit (“SIU”) Services;
Security Consulting and Investigations; and International Strategies. The
Preparedness Services unit develops and implements crisis management and
emergency response plans for disaster mitigation, continuity of operations and
other emergency management issues for governments, corporations and individuals.
The Fraud and SIU Services unit provides investigative surveillance, anti-fraud
solutions and business intelligence services to the insurance industry, law
firms and multinational organizations. The Security Consulting and
Investigations unit delivers specialized security and investigative services,
such as security assessments, threat analyses and forensic DNA analysis and
casework, to governments, corporations and individuals. The International
Strategies unit provides a full range of security and risk management services,
such as global business intelligence, investigations and litigation support, and
personal protection, to foreign and domestic governments, corporations and
individuals.





1




Industry
Overview




We
compete in the global security industry, focused on providing comprehensive risk
mitigation and management services to government entities, Fortune 1,000
corporations and high net-worth and high-profile individuals throughout the
world. The risk mitigation industry encompasses a broad range of services
enabling governments, corporations and individuals to enhance security, reduce
exposure to overt and covert threats and optimize preparation for and response
to critical events.




Until
recently, risk mitigation was defined by the actions taken by organizations
following the occurrence of a critical incident. Risk mitigation firms were
traditionally engaged to assess damage once a serious event, loss or security
breach had occurred. Engagements were typically non-recurring in nature and
usually involved a service provider offering both assistance with primarily
reactive measures and high-level analysis of incidents in order to reduce losses
following an event.




In recent
years, the risk mitigation industry has experienced significant growth,
primarily driven by the occurrence of natural and man-made disasters, heightened
regulatory and compliance standards and flaws and gaps in existing risk
mitigation policies and procedures. The importance of risk mitigation has
evolved as governments, corporations and individuals are faced with actively
managing a broad variety of elements of risk, including terrorism, litigation,
fraud, compliance, business continuity, brand protection, cyber attacks,
industrial espionage and regulatory issues. In response, the focus of risk
mitigation has shifted to proactively evaluating, identifying, quantifying and
managing elements of risk, in addition to reacting to critical
events.




The risk
mitigation industry is highly fragmented, comprised primarily of smaller,
specialized providers of a particular service. Historically, purchasers of risk
mitigation services have relied upon multiple vendors to satisfy their
requirements. However, due to the growing importance of risk mitigation, we
believe governments, corporations and individuals are seeking to address
proactively all of their risk mitigation needs through a single solutions
provider. Despite this trend, there are currently few large, independent
providers capable of delivering the full range of services sought by clients. As
the risk mitigation market continues to grow, we anticipate the pace of industry
consolidation will increase.




We
categorize the risk mitigation industry into four primary service areas:
investigations and background screening; preparedness and continuity planning;
security consulting; and litigation and compliance support. There are other
services, such as security guard services and alarm monitoring, that are
lower-margin areas of the risk mitigation industry and outside the scope of our
operational focus.




•
            Investigations
      andBackgroundScreening. Investigative services enable
      insurance companies, law firms and other organizations to combat fraud,
      substantiate suspicions of criminal acts and, ultimately, provide
      protection against financial loss and fraudulent activity. Background
      screening enables governments and corporations to implement effective
      hiring practices through in-depth analysis of a broad range of criteria of
      prospective employees, including work history, criminal offenses and drug
      testing results.




•
            Preparedness
      andContinuityPlanning. Preparedness and continuity
      planning services enable governments and corporations to effectively
      prepare for, respond to and recover from natural or man-made disasters.
      Specifically, these services include the creation of emergency response
      plans, business continuity planning and recovery services. We believe the
      funding of preparedness and continuity planning initiatives continues to
      be a priority for foreign, federal, state and local
      governments.




•
            SecurityConsulting. Security consulting services
      provide governments, corporations and individuals with increased
      protection by analyzing and aiding in the implementation of security
      measures. These services include executive protection, facility security
      assessments and threat
analysis.




•
            Litigation
      andComplianceSupport. In an increasingly stringent
      regulatory environment, governments and corporations have utilized
      litigation and compliance support services to ensure compliance with
      regulations and minimize the threat of litigation. Compliance support
      services assist organizations in effectively managing compliance with
      regard to financial reporting, government regulations andSecurities and Exchange
      Commission (“SEC”)requirements. Litigation support services aid in the preparation for legal
      proceedings and include document review, case preparation, targeted
      investigations and witness
interviewing.





2




Collectively,
these risk mitigation services enable organizations to protect constituents,
employees and stockholders as well as optimize preparation for and response to
critical events. We believe these services have become vital to the operational
effectiveness of organizations worldwide and that they will continue to be a
primary point of emphasis going forward.




Market
Opportunity




As a
result of geo-political events, corporate scandals, natural and man-made
disasters and increasing litigation costs, we believe proactive risk mitigation
has become critical for government entities, corporations and individuals. Our
target clients are now actively addressing their security needs, thereby driving
increased demand for outsourced risk mitigation and management services. The
emerging trend towards outsourcing these services represents a fundamental shift
in demand and we believe has created a compelling opportunity for market growth
in the risk assessment and mitigation industry. We believe the following key
market trends define our opportunity.




Natural Disasters and Emergency
Preparedness.Governments, corporations and individuals have increased
their focus on disaster preparedness and prevention after witnessing the loss of
life and financial impact of natural disasters and acts of terror, including
Hurricane Katrina and the terror attacks of September 11, 2001. According
to The Federal Emergency Management Agency (“FEMA”), in 2009, there were 59
major disaster declarations in the U.S., and public assistance for major
disasters in the U.S. has averaged approximately $275 billion annually since
1998. While major catastrophes capture the attention of a global audience,
smaller regional and localized disasters can be equally damaging to governments,
corporations and individuals. We believe most government entities, corporations
and individuals are not equipped to address communications continuity,
coordinate a rapid response and handle insurance related issues effectively
enough to satisfy their constituents, employees and stockholders.




Market Inefficiencies Created by
Fraud. According to the Insurance Information Institute, the total annual
cost of insurance fraud, including life and health insurance, is more than $100
billion. The Coalition Against Insurance Fraud estimates insurance fraud’s
overall impact on the consumer to be the equivalent of a hidden tax of
approximately $1 per U.S. family on the cost of goods and services. We believe
these market inefficiencies and the financial strain upon businesses as a result
of insurance fraud have created a demand for expertise in investigative
surveillance, business intelligence and other anti-fraud services.




Regulatory Complexity and Increased
Litigation. We believe heightened focus on regulatory activity and
corporate governance scrutiny will drive demand for risk mitigation and
management services. Ineffective compliance management in today’s stringent
regulatory environment can result in severe civil and criminal penalties for a
company and its officers and directors. We believe the financial and business
risk borne by a company, its corporate officers and directors from legislation
such as the USA Patriot Act, the Federal Information Security Act, the
Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act
and the Sarbanes-Oxley Act of 2002, increases the need for industry experts to
help organizations manage regulatory requirements.




Lack of Full Service Provider in a
Fragmented Market. We believe the heightened focus on emergency
preparedness and response, the escalating costs of fraud and the proliferation
of regulatory scrutiny have created the need for an efficient provider of
comprehensive risk mitigation and management services. Several of the
traditional leaders in our industry have been acquired or evolved their business
model, and we believe niche providers that offer limited services on a local
scale are unable to meet the full range of their clients’ needs, leaving a
service gap. We believe the drivers of increased risk assessment and mitigation
spending are likely to continue into the foreseeable future and, as a provider
of a comprehensive suite of customized services, we should benefit as the market
opportunity grows.





3




Competitive
Strengths




We are
committed to providing comprehensive risk mitigation and management services. We
believe the following factors are strengths of our company and provide us with
key competitive advantages.




Comprehensive Risk Mitigation
Solutions.We have assembled what we believe to be core services utilized
by clients seeking risk mitigation solutions. We are therefore able to offer a
comprehensive suite of customized services designed to address each client’s
specific needs. Our service offerings have been enhanced through our proprietary
systems, such as GlobalTrak 3.0TM, which provides both client and internal
personnel access to real-time, web-based reporting, communications and fraud
program management tools, and through advanced technologies, such as the
forensic DNA capabilities of the Bode Technology Group (“Bode”), part of our
Security Consulting Investigations Unit.




Reputable and Resourceful Management
and Advisory Boards. Due to the critical and sensitive nature of risk
mitigation and investigative engagements, we believe the ability to provide
services and retain clients is driven largely by reputation and personal
relationships. Our senior management and advisory boards have exceptional
credentials and well-established relationships. Their experience and former
titles include: a Brigadier General in the U.S. Air Force; a Director of FEMA; a
Director of theFBI;
a U.S. Secretary of Transportation; a Director of the CIA; a U.S. Ambassador and
high-ranking corporate executives. We believe this level of expertise provides
credibility with clients and access to key decision-makers within government and
industry.




Experienced Senior Management Team
and Professionals. Our senior management team and professionals include
individuals with vast industry experience. These individuals have the
operational experience to execute sensitive and critical engagements, enabling
us to effectively deliver solutions to our clients. Our management team has
demonstrated the ability to lead the integration of acquisitions, retain top
talent and drive organic growth from the combined business units.




Demonstrated Success with Strategic
Acquisitions. Since August 2005, we have executed and integrated nine
strategic acquisitions and retained selected key professionals, many as senior
management. These acquisitions have contributed to our rapid growth in revenues,
number of professionals, vertical industry coverage, areas of functional
expertise, geographic presence and brand recognition.




Strategic
Alternatives




We have
retained the services of Needham & Company to explore strategic
alternatives.  The exploration of strategic alternatives is consistent
with our overall strategy to maximize stockholder value.  While we
have not made any determination to pursue any transaction involving the sale of
our entire business or any of our individual business units, pursuant to the
retention of Needham we have had and continue to have discussions with various
third parties with respect to potential transactions.  No assurance
can be given that any such transaction will be effected and upon what terms such
a transaction would be effected.




Growth
Strategy




Our goal
is to continue to develop a company within the risk mitigation industry that
provides clients with a comprehensive offering solution through a balance of
organic growth and acquisitions. We intend to grow our business in the following
manner.




Leverage Our Relationships and
Expertise. Our highly trained professionals have deep domain expertise
and exceptional credentials. Further, our advisory boards are comprised of
thought leaders in their respective fields. Since our industry relies heavily on
reputation and trust, we believe our senior management team’s and advisory
boards’ experience and relationships will help us gain access to an increasing
number of opportunities.




Cross-sell and Integrate
Businesses. We intend to continue our aggressive efforts to integrate the
operations of companies we have acquired and will acquire, providing the
framework necessary for our senior managers to focus on identifying, prospecting
and winning new opportunities across all business units. We believe our
operational expertise and comprehensive service offerings enable us to
cross-sell over industry verticals as well as leverage our existing client base,
thereby enhancing our ability to execute on our organic growth
initiatives.





4




Develop New Solutions. We
will continue to develop and seek solutions to meet unique client and dynamic
market segment needs by expanding and bundling our product and service
offerings. As we continue to grow both organically and through acquisitions, we
expect to meet additional needs of our clients. Evidence of this strategy is the
continuing expansion of the capabilities of our enterprise-oriented solution,
GlobalTrak 3.0TM.  Through our GlobalTrak 3.0TM platform we are building
more enhanced client interface and support capabilities and additional tools to
help us more efficiently manage our investigations our Rapid Data and Rapid
Video are example of solutions that have helped us leverage technologies to
better serve our clients.  Our DNA technology service we offer through
Bode continues to develop new tools and technologies.





Our
Business Units




We
deliver risk mitigation and management services through four business units:
Preparedness Services; Fraud and SIU Services; Security Consulting and
Investigations; and International Strategies.




Preparedness
Services




The
Preparedness Services unit develops and implements crisis management and
emergency response plans for disaster mitigation, continuity of operations and
other emergency management issues for governments, corporations and individuals.
We offer a full range of services to help our clients better prepare for,
respond to and recover from disasters. We believe our ability to mobilize
management, security and communications resources in an expedited manner
differentiate us from our competitors. Services we provide include:




•
            Business continuity
      plans





•
            Emergency exercises and training
      programs





•
            Post-disaster crisis
      communications assistance





•
            Preparedness, response and
      recovery services





•
            Strategic advisory
      services





•
            Threat and impact
      assessments




The
Preparedness Services unit is comprised of James Lee Witt Associates, LLC
(“JLWA”) and is led by former FEMA Director James Lee Witt.  Mr.
Witt’s employment contract with us expired on March 10, 2010 and he is now
working with us on at at-will basis.  Our staff includes seasoned
crisis and emergency management leaders with significant experience in the
public sector. Our Preparedness Services unit has 74 full-time employees and 1
part-time employee and is headquartered in Washington, D.C.




For the
year ended December 31, 2009, we completed 103 crisis management and emergency
response projects with average revenue of approximately
$379.  Preparedness Services accounted for approximately 38% of our
revenues for the year ended December 31, 2009.





5




Fraud
and SIU Services




The Fraud
and SIU Services unit provides investigative surveillance, anti-fraud solutions
and business intelligence services to the insurance industry, law firms and
multinational organizations. We provide services to clients both nationally and
regionally through licensed investigators in all 50 states, as well as
internationally through affiliates. Our investigators provide reports and
intelligence on subjects such as workman’s compensation surveillance, unfair
trade practices, political trends, economic forecasts, mortgage insurance fraud,
profiles on competitors and satellite reconnaissance. Services we provide
include:




•
            Anti-fraud
      training





•
            Background
      investigations





•
            Corporate investigations for
      liability





•
            Fraud
      reporting





•
            Insurance claims
      investigations





•
            On-scene
      accident investigations





•
            Regulatory
      compliance





•
            Surveillance





Our
proprietary GlobalTrak 3.0TM technology enables us to deliver real-time,
web-based reporting, communications , rapid data intelligence, and fraud program
management. By automating and streamlining investigative processes, GlobalTrak
3.0TMprovides our clients with more expedient and cost-effective service. Our
recent rollout of rapid video upload, allowing for immediate delivery of field
intelligence represents an example our advanced capabilities. Our comprehensive
software enables adjusters, claims representatives, risk managers and SIU
departments to securely access and download status updates, including case
receipts, assignments, work schedules, results of investigative activity,
investigative reports and streaming video and audio. We believe GlobalTrak
3.0TM is a significant competitive differentiator and offers our clients a
valuable enterprise solution.




The Fraud
and SIU Services unit is comprised of the following acquired companies:
Confidential Business Resources (“CBR”); Hyperion Risk, Inc. (“Hyperion Risk”);
Secure Source, Inc (“Secure Source”); Facticon, Inc. (“Facticon”); and First
Advantage Investigative Services (“FAIS”).  This unit is led by
Halsey Fischer, a 20-year industry veteran and former President and Chief
Executive Officer of CBR. Our investigative team includes highly educated and
trained investigators who utilize extensive public and proprietary databases to
uncover factual circumstances surrounding sensitive investigations. Our experts
are capable of handling any type of investigative need anywhere in the world.
Our anti-fraud services are national in scope, but local in expertise.
Headquartered in Nashville, TN, the Fraud and SIU Services unit has 298
full-time and 68 part-time employees and has offices in Sacramento, Chicago,
Orlando and Philadelphia.





For the
year ended December 31, 2009, we completed 31,930 investigations and anti-fraud
projects with average revenue of just under $1. Fraud and SIU Services accounted
for approximately 29% of our revenues for the year ended December 31,
2009.





6





Security
Consulting and Investigations




The
Security Consulting and Investigations unit delivers specialized security and
investigative services to governments, corporations and individuals. We provide
security assessments, anti-terrorism training, threat analyses, fraud prevention
techniques, special event security, private travel management and the design,
implementation and management of security systems. Services we provide
include:




•
            Business
      intelligence





•
            Facilityand IT
      security





•
            Forensic DNA analysis and
      casework





•
            Independent monitoring and
      regulatory compliance





•
            IT and accounting
      forensics





•
            Litigation
      support




Through
Bode we are able to provide forensic DNA analysis, highly advanced and
proprietary DNA collection products and research services to law enforcement
agencies, federal and state governments, crime laboratories and disaster
management organizations.




Our
Security Consulting and Investigations unit is comprised of the following
acquired companies: Safir Rosetti, LLC (“Safir”); Bode and SPZ Oakland
Corporation, dba On Line Consulting Services, Inc. (“On Line Consulting”). Until
March 31, 2010, this unit will be led by Howard Safir, former New York City
Police Commissioner. Effective April 1, 2010, pursuant to the terms of a
consulting agreement, Mr. Safir will become a consultant to this business unit
and this unit will then be led by Harvey Schiller, our Chief Executive Officer
and Jeffrey Nyweide, our Chief Financial Officer. Our national network of
security and investigative personnel has extensive backgrounds in the fields of
security, investigations, intelligence, law enforcement and public safety.
Headquartered in New York, NY, we have 302 full-time and 14 part-time employees
in the Security Consulting and Investigations unit and have offices in
Dallas, Oakland, and Lorton, VA.




For the
year ended December 31, 2009, we completed 811 security and investigation
projects (excluding Bode) with average revenue of $15. During the year
ended December 31, 2009, Bode completed 75,621 DNA related projects with average
revenue of less than $1. Security Consulting and Investigations (including Bode)
accounted for approximately 33% of our revenues for the year ended December 31,
2009.





International
Strategies




The
International Strategies unit provides multidisciplinary, international risk
management and business solutions. We offer a range of security and risk
management services to foreign and domestic governments, corporations
and individuals. The International Strategies unit was our original core
business and is led by Thomas Ondeck, a founder of GlobalOptions. Headquartered
and operated in Washington, D.C., we employ two full-time
employees.




International
Strategies is not a separate reporting segment and as such we attribute its
revenues to the Fraud and SIU Services unit.




Corporate
History




GlobalOptions,
Inc., our wholly-owned operating subsidiary, was initially formed as a limited
liability company in the state of Delaware in November 1998 and converted into a
Delaware corporation on January 24, 2002. On June 24, 2005, we became
a public company by completing a reverse merger transaction, in which
GlobalOptions Acquisition Corp., a Delaware corporation and our newly created,
wholly owned subsidiary, merged with and into GlobalOptions, Inc. As a result of
the reverse merger, GlobalOptions, Inc. became our wholly owned operating
subsidiary, with GlobalOptions, Inc.’s former security holders acquiring a
majority of the outstanding shares of our common stock. At the time of the
reverse merger, our corporate name was Creative Solutions with Art, Inc., a
Nevada corporation. Following the reverse merger, we changed our name to
GlobalOptions Group, Inc.  On December 8, 2006, we completed a
reincorporation merger whereby we changed our state of incorporation from Nevada
to Delaware.





7





History
of Acquisitions




Since
becoming a public company in June 2005, we have actively pursued our acquisition
strategy.




On
August 14, 2005, we purchased substantially all of the assets and
liabilities of CBR, a nationwide investigations firm based in Nashville,
Tennessee. CBR was the foundation acquisition for our Fraud and SIU Services
unit. The CBR acquisition provides us with significant capabilities in the
intelligence gathering, surveillance, investigation, risk reduction and
litigation exposure reduction fields.




On
January 9, 2007, we acquired substantially all of the business and assets
of On Line Consulting, a full-service security and fire alarm consulting and
design firm headquartered in Oakland, California. The On Line Consulting
acquisition added security and communications systems expertise to our Security
Consulting and Investigations unit.




On
February 28, 2007, we acquired all of the outstanding common stock of Bode,
which provides forensic DNA analysis, proprietary DNA collection products and
related research services to law enforcement agencies, federal and state
governments, crime laboratories and disaster management organizations. The Bode
acquisition significantly expanded the size of our Security Consulting and
Investigations unit.




On
February 28, 2007, we acquired substantially all of the business and assets
of Facticon, a surveillance, investigative and business intelligence firm based
in Chadds Ford, Pennsylvania. The Facticon acquisition expanded our Fraud and
SIU Services unit’s risk mitigation expertise in the insurance, legal, business
and financial industries.




On April
21, 2008, we acquired substantially all of the business and assets of FAIS
related to our Fraud and SIU Services unit.  The FAIS acquisition
expanded our Fraud and SIU Services unit’s risk mitigation expertise in the
legal, business and insurance industries.




Underwritten
Public Offering




On
October 29, 2007, we completed an underwritten public offering of 4,500,000
shares of our common stock, receiving approximately $20.25 million in gross
proceeds ($18.2 million in net proceeds).




We used a
portion of the net proceeds from the proposed underwritten public offering to
repay $4.3 million of notes and $38 of related accrued interest and have been
using the balance of the net proceeds for working capital and general corporate
purposes.





In
connection with the underwritten public offering, on October 29, 2007 we entered
into an agreement with Canaccord Adams Inc. and Morgan Keegan &
Company, Inc., as underwriters, who were paid aggregate fees of $1.41
million.





Clients




We have
completed engagements for clients globally, including foreign, federal, state
and local government entities, domestic and foreign Fortune 1,000 corporations,
and high net-worth and high-profile individuals. We frequently work with clients
on multiple assignments. As required by the highly confidential nature of our
work, we keep the identities of our clients strictly confidential.




For the
years ended December 31, 2009, 2008 and 2007, a limited number of clients
accounted for a substantial percentage of our total revenues. For the year ended
December 31, 2009, our two largest clients accounted for approximately 24% and
8% of our revenues. For the year ended December 31, 2008, our two largest
clients accounted for approximately 26% and 8% of our revenues. For the year
ended December 31, 2007, our two largest clients accounted for approximately 29%
and 9% of our revenues.  Revenues from our largest client, the State
of Louisiana,. accounted for 63%, 68%, and 83%, of the revenues generated by our
Preparedness Services unit during the years ended December 31, 2009, 2008 and
2007, respectively.




Sales
and Marketing




Our
business is intensely personal due to the highly confidential nature of the
engagements and the critical nature of the brands, reputations, competitive
positions and overall market perceptions that our services support. We believe
our ability to provide services and retain clients is driven largely by
reputation and personal relationships. Our senior management team and advisory
boards have exceptional backgrounds and include former generals in the military,
top government officials and corporate officers, intelligence and law
enforcement officers, professional investigators and legal and crisis
communications specialists, each of whom can leverage relationships with leaders
in both the corporate and government markets.





8




We
believe these relationships give us the opportunity to bring in high-margin,
well-known clients and our operational experience allows us to successfully
complete these critical engagements. The success of this strategy is
demonstrated by the recurring nature of our business with established clients.
New opportunities typically arise from the ongoing relationships that our
management personnel have with their client counterparts. As executives move to
different companies or agencies, they often call upon us in their new
environment.




Our sales
and marketing strategy is to maintain and expand our reputation and track
record, the quality of the services we deliver and the skills and character of
the people we deploy on client engagements. In doing so, we intend to provide
the high level of investigative, litigation support, crisis management, risk
management and protective services demanded by our clients.




Competition




The
market for risk mitigation services is very competitive, highly fragmented and
subject to rapid change. We operate in a number of geographic and service
markets, all of which are highly competitive. We believe the principal
competitive factors and key differentiators in this market are reputation,
relationships, expertise, quality and scope of service and size of institution.
Therefore, new market entrants as well as existing competitors that have strong
brand recognition or highly recognized principals in the risk mitigation
industry likely pose the greatest threat to our business. We believe, however,
our reputation and the breadth and depth of our services provide us with key
competitive strengths and differentiate us from our competitors.




Competitors
in the risk management and security market include Control Risks Group Limited,
G4S Risk Management, Kroll Inc., Toribos GmbH, and Olive Group. Additionally,
many of the national and international accounting and consulting firms, along
with other companies such as FTI Consulting, Inc., Securitas AB and its
subsidiary, Pinkerton Consulting & Investigations, Inc.,
Alvarez & Marsal, LLC, AlixPartners LLC, Xroads Solutions Group, and
LexisNexis Applied Discovery, provide investigative, consulting and other
services that are similar to services we provide.




Employees




As of
January 31, 2010 the Company had 681 full-time and 83 part-time employees. We
enjoy good employee relations. None of our employees are members of any labor
union, and we are not a party to any collective bargaining
agreement.




Government
Regulation




Due to
our participation in government contracts, we are subject to audit from time to
time for our compliance with government regulations by various agencies.
Government agencies may also periodically conduct inquiries or investigations
that may cover a broad range of our activities. We believe we operate our
business in material compliance with all applicable federal, state and local
government regulations and contracts.




We hold a
number of General Services Administration (“GSA”) Federal Schedules, which
enable federal and state agencies to buy services and products from us. We are
required to be in compliance with the Federal Acquisition Regulations (“FAR”) in
providing these services and products to our federal and state government
clients. We are subject to audit by the GSA to assure we maintain compliance
with these requirements.





In
addition to maintaining our compliance with the FAR and the GSA, some contracts
we have with state agencies contain additional requirements. While most states
follow the FAR, in each contract, the state may require additional rules and
regulations to maintain compliance with each contract. In providing services
under each contract, we must be in compliance with contract rules and
regulations before we can invoice under the contract. Before making any payments
under a contract, a state will review our compliance.




Our
investigation and surveillance business must be in compliance with each state’s
licensing requirements for providing these services. In each state that we
operate our investigation and surveillance business, we maintain the necessary
licensing requirements to do business.





9





Item
1A. Risk Factors





Any
investment in our common stock involves a high degree of risk. You should
consider carefully the specific risk factors described below in addition to the
other information contained in this Annual Report on Form 10-K,, including our
consolidated financial statements and related notes included elsewhere in this
Annual report on Form 10-K, before making a decision to invest in our common
stock. If any of these risks actually occurs, our business, financial condition,
results of operations or prospects could be materially and adversely affected.
This could cause the trading price of our common stock to decline and a loss of
all or part of your investment.




Risks
Related to Our Business and Industry




We
are an emerging company with a history of operating losses and may not become
profitable.




We were
founded in 1998 and are still in the process of developing our four business
units: Preparedness Services; Fraud and SIU Services; Security Consulting and
Investigations; and International Strategies. We have incurred significant
operating losses since inception, including net losses available to common
stockholders of approximately $5.3 million, $7.9 million, and $27.9
million for the years ended December 31, 2009, 2008 and 2007,
respectively. We cannot anticipate when or if we will achieve profitability in
the future. We may not generate sufficient revenues to meet our expenses,
operate profitably or utilize our net operating losses in the
future.




Our
arrangements with members of our senior management team, or our failure to
retain or recruit key personnel, could negatively impact our ability to sell our
products and services and grow our business.




Our
success will depend to a significant extent upon the abilities, level of
service, reputation and relationships of members of our senior management team,
our Board of Directors and our advisory boards. Some members of our senior
management team work on a part-time basis and some do not have non-competition
agreements with us. These arrangements, or any reduction or loss of these
individuals’ services, could have a material adverse effect upon our business,
particularly if any of our key personnel sought to compete against
us.




Our
future success and growth also largely depends upon our ability to attract,
motivate and retain additional highly competent technical, management, service
and operations personnel. The marketplace for these qualified individuals is
highly competitive in the risk mitigation industry, and we cannot guarantee that
we will be successful in attracting and retaining this personnel. Departures and
additions of key personnel may be disruptive to and detrimentally affect our
business, operating results and financial condition.




Because
a small number of clients account for a substantial portion of our revenues, the
loss of any of these clients, or a decrease in their use of our services, could
cause our revenues to decline and losses to increase substantially.




Revenues
from our services to a limited number of clients have accounted for a
substantial percentage of our total revenues.  For the year ended
December 31, 2009, our largest client accounted for approximately 24% of
revenues For the year ended December 31, 2008, our largest client accounted for
approximately 26% of revenues.  For the year ended December 31, 2007, our
largest client accounted for approximately 29% of revenues. Revenues from our
largest client, the State of Louisiana, accounted for 63%, 68%, and 83% of the
revenues generated by our Preparedness Services unit during the years ended
December 31, 2009, 2008 and 2007, respectively.  Our contract with the
State of Louisiana, which expires on August 31, 2010, is a time and materials
contract under which the State is not required to purchase a minimum amount of
our services. Therefore, this contract could cease producing revenues at any
time with little or no notice.




The
concentration of our clients can cause our revenues and earnings to fluctuate
from quarter-to-quarter and year-to-year, based on the requirements of our
clients and the timing of delivery of services. Although the particular
clients are likely to change from period to period, we believe that large
engagements by a limited number of clients will continue to account for a
substantial portion of our revenues in any period or year. In any period or
year, the unexpected loss of or decline in business from a major client, or the
failure to generate significant revenues from other clients, could have a
material adverse effect on our consolidated financial results.




The
integration of acquired companies may be difficult and may result in a failure
to realize some of their anticipated potential benefits.




We may
not be able to integrate or manage businesses that we have acquired or may
acquire. Any difficulty in successfully integrating or managing the operations
of acquired businesses could have a material adverse effect on our business,
financial condition, results of operations or liquidity, and could lead to a
failure to realize any anticipated synergies. Our management team also will be
required to dedicate substantial time and effort to the integration of any
acquisitions. These efforts could divert management’s focus and resources from
other strategic opportunities and operational matters.





10




We
may have difficulty pursuing our acquisition strategy




A
key part of our growth strategy is to acquire complementary businesses. However,
we may not be able to identify suitable acquisition candidates, obtain the
capital necessary to pursue our acquisition strategy or complete acquisitions on
satisfactory terms or at all. A number of competitors have also adopted a
strategy of expanding and diversifying through acquisitions, including National
Security Solutions Inc., blank check company of which Howard Safir, our Chief
Executive Officer of our Security Consulting and Investigations Unit, and Adam
Safir, our Chief Operating Officer of our Security Consulting and Investigations
Unit, are the Chairman of the Board and a director,
respectively.  Such persons may have conflicting interests in
presenting acquisition opportunities to National Security Solutions Inc. and
us.  In addition, we will likely experience significant competition in
our effort to execute our acquisition strategy. As a result, we may be unable to
continue to make acquisitions or may be forced to complete acquisitions on less
favorable terms.




Our
business is vulnerable to fluctuations in government spending and subject to
additional risks as a result of the government contracting process, which often
involves risks not present in the commercial contracting process.




Because
many of our contracts are with government entities, our business is subject to a
number of risks, including global economic developments, wars, political and
economic instability, election results, changes in the tax and regulatory
environments, foreign exchange rate volatility and fluctuations in government
spending. Because many clients are federal, state or municipal government
agencies with variable and uncertain budgets, the amount of business that we
might receive from them may vary from year to year, regardless of the perceived
quality of our business.




Moreover,
competitive bidding for government contracts presents a number of risks that are
not typically present in the commercial contracting process,
including:




•
            the need to devote substantial
      time and attention of our management team and key personnel to the
      preparation of bids and proposals for contracts that may not be awarded to
      us; and




•
            the expenses that we might incur
      and the delays and revenue loss that we might suffer if our competitors
      protest or challenge contract awards made to us pursuant to competitive
      bidding. Such a protest or challenge could result in the resubmission of
      bids based on modified specifications, or in the termination, reduction or
      modification of the awarded
contract.




If we are
unable to consistently win new government contract awards over an extended
period, or if we fail to anticipate all of the costs and resources that will be
required to secure such contract awards, our growth strategy and our business,
financial condition and operating results could be materially adversely
affected.





Our professional
reputation, which is critical to our business, is especially vulnerable to
circumstances outside our control.





We depend
upon our reputation and the individual reputations of our senior management team
and advisory boards to obtain new client engagements. We also obtain a
substantial number of new engagements from existing clients or through referrals
from existing clients. Anything that diminishes our reputation or the
reputations of our senior management team and advisory boards may make it more
difficult to compete for new engagements or to retain existing clients and,
therefore, could materially adversely affect our business. For example, a
national television news story in 2007 that contained allegations regarding
JLWA’s performance and billing practices under our contract with the State of
Louisiana prompted a State auditor to review these allegations. Although we were
awarded and subsequently executed a renewal contract with the State, the State
may terminate this new contract without penalty upon limited notice. Any
circumstances, including those where we are not at fault, and including any
repercussions from the above events, that might publicly damage our goodwill,
injure our reputation or damage our business relationships may lead to a broader
material adverse effect on our business or prospects through loss of business,
goodwill, clients, agents or employees. In particular, if the State of Louisiana
were to terminate our contract, it may have a material adverse effect on our
business.





Failure
to maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business
and operating results. In addition, current and potential stockholders could
lose confidence in our financial reporting, which could cause our stock price to
decline.





Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, our business could be harmed.





11





As a
public company, we are required to document and test our internal control
procedures in order to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, which requires annual management assessments of the
effectiveness of our internal control over financial reporting. Furthermore, our
registered independent public accounting firm will be required to report on our
assessment of the effectiveness of our internal control over financial reporting
and separately report on the effectiveness of our internal control over
financial reporting beginning with our fiscal year ending December 31,
2010.





Failure
to maintain an effective internal control environment could cause us to face
regulatory action, result in delays or inaccuracies in reporting financial
information or cause investors to lose confidence in our reported financial
information, any of which could cause our stock price to decline.





In
order to comply with public reporting requirements, we may need to strengthen
the financial systems and controls of any business we acquire, and the failure
to do so could adversely affect our ability to provide timely and accurate
financial statements.




Immediately
upon the acquisition of any company, we will be responsible for ensuring that
the disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) of any acquired company are effectively designed, operated and
integrated with our disclosure controls and procedures. Our management and our
independent registered public accounting firm may be required to test any
acquired business’s internal control over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent
testing of internal control by our independent registered public accounting
firm, may reveal deficiencies in an acquired company’s financial systems that
are deemed to be material weaknesses with respect to our financial systems. The
existence of these material weaknesses or any failure to improve an acquired
company’s financial systems could result in delays or inaccuracies in reporting
financial information, or non-compliance with SEC reporting and other
regulatory requirements, any of which could subject us to sanctions from the SEC
and The NASDAQ Stock Market LLC and adversely affect our business and stock
price.




Our
business depends, in part, on the occurrence of unpredictable
events.




Our
Preparedness Services unit assists governments, corporations and individuals in
connection with, among other things, emergency management issues and natural and
other disaster preparedness and recovery efforts. Our revenues may fluctuate
significantly depending upon the occurrence, or anticipated occurrence, of
events of this nature. For example, for the years ended December 31, 2009,
2008 and 2007, 24%, 26% and 29% of the Company’s revenues, or 45%, 52% and
61% of the Company’s revenues from government contracts, respectively, were
generated by one contract with the State of Louisiana. Accordingly, any decrease
in demand for our services in this area could materially adversely affect our
results of operations.




We
may not be able to manage our growth or meet marketplace demands
effectively.




We have
expanded significantly in the past few years and intend to maintain our focus on
growth. However, our growth will place additional demands on our resources and
we cannot be sure that we will be able to manage our growth effectively. In
order to successfully manage our growth, we will need to:




•
            expand and enhance our
      administrative
infrastructure;





•
            continue to improve our
      management, financial and information systems and controls;
      and





•
            recruit, train, manage and retain
      our employees effectively.




Continued
growth could place a strain on our management, operations and financial
resources. In addition, this growth may adversely affect our ability to service
the demands of our clients or the quality of services we provide. If we are
unable to meet these demands or our clients’ expectations, our competitors may
be able to gain a greater market share in the risk mitigation markets generally,
as well as gain a greater share of our clients’ business. We cannot assure you
that our infrastructure, operational, financial and management controls,
reporting systems and procedures, facilities and personnel will be adequate to
support our future operations or to effectively adapt to future growth. Our
expected addition of personnel and capital investments will increase our fixed
costs, which will make it more difficult for us to offset any future revenue
shortfalls with short-term expense reductions. If we cannot manage our growth
effectively, our business and results of operations may be adversely
affected.





12





We
may not be able to realize the entire book value of goodwill from
acquisitions.




As of
December 31, 2009, we had approximately $19,968 of goodwill, which represented
approximately 34% of our total assets as of December 31, 2009. All of this
goodwill resulted from previous acquisitions, and it is possible that future
acquisitions will result in additional goodwill. We have implemented accounting
guidance for acquisitions which requires that existing goodwill not be
amortized, but instead be assessed annually for impairment or sooner if
circumstances indicate a possible impairment.  In the event that we
determine the book value of goodwill is impaired, any such impairment would be
charged to earnings in the period of impairment. Any such future impairment of
goodwill could have a material adverse effect on our results of
operations.




Competitive
conditions could adversely affect our business.




We
operate in a number of geographic and service markets, all of which are highly
competitive. There are relatively few barriers preventing companies from
competing with us and we do not own any patents or other technology that, by
itself, precludes or inhibits others from entering our markets. As a result, new
market entrants, particularly those who already have recognizable names in the
risk mitigation industry, will likely pose a threat to our business. If we are
unable to respond effectively to our competitors, some of which have greater
financial resources or name recognition, our business and results of operations
will be materially adversely affected. Competitors in the risk management and
security market include Control Risks Group Limited, G4S Risk Management, Kroll
Inc., Toribos GmbH and Olive Group. Additionally, many of the national and
international accounting and consulting firms, along with other companies such
as FTI Consulting, Inc., Securitas AB and its subsidiary, Pinkerton
Consulting & Investigations, Inc., Alvarez & Marsal, LLC,
AlixPartners LLC, Xroads Solutions Group, and LexisNexis Applied Discovery,
provide investigative, consulting and other services that are similar to
services we provide.




Some of
these firms have indicated an interest in providing services on a broader scale
similar to ours and may prove to be formidable competitors if they elect to
devote the necessary resources to these competitive businesses. The national and
international accounting, consulting and risk management firms have
significantly larger financial and other resources than we have, greater name
recognition and long-established relationships with their clients, which also
are likely to be clients or prospective clients of our company.




We
are a worldwide business and are therefore influenced by factors and regulations
in many countries.




We
undertake our business worldwide. The occurrence of any of the following risks
relating to the conduct of our business in foreign countries could have a
material adverse effect on the market for our services, their value to our
clients or our ability to provide them:





•
            changes in, and difficulty in
      complying with, laws and regulations of the different countries, including
      authority to trade or perform our existing and future
      services;





•
            nullification, modification and
      renegotiation of contracts;





•
            reversal of current policies,
      including favorable tax policies, encouraging foreign investment or
      foreign trade, or relating to the use of local
    agents;





•
            restrictive actions by local
      governments, including tariffs and limitations on imports and
      exports;





•
            adverse
      economic conditions which might impact the generation and flow of capital;
      and





•
            difficulty in collecting accounts
      receivable and longer collection
times.




The
occurrence of any of these risks could materially adversely affect our results
of operations or financial condition.





13




Clients
can terminate engagements with us on short notice or with no
notice.




A
majority of our engagements are project-based and are generally terminable by
either party on short-term notice. As a result, our clients, including the State
of Louisiana under the three year contract that it awarded to us in September
2007, are not obligated to continue using our services at historical levels or
at all, and may cancel their arrangements with us without penalty. Identifying
and engaging new clients can be a lengthy and difficult process. If a
significant amount of our clients cease using our services around the same time,
we could experience an adverse effect on our results of operations.




Our
inability to accurately forecast costs of fixed price contracts could result in
lower than expected margins and profitability.




The
profitability of fixed price projects is primarily determined by our success in
correctly estimating and thereafter controlling project costs. Costs may in fact
vary substantially as a result of various factors, including underestimating
costs, need for unforeseen specialized subcontractors, difficulties with new
technologies and economic, regulatory and other changes that may occur during
the term of the contract. If for any reason the costs are substantially higher
than expected, we may incur losses on fixed price contracts and our
profitability could be adversely affected.




We
may need to raise additional funds to consummate an acquisition or continue our
operations.




An
unforeseen reduction in our revenues or cash flows, an increase in operating
expenses or the consummation of an acquisition may require us to raise
additional funds. To the extent we identify additional opportunities to raise
cash, we may sell additional equity or convertible debt securities, which would
result in further dilution of our stockholders. Stockholders may experience
substantial dilution due to our current stock price and the amount of financing
we may need to raise, and any securities we issue may have rights senior to our
common stock. Any future indebtedness may contain covenants that restrict our
operating flexibility.




We have
limited access to the capital markets. The capital markets have been
unpredictable in the past, especially for smaller companies or for unprofitable
companies such as ours, and recent contractions in the capital markets have
generally made financing more difficult to obtain.  In addition, the
amount of capital that a company such as ours is able to raise often depends on
variables that are beyond our control, such as the share price of our stock and
its trading volume. As a result, efforts to secure financing on terms attractive
to us may not be successful, and we may not be able to secure additional
financing on any terms.




If we are
able to consummate a financing arrangement, the amount raised may not be
sufficient to meet our future needs. If adequate funds are not available on
acceptable terms, or at all, our business, results of operations and financial
condition may be materially adversely affected.




Compliance
with changing corporate governance and public disclosure regulations may result
in additional expenses.




Keeping
abreast of, and in compliance with, changing laws, regulations and standards
relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002, new SEC regulations and The NASDAQ Stock Market
LLC’s marketplace rules, require a substantial amount of management attention
and financial and other resources. We intend to continue to invest all
reasonably necessary resources to comply with evolving standards, which may
result in increased general and administrative expenses and divert management
from revenue-generating activities.





We
may become subject to significant legal proceedings.




We are
subject from time to time to litigation and other adverse claims related to our
businesses, some of which may be substantial.  These claims have in
the past been, and may in the future be, asserted by persons who are screened by
us, regulatory agencies, clients or other third parties. Matters such as these,
in which we may become defendants, may negatively impact our results of
operations or cash flows, as well as our reputation.




14





Our
exposure in a future liability action could exceed our insurance
coverage.




Some of
our service offerings involve high risk activities. We may not be able to
maintain insurance at levels of risk coverage or policy limits that we deem
adequate for any of our activities and cannot guarantee that every contract
contains or will contain limitations on our liability below these policy limits.
Because of the increasing cost of liability insurance, purchasing sufficient
amounts of insurance coverage, or additional insurance when needed, could be
prohibitively expensive. If we are sued for any injury caused by our business
offerings, our liability could exceed our total assets. Any claims against us,
regardless of their merit or eventual outcome, could have a detrimental effect
upon our business, operating results and financial condition.





We
may be subject to increased regulation regarding the use of personal
information.




Some of
the data and services that we provide, including DNA testing conducted by Bode,
are subject to regulation by various federal, state and local regulatory
authorities, which may become more stringent in the future. Federal, state and
local laws and regulations in the United States designed to protect the public
from the misuse of personal information in the marketplace, and adverse
publicity or potential litigation concerning the commercial use of such
information, may negatively affect our operations and could result in
substantial regulatory compliance expense, litigation expense or revenue
loss.




If
we are unable to manage successfully our relationships with our information
suppliers, the quality and availability of our services may be
harmed.




We obtain
some of the data used in our services from third-party information suppliers,
some of which are government entities. If a supplier is no longer able or
willing to provide us with data, we may need to find alternative sources. There
is no assurance that we will obtain new agreements with third-party suppliers on
favorable terms, if at all. If we are unable to identify and contract with
suitable alternative data suppliers and integrate these data sources into our
service offerings, we could experience service disruptions, increased costs and
reduced quality of our services. Loss of such access or the availability of data
in the future due to increased government regulation or otherwise could have a
material adverse effect on our business, financial condition or results of
operations.




Risks
Related to Our Common Stock




Our
common stock price has fluctuated considerably and stockholders may not be able
to resell their shares at or above the price at which their shares were
purchased.




Since our
reverse merger in June 2005, the high and low bid price for our common stock has
been $32.00 and $1.14 per share, respectively. The market price of our common
stock may fluctuate significantly in response to a number of factors, some of
which are beyond our control, including the following:




•
            factors affecting demand for risk
      mitigation services such as the domestic and global security environment,
      competition and general economic
  conditions;





•
            fluctuation in government
      spending that affects our contracts with government entities;
      and





•
            changes in the laws and
      regulations of different countries that affect our ability to perform the
      services of a  risk mitigation and management services
      company.




The stock
market in general has experienced extreme price fluctuations. The market prices
of shares of companies in the security industry have experienced fluctuations
that often have been unrelated or disproportionate to the operating results of
these companies. Continued market fluctuations could result in extreme
volatility in the price of our common stock, which could cause a decline in the
value of our common stock. Price volatility might be worse if the trading volume
of our common stock continues to be low.





15




Our
common stock has historically been sporadically or thinly
traded.  While our common stock became listed on the NASDAQ Capital
Market on September 26, 2007, there is no guarantee that our trading volume will
increase. As a result, the number of persons interested in purchasing our common
stock at or near ask prices at any given time may be relatively small or
non-existent. This situation is attributable to a number of factors, including
the fact that stock analysts, stock brokers, institutional investors and others
in the investment community that generate or influence sales volume may be
reluctant to follow an unproven company such as ours or purchase or recommend
the purchase of our common stock until we demonstrate that we can consistently
operate profitably. As a consequence, there may be periods of several days or
more when trading activity in our shares is low and a stockholder may be unable
to sell his shares of common stock at an acceptable price, or at all. We cannot
give stockholders any assurance that a broader or more active public trading
market for our common stock will develop or be sustained, that current trading
levels will be sustained or that we will continue to meet the requirements for
listing on the NASDAQ Capital Market.





Our
executive officers, directors and 10% stockholders have significant voting power
and may vote their shares in a manner that is not in the best interest of other
stockholders.




Our
executive officers, directors and 10% stockholders control approximately 41% of
the voting power represented by our outstanding.  If these
stockholders act together, they may be able to exert significant control over
our management and affairs requiring stockholder approval, including approval of
significant corporate transactions.  This concentration of ownership
may have the effect of delaying or preventing a change in control and might
adversely affect the market price of our common stock. This concentration of
ownership may not be in the best interests of all our stockholders.




We
do not anticipate paying cash dividends for the foreseeable future, and the lack
of dividends may have a negative effect on our stock price.




We have
never declared or paid any cash dividends or distributions on our common stock
and our senior credit facility prohibits us from paying dividends. We currently
intend to retain our future earnings, if any, to support operations and to
finance our growth strategy and therefore we do not anticipate paying any cash
dividends on our common stock in the foreseeable future.




Provisions
in our certificate of incorporation and by-laws may deter third parties from
acquiring us and could lead to the entrenchment of our Board of
Directors.




Our
certificate of incorporation and by-laws contain provisions that may make the
acquisition of our company more difficult without the approval of our Board of
Directors, including the following:




•
            we have authorized undesignated
      preferred stock, the terms of which may be established and shares of which
      may be issued without stockholder
  approval;





•
            stockholder action by written
      consent must be unanimous;





•
            stockholders may only remove
      directors for cause;





•
            vacancies on the Board of
      Directors may be filled only by the directors;
  and





•
            we require advance notice for
      stockholder proposals.




These
provisions could also discourage proxy contests and make it more difficult for
you and other stockholders to elect directors of your choosing and cause us to
take other corporate actions that you desire. The anti-takeover defenses in our
certificate of incorporation and by-laws could discourage, delay or prevent a
transaction involving a change in control of our company.





Item
1B. Unresolved Staff Comments





Not applicable





16





Item
2.    Properties




Our
operational headquarters is located in Washington, D.C. and our administrative
headquarters is located in New York, New York. We have additional offices in
Arkansas, California, Florida, Illinois, Tennessee, Texas and Virginia. All of
our offices are leased and we do not consider any specified leased facility to
be material to our operations. We believe that equally suited facilities are
available in several other areas throughout the U.S. The following table
summarizes information with respect to our material facilities:




Business Unit
                        
                        Location
                        
                        Area
                          (sq.feet)
                        
                        Year of Lease
                          ExpirationCorporate
      Headquarters:
                        
                        New
      York, New York
                        
                        4,525
                        
                        (1)Preparedness
      Services:
                        
                        Washington,
      D.C.
                        
                        15,294
                        
                        2015Little
      Rock, Arkansas
                        
                        4,000
                        
                        2012Sacramento,
      California
                        
                        3,322
                        
                        2011Fraud
      and SIU Services:
                        
                        Orlando,
      Florida
                        
                        7,872
                        
                        2011Nashville,
      Tennessee
                        
                        2,942
                        
                        2012Security
      Consulting and
                          Investigations:
                        
                        Lorton,
      Virginia
                        
                        38,505
                        
                        2016New
      York, New York
                        
                        9,179
                        
                        2015Dallas,
      Texas
                        
                        5,500
                        
                        2012




(1)
The Company’s leases its Corporate Headquarters on a month to month
basis.





Item
3.    Legal Proceedings




From time
to time, we are involved in litigation arising in the ordinary course of
business. We do not believe that we are involved in any litigation that is
likely, individually or in the aggregate, to have a material adverse effect on
our consolidated financial condition, results of operations or cash
flows.





Item
4.    (Removed and Reserved)





17





PART
II





Item
5.  Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.





Market
for Common Equity





Our
common stock is quoted on the NASDAQ Capital Market under the symbol “GLOI”.
Based upon information furnished by our transfer agent, as of March 6, 2010, we
had 207 holders of record of our common stock.




The
following table sets forth the high and low sales prices for our common stock
for the periods indicated as reported by NASDAQ:





Fiscal Year 2008
                      
                      High
                      
                      
                      LowFirst
      Quarter
                      
                      $
                      4.02
                      
                      
                      $
                      1.47Second
      Quarter
                      
                      
                      2.99
                      
                      
                      
                      1.90Third
      Quarter
                      
                      
                      2.36
                      
                      
                      
                      1.25Fourth
      Quarter
                      
                      
                      2.45
                      
                      
                      
                      1.25Fiscal Year 2009
                      
                      High
                      
                      
                      LowFirst
      Quarter
                      
                      $
                      2.15
                      
                      
                      $
                      1.14Second
      Quarter
                      
                      
                      2.15
                      
                      
                      
                      1.25Third
      Quarter
                      
                      
                      2.10
                      
                      
                      
                      1.55Fourth
      Quarter
                      
                      
                      2.08
                      
                      
                      
                      1.30Fiscal Year 2010
                      
                      High
                      
                      
                      LowFirst
      Quarter (1)
                      
                      $
                      1.92
                      
                      
                      $
                      1.38





We
have not declared or paid any cash dividends on our common stock and do not
anticipate declaring or paying any cash dividends in the foreseeable future. Our
senior credit facility prohibits us from paying dividends.  We
currently expect to retain future earnings, if any, for the development of our
business.





(1)  From
January 1, 2010 through March 12, 2010.





18





Securities
Authorized for Issuance Under Equity Compensation Plans




The
following table contains information about our common stock that may be issued
upon the exercise of options and upon the vesting of restricted stock units
(“RSUs”) under all of our equity compensation plans as of December 31, 2009. See
“Executive Compensation—Benefit Plans” for a description of our stock option and
incentive plans.




Plan Category
                            
                            Number of securities
                              to be issued upon
                              exercise of
                              outstanding options
                              and upon vesting of
                              RSUs
                              (a)
                            
                            Weighted average
                              exercise price of
                              outstanding
                              options
                              (does not include
                              RSUs)
                              (b)
                            
                            Number of securities
                              remaining available
                              for future issuance
                              under equity
                              compensation plans
                              (excluding securities
                              reflected in
                              column (a))
                              (c)Equity
      compensation plans approved by security holders(1)
                            
                            1,196,600
                            
                            $
                            2.57
                            
                            2,971,976
      (2)Equity
      compensation plans not approved by security holders
                            
                            —
                            
                            
                            —
                            
                            —Total
                            
                            1,196,600
                            
                            $
                            2.57
                            
                            2,971,976





(1)Our
2005 Stock Option Plan and 2006 Stock Option Plan were adopted by our
stockholders on August 8, 2005 and June 12, 2006, respectively.
On October 17, 2006, our Board of Directors approved, and stockholders
later ratified, that the remaining shares reserved, but unissued, with respect
to any awards under the 2005 Stock Option Plan and 2006 Stock Option Plan were
unreserved and that no new awards were to be issued under these plans. Our
Amended and Restated 2006 Long-Term Incentive Plan and Amended and Restated 2006
Employee Stock Purchase Plan were adopted by our stockholders on July 24,
2008.




(2)The
number of securities remaining available for future issuances includes 1,063,075
under the Amended and Restated 2006 Long-Term Incentive Plan and 1,908,901 under
the Amended and Restated 2006 Employee Stock Purchase Plan.





19





Item
6.  Selected Financial Data




Not
applicable.





Item
7.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations.




The
following discussion of results of operations and financial condition is based
upon, and should be read in conjunction with, our consolidated financial
statements and accompanying notes thereto included elsewhere in this Form 10-K.
This discussion contains forward-looking statements. Actual results could differ
materially from the results discussed in the forward-looking statements. Please
see “Forward-Looking Statements” and “Risk Factors” for a discussion of some of
the uncertainties, risks and assumptions associated with these
statements.




(Dollar
amounts in thousands, except per share amounts)




Overview




GlobalOptions
is an integrated provider of risk mitigation and management services to
government entities, Fortune 1,000 corporations and high net-worth and
high-profile individuals. We enable clients to identify, assess and prevent
natural and man-made threats to the well-being of individuals and the operations
of governments and corporations. In addition, we assist our clients in
recovering from the damages or losses resulting from the occurrence of acts of
terror, natural disasters, fraud and other risks. Our strategy is to
continue to develop a comprehensive risk mitigation solutions company.  In
pursuit of our strategy, we have acquired and integrated nine complementary risk
mitigation businesses since August 2005 that contributed an aggregate of
approximately $102,900, $103,000, and $84,800 in revenues to our business during
the years ended December 31, 2009, 2008 and 2007, respectively.




We
believe our reputation, credentials and personal relationships provide us with a
competitive advantage in securing new business. Our senior management team and
advisory boards have extensive industry backgrounds and include former generals
in the military, top government officials and corporate officers, intelligence
and law enforcement officers, professional investigators and legal and crisis
communications specialists.




We
deliver risk mitigation and management services through the following four
business units:




•
            Preparedness
      Servicesdevelops
      and implements crisis management and emergency response plans for disaster
      mitigation, continuity of operations and other emergency management issues
      for governments, corporations and individuals. This unit is comprised
      of  JLWA.





•
            Fraud and SIU
      Servicesprovides
      investigative surveillance, anti-fraud solutions and business intelligence
      services to the insurance industry, law firms and multinational
      organizations. This unit is comprised of the following acquired companies:
      CBR; Hyperion Risk; Secure Source; Facticon and
    FAIS.





•
            Security
      Consulting and Investigationsdelivers specialized security
      and investigative services, such as security assessments, threat analyses
      and forensic DNA analysis and casework, to governments, corporations and
      individuals. This unit is comprised of the following acquired companies:
      Safir; Bode; and On Line
Consulting.





•
            International
      Strategiesprovides
      a range of security and risk management services, such as global business
      intelligence, investigations and litigation support to foreign and
      domestic governments, corporations and individuals. Our International
      Strategies unit was our original core
  business.




Our
Preparedness Services, Fraud and SIU Services, and Security Consulting and
Investigations units represent our three financial reporting segments. Our
International Strategies business unit, on the basis of its relative
materiality, is included in our Fraud and SIU Services segment.





20





The
following table represents the revenue contribution by each of these three
reporting segments as a percentage of our total revenues:




For the Years Ended
                    December 31,Segment
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007Preparedness
      Services
                  
                  
                  38.2
                  %
                  
                  
                  37.6
                  %
                  
                  
                  35.4
                  %Fraud
      and SIU Services
                  
                  
                  29.0
                  
                  
                  
                  30.1
                  
                  
                  
                  28.1Security
      Consulting and Investigations
                  
                  
                  32.8
                  
                  
                  
                  32.3
                  
                  
                  
                  36.5Total
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %




Strategic
Alternatives




We have
retained the services of Needham & Company to explore strategic
alternatives.  The exploration of strategic alternatives is consistent
with our overall strategy to maximize stockholder value.  While we
have not made any determination to pursue any transaction involving the sale of
our entire business or any of our individual business units, pursuant to the
retention of Needham we have had and continue to have discussions with various
third parties with respect to potential transactions.  No assurance
can be given that any such transaction will be effected and upon what terms such
a transaction would be effected.




Revenues




Principally,
we generate our revenues through providing risk mitigation solutions to our
clients. For our Preparedness Services and Security Consulting and
Investigations engagements, we typically invoice on a time and materials basis.
For most of our Fraud and SIU Services engagements, we invoice on a fixed fee
basis. We enter into contractual arrangements with most of our clients, on both
an exclusive and non-exclusive basis. The duration of our engagements ranges
from one week to two or more years. Over half of our revenues are generated from
repeat client relationships that we have had for more than one year. In addition
to our services, we also generate revenues from the sale of kits and supplies
principally used by law enforcement to collect DNA materials. Generally, we must
compete in the market for our clients based upon our reputation, service history
and relationships. There are limited cases within all of our business segments
that we are considered by our clients to be the sole source provider, based
principally upon the experience of our personnel or, in the case of Bode and
certain DNA investigations, our technical expertise. Our clients consist of
government entities, corporations and high net-worth and high-profile
individuals. We provide our services domestically through our own employees and
through a network of approved subcontractors to achieve scale, geographic
coverage or a specialized expertise. Currently, a small portion of our revenues
is generated by services provided outside the United States.




Gross
Profit




Our gross
profit represents our revenues less the costs of revenues incurred to provide
services to our clients. The most significant components of our costs of
revenues are the costs of our direct labor, our third-party consultants and our
reimbursable costs, which principally consist of travel expenses. For the most
part, our costs of revenues are variable and based upon the type of services
performed or the amount of revenues generated. Where possible, we structure our
personnel arrangements to compensate our employees and our consultants on the
basis of work performed. This enables us to maintain a variable cost structure
and relatively consistent gross margins in our business segments from year to
year. The variability in our gross margins results primarily from changes in our
client mix. For our DNA analysis business, we incur fixed costs for our
equipment and dedicated personnel.




Operating
Expenses




Our
selling and marketing expenses primarily include salaries and commissions, as
well as travel and other expenses, incurred by our employees who are involved in
selling and promoting our services. The accrued earnout expenses related to the
acquisition of JLWA are also reflected in our selling and marketing expenses.
Our general and administrative expenses consist primarily of salaries, bonuses,
depreciation and amortization, and stock-based compensation for our employees
not performing work directly for our clients. Also included in general and
administrative expenses are corporate support expenses such as legal and
professional fees, investor relations, human resources, facilities,
telecommunication support services, information technology, stock option
expenses, salaries for members of our senior management team and impairment
losses recognized on goodwill.





21




Results
of
Operations




The
following is a summary of our operating results as a percentage of our total
consolidated revenues for the periods indicated:





For the years ended December 31,2009
                                                                    
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    2007Revenues
                                                                    
                                                                    
                                                                    100
                                                                    %
                                                                    
                                                                    
                                                                    100
                                                                    %
                                                                    
                                                                    
                                                                    100
                                                                    %Cost
      of revenues
                                                                    
                                                                    
                                                                    56
                                                                    
                                                                    
                                                                    
                                                                    58
                                                                    
                                                                    
                                                                    
                                                                    56Gross
      profit
                                                                    
                                                                    
                                                                    44
                                                                    
                                                                    
                                                                    
                                                                    42
                                                                    
                                                                    
                                                                    
                                                                    44Operating
      expenses:Selling
      and marketing
                                                                    
                                                                    
                                                                    12
                                                                    
                                                                    
                                                                    
                                                                    11
                                                                    
                                                                    
                                                                    
                                                                    17General
      and administrative
                                                                    
                                                                    
                                                                    36
                                                                    
                                                                    
                                                                    
                                                                    39
                                                                    
                                                                    
                                                                    
                                                                    52Impairment
      loss ongoodwill
      and intangibles
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    6Total
      operating expenses
                                                                    
                                                                    
                                                                    48
                                                                    
                                                                    
                                                                    
                                                                    50
                                                                    
                                                                    
                                                                    
                                                                    75Loss
      from operations
                                                                    
                                                                    
                                                                    (4
                                                                    )
                                                                    
                                                                    
                                                                    (8
                                                                    )
                                                                    
                                                                    
                                                                    (31
                                                                    )Other
      income (expense), net
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (1
                                                                    )Net
      loss before income taxes
                                                                    
                                                                    
                                                                    (4
                                                                    )
                                                                    
                                                                    
                                                                    (8
                                                                    )
                                                                    
                                                                    
                                                                    (32
                                                                    )Provision
      for income taxes
                                                                    
                                                                    
                                                                    (1
                                                                    )
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -Net
      loss after taxes
                                                                    
                                                                    
                                                                    (5
                                                                    )
                                                                    
                                                                    
                                                                    (8
                                                                    )
                                                                    
                                                                    
                                                                    (32
                                                                    )Net
      loss applicable to common stockholders
                                                                    
                                                                    
                                                                    (5
                                                                    )%
                                                                    
                                                                    
                                                                    (8
                                                                    )%
                                                                    
                                                                    
                                                                    (32
                                                                    )%





GlobalOptions’
Year Ended December 31, 2009 Compared to the Year Ended December 31,
2008




Revenues





We had overall revenues of $102,130 for
the year ended December 31, 2009, as compared to revenues of $104,187 for the
year ended December 31, 2008, for an overall decrease of $2,057 or
2%  The decrease in revenues for the year ended December 31, 2009 was
principally attributable to a slowdown in investigations and security projects
resulting from recessionary economic conditions, partially offset by increases
in revenues related to DNA projects at our Bode division.




Preparedness Services revenues were
$39,003 for the year ended December 31, 2009, as compared to $39,117 for the
year ended December 31, 2008, representing a decrease of $114 or less than
1%.  The State of Louisiana, which retained JLWA to manage the state’s
relief program related to Hurricanes Katrina, Rita, and Gustav, represented
$24,478 of revenues for the year ended December 31, 2009, as compared to $26,647
of revenues for the year ended December 31, 2008.




Fraud and SIU Services revenues were
$29,593 for the year ended December 31, 2009, as compared to $31,388 for the
year ended December 31, 2008.  The decrease of $1,795 or 6% was
attributable to the reduction in revenues of $1,000 from our International
Strategies Unit and $795 was on account of a slowdown in the demand for our
investigations with our Fraud and SIU Unit, principally due to softness in the
insurance industry.





Security Consulting and Investigations
revenues were $33,534 for the year ended December 31, 2009, as compared to
$33,682 for the December 31, 2008, representing a decrease of $148 or less than
1%.





22





Gross
Profit





Our consolidated gross profit for the
years ended December 31, 2009 and 2008 was $44,763 and $44,248, reflecting gross
profit margins of 44% and 42%, respectively.  Preparedness Services
gross profit was $17,933 or 46% of this segment’s revenues for the year ended
December 31, 2009, as compared to $17,323 or 44% of this segment’s revenues for
the year ended December 31, 2008, due to a decreased usage of outside
consultants. Fraud and SIU Services gross profit was $12,066 or 41% of this
segment’s revenues for the year ended December 31, 2009, as compared to $13,152
or 42% of this segment’s revenues for the year ended December 31,
2008.  Security Consulting and Investigations gross profit was $14,764
or 44% of this segment’s revenues for the year ended December 31, 2009, as
compared to $13,773 or 41% of this segment’s revenues for the year ended
December 31, 2008, due principally to measures taken to improve efficiency and
greater utilization of labor and equipment on account of higher revenue levels
at Bode.





Operating
Expenses





Selling and marketing expenses were
$12,455 or 12% of revenues for the year ended December 31, 2009, as compared to
$11,504 or 11% of revenues for the year ended December 31, 2008, representing an
increase of $949 or 8%.  During the years ended December 31, 2009 and
December 31, 2008, we incurred earnout charges of $0 and $720 respectively, in
connection with the May 11, 2007 JLWA Modification Agreement.  The
$720 decrease in earnout is offset by an increased emphasis on selling and
marketing activities during 2009, including additional personnel dedicated to
these activities.





General and administrative expenses
were $36,568 or 36% of revenues for the year ended December 31, 2009, as
compared to $40,348 or 39% of revenues for the year ended December 31, 2008. The
decrease of $3,780 or 9% is principally due to a decrease in headcount and
professional fees.





Other
Income (Expense), Net





Interest expense, net, was $540 for the
year ended December 31 2009, as compared to $352 for the year ended December 31,
2008. The increase of $187 or 53% was attributable to an increase in the average
balance outstanding under our line of credit.




Income Tax Provision








GlobalOptions’
Year Ended December 31, 2008 Compared to the Year Ended December 31,
2007




Revenues





We had overall revenues of $104,187 for
the year ended December 31, 2008, as compared to revenues of $87,131 for the
year ended December 31, 2007, for an overall increase of $17,056 or
20%.  The increase in revenues for the year ended December 31, 2008
was principally attributable to a combination of organic growth and to our new
client account relationships that we have obtained through the execution of our
acquisition plan.




Preparedness Services revenues were
$39,117 for the year ended December 31, 2008, as compared to $30,823 for the
year ended December 31, 2007.  The increase of $8,294 or 27% was
primarily attributable to an increase in revenues related to response and
recovery efforts in Louisiana in connection with Hurricane Gustav as well as the
flooding in Iowa and Indiana. The State of Louisiana, which retained JLWA to
manage the state’s relief program related to Hurricanes Katrina, Rita, and
Gustav, represented $26,647 of revenues for the year ended December 31, 2008, as
compared to $25,536 of revenues for the year ended December 31,
2007.




Fraud and SIU Services revenues were
$31,388 for the year ended December 31, 2008, as compared to $24,493 for the
year ended December 31, 2007.  The increase of $6,895 or 28% was
primarily attributable to the expansion of our client base through the
acquisition of FAIS in April 2008 and benefitting from a full year of revenues
from the Facticon acquisition, as well as through the addition of new program
accounts.





Security Consulting and Investigations
revenues were $33,682 for the year ended December 31, 2008, as compared to
$31,815 for the December 31, 2007.  The increase of $1,867 or 6% was
principally attributable to a full year of revenues from the acquisition of
Bode, as well as through the expansion of our physical safety and security
consulting practice.




23




Gross
Profit





Our consolidated gross profit for the
years ended December 31, 2008 and 2007 was $44,248 and $38,162, reflecting gross
profit margins of 42% and 44%, respectively.  Preparedness Services
gross profit was $17,323 or 44% of this segment’s revenues for the year ended
December 31, 2008, as compared to $13,559 or 44% of this segment’s revenues for
the year ended December 31, 2007. Fraud and SIU Services gross profit was
$13,152 or 42% of this segment’s revenues for the year ended December 31, 2008,
as compared to $11,117 or 45% of this segment’s revenues for the year ended
December 31, 2007, due to changes in customer programs and product
mix.  Security Consulting and Investigations gross profit was $13,773
or 41% of this segment’s revenues for the year ended December 31, 2008, as
compared to $13,486 or 42% of this segment’s revenues for the year ended
December 31, 2007, due primarily to changes in product mix at Bode.





Operating
Expenses





Selling and marketing expenses were
$11,504 or 11% of revenues for the year ended December 31, 2008, as compared to
$14,821 or 17% of revenues for the year ended December 31, 2007, representing a
decrease of $3,317 or 22%.  During the years ended December 31, 2008
and December 31, 2007, we incurred earnout charges of $720 and $6,330
respectively, in connection with the May 11, 2007 JLWA Modification
Agreement.  The $5,610 decrease in earnout is offset by an increased
emphasis on selling and marketing activities in 2008, including additional
personnel dedicated to these activities.





General and administrative expenses
were $40,348 or 39% of revenues for the year ended December 31, 2008, as
compared to $44,908 or 52% of revenues for the year ended December 31, 2007. The
decrease of $4,560 or 10% is principally due to personnel reductions implemented
at the operating levels and corporate cost savings attributable to lower
professional fees on account of reduced restructuring activities and fewer
acquisitions in 2008.





Other
Income (Expense), Net





Interest expense, net, was $352 for the
year ended December 31 2008, as compared to $517 for the year ended December 31,
2007. The decrease of $165 or 32% was attributable to a net decrease in debt
related to acquisitions.





Liquidity
and Capital Resources





We had a cash and cash equivalent
balance of $3,221 as of December 31, 2009.





Cash provided by (used in) operating
activities was approximately $6,082 and ($839) for the years ended December 31,
2009 and 2008, respectively.  Cash provided by operating activities
for the year ended December 31, 2009 resulted primarily from improvements in the
collection of accounts receivable of $8,112 as well as  non-cash
charges for depreciation and amortization $3,352 and for stock based
compensation of $2,831, offset by our net loss of $5,311 as well as an increase
in the use of funds to reduce accounts payable of $2,634.





Cash used
in operating activities for the year ended December 31, 2008 resulted primarily
from our net loss of $7,956 as well as an increase in the use of funds to
finance accounts receivable of $1,219, offset by non-cash charges for
depreciation and amortization of $4,366 and for stock based compensation of
$4,258.





Cash used in investing activities
during 2009 was $2,865 of which $2,797 related to the purchases of property and
equipment, including the capitalization of internally developed software. Cash used in
investing activities for the year ended December 31, 2008 was $4,430, of which
$2,548 related to the Company’s acquisition of FAIS in April 2008.





Financing
activities used net funds of $5,272 during the year ended December 31, 2009 and
provided net funds 6,119 for the year ended December 31, 2008. Cash used during
the year ended December 31, 2009 was primarily to the paydown the line of
credit. Cash provided for the year ended December 31, 2008 was primarily due to
draws upon our line of credit of $7,093, less repayment of notes payable of
approximately $800, and the repurchase of common stock of approximately
$208.





24





We have
an arrangement with a financial institution that provides a line of credit for
us and our wholly owned subsidiaries.  The applicable interest rate
with respect to the amount outstanding under the line of credit ranges from
1.00% to 1.75%, based upon our liquidity, plus the greater of 6.25% or the
lender’s most recently announced “prime rate.”  As of December 31,
2009, our net borrowings were $2,163 under the line of credit and based upon the
amount of qualifying accounts receivable, we were eligible to draw up an
additional $7,837 for up to a total of $10,000 under the line of
credit.  The line of credit and all obligations outstanding thereunder
are due and payable not later than March 30, 2010.  We are currently
in discussions with respect to the renewal or replacement of this line of
credit.  We anticipate that any renewal or replacement would be in an
aggregate amount sufficient for our current working capital
requirements.  There can be no assurance that we will successfully
renew or replace this line of credit.




In
connection with exploring our strategic alternatives, during the year ended
December 31, 2009, we have spent approximately $669.  We believe that
as we pursue these efforts in 2010, we may need to spend additional funds
towards these strategic alternatives.




For the
year 2009, we have met our cash needs through operating cash flows and through
borrowings under our line of credit.  At December 31, 2009, we had
working capital of $15,356.   We believe that a combination of
cost reductions that we have implemented during 2009 and will continue to
implement in 2010, along with our targeted improvements in revenues in 2010,
will allow us to generate improvements in 2010 cash flows from operations, as
compared to 2009.  Furthermore, we believe that these improved
operating cash flows, along with the proceeds from our line of credit
arrangement, will be sufficient to finance our operations through December 31,
2010.





Off-Balance
Sheet Arrangements




We have
not entered into any transactions with unconsolidated entities in which we have
financial guarantees, subordinated retained interests, derivative instruments or
other contingent arrangements that expose us to material continuing risks,
contingent liabilities or any other obligations under a variable interest in an
unconsolidated entity that provides us with financing, liquidity, market risk or
credit risk support.





Critical
Accounting Policies





Our
significant accounting policies, including the assumptions and judgments
underlying them, are more fully described in our “Notes to Consolidated
Financial Statements” included elsewhere within this Annual Report on Form 10-K.
Some of our accounting policies require the application of significant judgment
by management in the preparation of the consolidated financial statements and,
as a result, they are subject to a greater degree of uncertainty. In applying
these policies, management uses its judgment to determine the appropriate
assumptions to be used in calculating estimates that affect the reported amounts
of assets, liabilities, revenues and expenses. Management bases its estimates
and assumptions on historical experience and on various other factors that are
believed to be reasonable under the circumstances. We have identified certain of
our accounting policies as the ones that are most important to the portrayal of
our consolidated financial condition and results of operations and which require
management to make its most difficult and subjective judgments, often as a
result of the need to make estimates of matters that are inherently uncertain.
Our critical accounting policies include the following:




Revenue
Recognition and Related Costs




For
investigation, crisis management and non-DNA related security, revenue is
recognized on a time and materials or fixed price arrangement and is recognized
as the services are performed pursuant to the applicable contractual
arrangements. Revenue related to time and materials arrangements is recognized
in the period in which the services are performed. Revenue related to fixed
price arrangements is recognized based upon the achievement of certain
milestones or progress points within the project plan. The impact of any
revisions in estimated total revenue and direct contract costs is recognized in
the period in which they become known. Expenses incurred by professional staff
in the generation of revenue are billed to the client and recorded as revenue
when incurred.




For DNA
related revenues, revenue is recognized when it is realized or realizable and
earned. The Company considers revenue realized or realizable and earned when it
has persuasive evidence that an agreement exists, prices are fixed or
determinable, services and products are provided to the client, and
collectability is reasonably assured. The Company reduces revenue for estimated
discounts and other allowances.





25





Revenues earned on DNA related services
are derived from the following sources: (1) forensic DNA analysis;
(2) research and development projects; and (3) sales of DNA collection
products. The Company recognizes revenues from forensic DNA analysis at the time
tests are completed and the results are reported to the client. Revenues from
research and development projects are recognized as the related research is
completed and when the Company has satisfied specific obligations under the
terms of the respective agreements. Revenues from the sales of DNA collection
products are recognized upon delivery of the products to the
client.




Forensic
DNA analysis is billed on a per sample fixed fee arrangement. Research and
development projects are billed on a cost plus fixed fee
arrangement.




Costs
incurred in the performance of forensic DNA analysis are recorded as inventories
and charged to cost of revenues upon the completion of the project, which
generally ranges from one to three months. Costs related to research and
development projects are expensed as incurred and costs related to DNA
collection products are maintained as inventory and charged to operations when
the products are delivered.





Intangible
Assets, Goodwill and Impairment




In
accordance with accounting standards, we recognize certain intangible assets
acquired in acquisitions, primarily goodwill, trade names, covenants not to
compete and client relationships.  On a regular basis, we perform
impairment analysis of the carrying value of goodwill and certain other
intangible assets by assessing the recoverability when there are indications of
potential impairment based on estimates of undiscounted future cash
flows.




Allowance
for Doubtful Accounts




The
number of clients that comprise our client base, along with the different
industries, governmental entities and geographic regions, including foreign
countries, in which our clients operate, limits concentrations of credit risk
with respect to accounts receivable. We do not generally require collateral or
other security to support client receivables, although we do require retainers,
up-front deposits or irrevocable letters of credit in certain situations. We
have established an allowance for doubtful accounts based upon facts surrounding
the credit risk of specific clients and past collections history. Credit losses
have been within management’s expectations.




Stock-Based
Compensation





The
Company utilizes the fair value method for stock-based awards and the related
stock-based compensation is based upon the estimated grant-date fair value. The
Company recognizes these compensation costs over the requisite service period of
the award, which is generally the vesting term of the options associated with
the underlying employment agreement, where applicable.





Accounting
guidance requires forfeitures to be estimated at the time of grant and are
revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates. Forfeitures are estimated based on historical
experience.




We
account for equity instruments issued to non-employees in accordance with
accounting standards which require that such equity instruments be recorded at
their fair value on the measurement date, which is typically the date the
services are performed. Stock-based compensation for non-employees is reflected
within general and administrative expenses.




Recent
Accounting Pronouncements




In June 2009, the FASB issued
new accounting guidance that established the FASB Accounting Standards
Codification, ("Codification" or “ASC”) as the single source of
authoritative GAAP to be applied by nongovernmental entities, except for
the rules and interpretive releases of the SEC under authority of federal
securities laws, which are sources of authoritative GAAP for SEC
registrants.  The FASB will no longer issue new standards in the form
of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts;
instead the FASB will issue Accounting Standards Updates. Accounting Standards
Updates will not be authoritative in their own right as they will only serve to
update the Codification. These changes and the Codification itself do not change
GAAP. This new guidance became effective for interim and annual periods ending
after September 15, 2009.  Other than the manner in which new
accounting guidance is referenced, the adoption of these changes did not have a
material effect on our consolidated financial statements.





26





In
February 2007, the FASB issued new accounting guidance, under ASC Topic 825 on
financial instruments, which permits entities to choose to measure many
financial instruments and certain other items at fair value. The fair value
option established by this statement permits all entities to choose to measure
eligible items at fair value at specified election dates. A business entity
shall report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date. Adoption
is required for fiscal years beginning after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of ASC Topic 820 on fair value measurements and disclosures. We did
not elect the fair value reporting option for any assets and liabilities not
previously recorded at fair value.





In
December 2007, the FASB issued new accounting guidance, under ASC Topic 805 on
business combinations, which established principles and requirements as to how
acquirers recognize and measure in these financial statements the identifiable
assets acquired, the liabilities assumed, noncontrolling interests and goodwill
acquired in the business combination or a gain from a bargain
purchase.  This guidance is effective for business combinations with
an acquisition date on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.   This guidance
will have an impact on our accounting for any future business
acquisitions.





In
December 2007, the FASB issued new accounting guidance, under ASC Topic 810 on
consolidations, which establishes the accounting for noncontrolling interests in
a subsidiary and the deconsolidation of a subsidiary. This guidance requires (a)
the ownership interest in the subsidiary held by parties other than the parent
to be clearly identified and presented in the consolidated balance sheet within
equity, but separate from the parent’s equity, (b) the amount of consolidated
net income attributable to the parent and to the noncontrolling interest to be
clearly identified and presented on the face of the consolidated statement of
operations and (c) changes in a parent’s ownership interest while the parent
retains its controlling financial interest in its subsidiary to be accounted for
consistently. Entities must provide sufficient disclosures that clearly identify
and distinguish between the interests of the parent and the interests of the
noncontrolling owners. This guidance is effective for financial statements
issued for fiscal years beginning on or after December 15, 2008, and interim
periods within those fiscal years. This guidance will have an impact on our
accounting for any future business acquisitions.





In March
2008, the FASB issued new accounting guidance under ASC Topic 815 on derivatives
and hedging, which changes the disclosure requirements for derivative
instruments and hedging activities.  Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance and cash
flow.  The guidance is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged.  This accounting guidance encourages, but does
not require, comparative disclosures for earlier periods at initial adoption.
The adoption of this guidance did not have a material effect on our consolidated
financial statements.





In April
2008, the FASB issued new accounting guidance, under ASC Topic 350 on
intangibles, which outlines the requirements for determining the useful life of
an intangible asset.  The new guidance is intended to improve the
consistency between the useful life of a recognized intangible asset and the
period of expected cash flows used to measure the fair value of the asset when
the underlying arrangement includes renewal or extension of terms that would
require substantial costs or result in a material modification to the asset upon
renewal or extension. Companies estimating the useful life of a recognized
intangible asset must now consider their historical experience in renewing or
extending similar arrangements or, in the absence of historical experience, must
consider assumptions that market participants would use about renewal or
extension as adjusted for entity-specific factors. This guidance is effective
for financial statements issued for fiscal years beginning on or after December
15, 2008, and interim periods within those fiscal years.  We expect
the new guidance to have an impact on the accounting for any future business
acquisitions.





In June
2008, the FASB issued new accounting guidance, under ASC Topic 815 on
derivatives and hedging, as to how an entity should determine whether an
instrument (or an embedded feature) is indexed to an entity's own stock. This
guidance provides that an entity should use a two-step approach to evaluate
whether an equity-linked financial instrument (or embedded feature) is indexed
to its own stock, including evaluating the instrument's contingent exercise and
settlement provisions. This guidance is effective for financial statements
issued for fiscal years beginning after December 15, 2008. Early application is
not permitted.  The adoption of this guidance did not have a material
effect on our consolidated financial statements.





27





In June
2008, the FASB issued new accounting guidance, under ASC Topic 260 on earnings
per share, which clarifies that all outstanding unvested share-based payment
awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. The guidance is effective for
financial statements issued for fiscal years beginning on or after December 15,
2008, and interim periods within those fiscal years. The adoption of this
guidance did not have a material effect on our consolidated financial
statements.





In
November 2008, the FASB issued new accounting guidance, under ASC Topic 323 on
investments— equity method and joint ventures, relating to the accounting for
equity method investments.  This guidance addresses how the initial
carrying value of an equity method investment should be determined, how it
should be tested for impairment, and how changes in classification from equity
method to cost method should be treated.  This guidance is effective
on a prospective basis in fiscal years beginning on or after December 15, 2008,
and interim periods within those fiscal years.  We expect this
guidance to have an impact on its accounting for any future business
acquisitions.





Item 7A. Quantitative and Qualitative
Disclosures About Market Risk.





Not applicable.





Item 8. Financial Statements
and Supplementary Data.





Our
consolidated financial statements and the related notes to the financial
statements called for by this item appear under the caption “Index to
Consolidated Financial Statements” beginning on Page F-1 attached hereto of this
Annual Report on Form 10-K.





28




GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Table
of Contents to Consolidated Financial Statements





Page(s)Report
      of Independent Registered Public Accounting Firm
                F-2Consolidated
      Balance Sheets as of December 31, 2009 and 2008
                F-3Consolidated
      Statements of Operations for the Years Ended December 31,
      2009,  2008 and 2007
                F-4Consolidated
      Statements of Stockholders' Equity for the Years Ended December 2009, 2008
      and 2007
                F-5Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and
      2007
                F-8Notes
      to Consolidated Financial Statements
                F-12




F-1





REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





To the
Audit Committee of the Board of Directors and Shareholders


Of
GlobalOptions Group, Inc. and Subsidiaries





We have
audited the accompanying consolidated balance sheets of GlobalOptions Group,
Inc. and Subsidiaries (the “Company”) as of December 31, 2009 and 2008 and the
related consolidated statements of operations, stockholders’ equity, and cash
flows for the years ended December 31, 2009, 2008 and 2007. These consolidated
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide
a reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of GlobalOptions Group,
Inc. and Subsidiaries as of December 31, 2009 and 2008, and the consolidated
results of their operations and their cash flows for the years ended December
31, 2009, 2008 and 2007 in conformity accounting principles generally accepted
in the United States of America.





/s/
Marcum LLP





New York,
New York




March 16,
2010





F-2




GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Consolidated
Balance Sheets


(dollars
in thousands, except per share amount)





December 31,2009
                
                
                2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                3,221
                
                
                $
                5,276Accounts
      receivable, net
                
                
                19,632
                
                
                
                27,485Inventories,
      net
                
                
                3,354
                
                
                
                2,522Prepaid
      expenses and other current assets
                
                
                840
                
                
                
                862Total
      current assets
                
                
                27,047
                
                
                
                36,145Property
      and equipment, net
                
                
                6,994
                
                
                
                5,834Intangible
      assets, net
                
                
                4,268
                
                
                
                5,981Goodwill
                
                
                19,968
                
                
                
                19,968Security
      deposits and other assets
                
                
                537
                
                
                
                553Total
      assets
                
                $
                58,814
                
                
                $
                68,481LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Line
      of credit
                
                $
                2,163
                
                
                $
                7,093Notes
      payable
                
                
                -
                
                
                
                400Accounts
      payable
                
                
                3,565
                
                
                
                6,199Deferred
      revenues
                
                
                590
                
                
                
                585Accrued
      compensation and related benefits
                
                
                3,643
                
                
                
                3,155Other
      current liabilities
                
                
                1,730
                
                
                
                1,966Total
      current liabilities
                
                
                11,691
                
                
                
                19,398Long-term
      liabilities:Deferred
      tax obligation
                
                
                511
                
                
                
                -Other
      long-term obligations
                
                
                789
                
                
                
                838Total
      long-term liabilities
                
                
                1,300
                
                
                
                838Total
      liabilities
                
                
                12,991
                
                
                
                20,236Commitments
      and contingenciesStockholders'  equity:Preferred
      stock, $0.001 par value, 14,900,000 shares authorized, no shares issued or
      outstanding Series D convertible preferred stock, non-voting, $0.001 par
      value, 100,000 shares authorized, dividends do not accrue,  no
      anti-dilution protection,  0 and 55,388.37
      shares  issued and outstanding, convertible into 0 and
      3,692,743  shares of common stock  at December 31,
      2009 and 2008, respectively, liquidation preference   of
      $0.001 per share or $0.
                
                
                -
                
                
                
                -Common
      stock, $0.001 par value; 100,000,000 shares authorized; 14,472,363 shares
      issued and 14,348,469  shares outstanding at December 31,
      2009,  and   10,486,935 shares issued and
      10,379,868 shares outstanding at December 31,
      2008,  and
                
                
                14
                
                
                
                10Additional
      paid-in capital
                
                
                111,909
                
                
                
                108,989Accumulated
      deficit
                
                
                (65,857
                )
                
                
                (60,546
                )Treasury
      stock; at cost, 123,894 and 107,067 shares at December 31, 2009 and
      December 31, 2008, respectively
                
                
                (243
                )
                
                
                (208
                )Total
      stockholders' equity
                
                
                45,823
                
                
                
                48,245Total
      liabilities and stockholders' equity
                
                $
                58,814
                
                
                $
                68,481




See notes
to these consolidated financial statements.





F-3





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Operations


(dollars
in thousands, except per share amounts)





For
      the Years Ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007Revenues
                      
                      $
                      102,130
                      
                      
                      $
                      104,187
                      
                      
                      $
                      87,131Cost
      of revenues
                      
                      
                      57,367
                      
                      
                      
                      59,939
                      
                      
                      
                      48,969Gross
      profit
                      
                      
                      44,763
                      
                      
                      
                      44,248
                      
                      
                      
                      38,162Operating
      expenses:Selling
      and marketing
                      
                      
                      12,455
                      
                      
                      
                      11,504
                      
                      
                      
                      14,821General
      and administrative
                      
                      
                      36,568
                      
                      
                      
                      40,348
                      
                      
                      
                      44,908Impairment
      loss on goodwill and intangibles
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      5,144Total
      operating expenses
                      
                      
                      49,023
                      
                      
                      
                      51,852
                      
                      
                      
                      64,873Loss
      from operations
                      
                      
                      (4,260
                      )
                      
                      
                      (7,604
                      )
                      
                      
                      (26,711
                      )Other
      income (expense):Interest
      income
                      
                      
                      12
                      
                      
                      
                      27
                      
                      
                      
                      297Interest
      expense
                      
                      
                      (552
                      )
                      
                      
                      (379
                      )
                      
                      
                      (814
                      )Other
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      100Prepayment
      premium
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (800
                      )Other
      expense, net
                      
                      
                      (540
                      )
                      
                      
                      (352
                      )
                      
                      
                      (1,217
                      )Loss
      before income taxes
                      
                      
                      (4,800
                      )
                      
                      
                      (7,956
                      )
                      
                      
                      (27,928
                      )Income
      tax provision
                      
                      
                      511
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      loss
                      
                      $
                      (5,311
                      )
                      
                      $
                      (7,956
                      )
                      
                      $
                      (27,928
                      )Basic
      and diluted net loss per share
                      
                      $
                      (0.41
                      )
                      
                      $
                      (0.81
                      )
                      
                      $
                      (6.69
                      )Weighted
      average number of common shares outstanding - basic and
      diluted
                      
                      
                      12,870,729
                      
                      
                      
                      9,834,069
                      
                      
                      
                      4,177,435









F-4





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Consolidated
Statement of Stockholders' Equity


For
the Year Ended December 31, 2009


(dollars
in thousands)





Series
      DConvertible
                  
                  
                  AdditionalCommon
      Stock
                  
                  
                  Treasury
      Shares
                  
                  
                  Preferred
      Stock
                  
                  
                  Paid-in
                  
                  
                  AccumulatedShares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  TotalBalance,
      January 1, 2009
                  
                  
                  10,486,935
                  
                  
                  $
                  10
                  
                  
                  
                  107,067
                  
                  
                  $
                  (208
                  )
                  
                  
                  55,388.37
                  
                  
                  $
                  -
                  
                  
                  $
                  108,989
                  
                  
                  $
                  (60,546
                  )
                  
                  $
                  48,245Stock
      issued to consultants for services
                  
                  
                  89,577
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  165
                  
                  
                  
                  -
                  
                  
                  
                  165Shares
      issued upon the exercise of stock options
                  
                  
                  44
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Shares
      issued in connection with the vesting of RSUs
                  
                  
                  134,274
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Treasury
      shares acquired in satisfaction of income tax withoholding
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  16,827
                  
                  
                  
                  (35
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (35
                  )Issuance
      of common stock in connection with the conversion of Series D Convertible
      Preferred Stock
                  
                  
                  3,692,552
                  
                  
                  
                  4
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (55,388.37
                  )
                  
                  
                  -
                  
                  
                  
                  (4
                  )
                  
                  
                  -
                  
                  
                  
                  -Issuance
      of common stock under employee stock purchase plan
                  
                  
                  68,981
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  93
                  
                  
                  
                  -
                  
                  
                  
                  93Stock
      based compensation - restricted stock vested
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,041
                  
                  
                  
                  -
                  
                  
                  
                  1,041Stock
      based compensation - employee stock purchase plan
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  31
                  
                  
                  
                  -
                  
                  
                  
                  31Amortization
      of consultant stock option costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  96
                  
                  
                  
                  -
                  
                  
                  
                  96Amortization
      of employee stock options costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  394
                  
                  
                  
                  -
                  
                  
                  
                  394Amortization
      of consultant restricted stock unit costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4
                  
                  
                  
                  -
                  
                  
                  
                  4Amortization
      of employee restricted stock unit costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,100
                  
                  
                  
                  -
                  
                  
                  
                  1,100Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (5,311
                  )
                  
                  
                  (5,311
                  )Balance,
      December 31, 2009
                  
                  
                  14,472,363
                  
                  
                  $
                  14
                  
                  
                  
                  123,894
                  
                  
                  $
                  (243
                  )
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  111,909
                  
                  
                  $
                  (65,857
                  )
                  
                  $
                  45,823








F-5





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Consolidated
Statement of Stockholders' Equity


For
the Year Ended December 31, 2008


(dollars
in thousands)





Series
      DConvertible
                  
                  
                  AdditionalCommon
      Stock
                  
                  
                  Treasury
      Shares
                  
                  
                  Preferred
      Stock
                  
                  
                  Paid-in
                  
                  
                  AccumulatedShares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  TotalBalance,
      January 1, 2008
                  
                  
                  9,660,269
                  
                  
                  $
                  10
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  55,989.32
                  
                  
                  $
                  -
                  
                  
                  $
                  102,537
                  
                  
                  $
                  (52,590
                  )
                  
                  $
                  49,957Stock
      issued to consultants for services
                  
                  
                  26,984
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  167
                  
                  
                  
                  -
                  
                  
                  
                  167Treasury
      shares acquired in satisfaction of income tax withoholding
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  19,567
                  
                  
                  
                  (50
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (50
                  )Treasury
      shares acquired in connection with settlement of Facticon
      matters
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  87,500
                  
                  
                  
                  (158
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (158
                  )Issuance
      of common stock to sellers of JLWA in satisfaction of $2,160 obligation to
      issue common stock
                  
                  
                  225,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,160
                  
                  
                  
                  -
                  
                  
                  
                  2,160Issuance
      of common stock to sellers of JLWA
                  
                  
                  75,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  720
                  
                  
                  
                  -
                  
                  
                  
                  720Issuance
      of common stock in connection with the conversion of Series D Convertible
      Preferred Stock
                  
                  
                  40,064
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (600.95
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Issuance
      of common stock to executive employees for future services
                  
                  
                  437,500
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Issuance
      of common stock under employee stock purchase plan
                  
                  
                  22,118
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  34
                  
                  
                  
                  -
                  
                  
                  
                  34Stock
      based compensation - restricted stock vested
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,058
                  
                  
                  
                  -
                  
                  
                  
                  1,058Stock
      based compensation - employee stock purchase plan
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  11
                  
                  
                  
                  -
                  
                  
                  
                  11Amortization
      of consultant stock option costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  122
                  
                  
                  
                  -
                  
                  
                  
                  122Amortization
      of employee stock options costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,650
                  
                  
                  
                  -
                  
                  
                  
                  1,650Amortization
      of consultant restricted stock unit costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4
                  
                  
                  
                  -
                  
                  
                  
                  4Amortization
      of employee restricted stock unit costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  526
                  
                  
                  
                  -
                  
                  
                  
                  526Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (7,956
                  )
                  
                  
                  (7,956
                  )Balance,
      December 31, 2008
                  
                  
                  10,486,935
                  
                  
                  $
                  10
                  
                  
                  
                  107,067
                  
                  
                  $
                  (208
                  )
                  
                  
                  55,388.37
                  
                  
                  $
                  -
                  
                  
                  $
                  108,989
                  
                  
                  $
                  (60,546
                  )
                  
                  $
                  48,245







F-6





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Consolidated
Statement of Stockholders' Equity


For
the Year Ended December 31, 2007


(dollars
in thousands)





Series
      A
                      
                      
                      Series
      B
                      
                      
                      Series
      C
                      
                      
                      Series
      DConvertible
                      
                      
                      Convertible
                      
                      
                      Convertible
                      
                      
                      Convertible
                      
                      
                      AdditionalCommon
      Stock
                      
                      
                      Preferred
      Stock
                      
                      
                      Preferred
      Stock
                      
                      
                      Preferred
      Stock
                      
                      
                      Preferred
      Stock
                      
                      
                      Paid-in
                      
                      
                      AccumulatedShares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Deficit
                      
                      
                      TotalBalance,
      January 1, 2007
                      
                      
                      2,678,059
                      
                      
                      $
                      3
                      
                      
                      
                      6,380
                      
                      
                      $
                      -
                      
                      
                      
                      53,073
                      
                      
                      $
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      78,558
                      
                      
                      $
                      (24,662
                      )
                      
                      $
                      53,899Fractional shares
      of common stock issued in connection with reverse split
                      
                      
                      42
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Adjustment
      to Series B Convertible Preferred shares outstanding
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (3
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of common stock  in connection with the purchase of On Line
      Consulting
                      
                      
                      84,375
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,350
                      
                      
                      
                      -
                      
                      
                      
                      1,350Issuance
      of common stock in connection with purchase of Facticon
                      
                      
                      87,500
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,400
                      
                      
                      
                      -
                      
                      
                      
                      1,400Exercise
      of stock options
                      
                      
                      88,236
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      48
                      
                      
                      
                      -
                      
                      
                      
                      48Cashless
      exercise of stock options
                      
                      
                      39,706
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (318
                      )
                      
                      
                      -
                      
                      
                      
                      (318
                      )Stock
      issued to employees pursuant to 2006 Long-Term Incentive
    Plan
                      
                      
                      3,471
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      41
                      
                      
                      
                      -
                      
                      
                      
                      41Stock
      issued to consultants for services
                      
                      
                      3,823
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      67
                      
                      
                      
                      -
                      
                      
                      
                      67Stock
      based compensation - restricted stock vested
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      677
                      
                      
                      
                      -
                      
                      
                      
                      677Amortization
      of consultant stock option costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      64
                      
                      
                      
                      -
                      
                      
                      
                      64Amortization
      of employee stock options costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,480
                      
                      
                      
                      -
                      
                      
                      
                      2,480Issuance
      of common stock in connection with the conversion of shares of Series A
      Convertible Preferred Stock
                      
                      
                      3,125
                      
                      
                      
                      -
                      
                      
                      
                      (50
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Equity
      restructuring (See Note 14)
                      
                      
                      630,765
                      
                      
                      
                      -
                      
                      
                      
                      (6,330
                      )
                      
                      
                      -
                      
                      
                      
                      (53,070
                      )
                      
                      
                      -
                      
                      
                      
                      59,400
                      
                      
                      
                      -
                      
                      
                      
                      19,706.52
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of common stock in connection with qualified public offering net of
      offering costs
                      
                      
                      4,500,000
                      
                      
                      
                      5
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      18,172
                      
                      
                      
                      -
                      
                      
                      
                      18,177Conversion
      of Series C Convertible Preferred Stock into shares of common stock and
      share of Series D Convertible Preferred Stock
                      
                      
                      1,541,167
                      
                      
                      
                      2
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (59,400
                      )
                      
                      
                      -
                      
                      
                      
                      36,283.00
                      
                      
                      
                      -
                      
                      
                      
                      (2
                      )
                      
                      
                      -
                      
                      
                      
                      -Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (27,928
                      )
                      
                      
                      (27,928
                      )Balance,
      December 31, 2007
                      
                      
                      9,660,269
                      
                      
                      $
                      10
                      
                      
                      
                      -
                      
                      
                      $
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      -
                      
                      
                      
                      55,989.52
                      
                      
                      $
                      -
                      
                      
                      $
                      102,537
                      
                      
                      $
                      (52,590
                      )
                      
                      $
                      49,957







F-7





GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Cash Flows


(dollars
in thousands)





For
      the Years Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (5,311
                  )
                  
                  $
                  (7,956
                  )
                  
                  $
                  (27,928
                  )Adjustments
      to reconcile net loss to net cash provided by(used
      in) operating activities:Provision
      for bad debts
                  
                  
                  (259
                  )
                  
                  
                  148
                  
                  
                  
                  1,699Depreciation
      and amortization
                  
                  
                  3,352
                  
                  
                  
                  4,366
                  
                  
                  
                  3,917Deferred
      rent
                  
                  
                  28
                  
                  
                  
                  448
                  
                  
                  
                  38Non-cash
      interest charges
                  
                  
                  -
                  
                  
                  
                  4
                  
                  
                  
                  37Reserve
      for restructuring
                  
                  
                  420
                  
                  
                  
                  517
                  
                  
                  
                  -Reserve
      for litigation
                  
                  
                  65
                  
                  
                  
                  -
                  
                  
                  
                  -Reserve
      for obsolete inventory
                  
                  
                  (5
                  )
                  
                  
                  -
                  
                  
                  
                  -Impairment
      of goodwill and intangible assets
                  
                  
                  66
                  
                  
                  
                  -
                  
                  
                  
                  5,144Stock-based
      compensation
                  
                  
                  2,831
                  
                  
                  
                  4,258
                  
                  
                  
                  3,330Deferred
      income taxes
                  
                  
                  511
                  
                  
                  
                  -
                  
                  
                  
                  -Loss
      on disposition of equipment
                  
                  
                  -
                  
                  
                  
                  27
                  
                  
                  
                  -Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  8,112
                  
                  
                  
                  (1,219
                  )
                  
                  
                  (723
                  )Inventories
                  
                  
                  (827
                  )
                  
                  
                  (196
                  )
                  
                  
                  194Prepaid
      expenses and other current assets
                  
                  
                  22
                  
                  
                  
                  (70
                  )
                  
                  
                  (59
                  )Security
      deposits and other assets
                  
                  
                  16
                  
                  
                  
                  25
                  
                  
                  
                  (264
                  )Accounts
      payable
                  
                  
                  (2,634
                  )
                  
                  
                  459
                  
                  
                  
                  769Deferred
      revenues
                  
                  
                  5
                  
                  
                  
                  42
                  
                  
                  
                  396Accrued
      compensation and related benefits
                  
                  
                  488
                  
                  
                  
                  (585
                  )
                  
                  
                  576Due
      to former members of JLWA for earnout
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,732Other
      current liabilities
                  
                  
                  (751
                  )
                  
                  
                  (1,053
                  )
                  
                  
                  (432
                  )Other
      long-term obligations
                  
                  
                  (47
                  )
                  
                  
                  (54
                  )
                  
                  
                  108Total
      adjustments
                  
                  
                  11,393
                  
                  
                  
                  7,117
                  
                  
                  
                  22,462Net
      cash provided by (used in) operating activities
                  
                  
                  6,082
                  
                  
                  
                  (839
                  )
                  
                  
                  (5,466
                  )Cash
      flows from investing activities:Purchases
      of property and equipment
                  
                  
                  (2,797
                  )
                  
                  
                  (1,638
                  )
                  
                  
                  (1,520
                  )Purchase
      of intangible assets
                  
                  
                  (68
                  )
                  
                  
                  (44
                  )
                  
                  
                  (920
                  )Acquisition
      of FAIS
                  
                  
                  -
                  
                  
                  
                  (2,548
                  )
                  
                  
                  -Acquisition
      of On Line Consulting
                  
                  
                  -
                  
                  
                  
                  (200
                  )
                  
                  
                  (988
                  )Acquisition
      of Facticon
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,300
                  )Acquisition
      of Bode, less cash acquired of $284
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (12,907
                  )Net
      cash used in investing activities
                  
                  
                  (2,865
                  )
                  
                  
                  (4,430
                  )
                  
                  
                  (17,635
                  )




F-8





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Cash Flows, continued


(dollars
in thousands)





For
      the Years Ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007Cash
      flows from financing activities:Net  proceeds
      (repayments) under line of credit
                      
                      $
                      (4,930
                      )
                      
                      $
                      7,093
                      
                      
                      $
                      -Proceeds
      from issuance of common stock
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      18,177Repayment
      of notes payable
                      
                      
                      (400
                      )
                      
                      
                      (800
                      )
                      
                      
                      (12,231
                      )Proceeds
      from exercise of stock options
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      48Proceeds
      from issuance of stock in connection with ESPP
                      
                      
                      93
                      
                      
                      
                      34
                      
                      
                      
                      -Repurchase
      of common stock
                      
                      
                      (35
                      )
                      
                      
                      (208
                      )
                      
                      
                      -Net
      cash (used in) provided by  financing activities
                      
                      
                      (5,272
                      )
                      
                      
                      6,119
                      
                      
                      
                      5,994Net
      increase (decrease)  in cash and cash
equivalents
                      
                      
                      (2,055
                      )
                      
                      
                      850
                      
                      
                      
                      (17,107
                      )Cash
      and cash equivalents - beginning of year
                      
                      
                      5,276
                      
                      
                      
                      4,426
                      
                      
                      
                      21,533Cash
      and cash equivalents - end of year
                      
                      $
                      3,221
                      
                      
                      $
                      5,276
                      
                      
                      $
                      4,426Supplemental
      disclosure of cash flow information:Cash
      paid during the year for interest
                      
                      $
                      631
                      
                      
                      $
                      353
                      
                      
                      $
                      827Supplemental
      disclosures of non-cash investing and financing
activities:Common
      stock issued to settle the obligation to issue common
stock
                      
                      $
                      -
                      
                      
                      $
                      2,160
                      
                      
                      $
                      -Common
      stock issued upon the cashless exercise of stock options
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      318Common
      stock issued upon conversion of Series A convertiblepreferred
      stock
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      3Common
      stock ($1,541) and Series D convertible preferred stock
    ($36)issued
      upon conversion of Series C convertible preferred stock
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      1,577Issuance
      of common stock ($631), Series C ($59) and Series D ($20)convertible
      preferred stock in equity restructuring
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      1




F-9


GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Cash Flows, continued


(dollars
in thousands)





For
      the Years Ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007Supplemental
      non-cash investing and financing activity - acquisition of
      FAIS:Assets
      acquired and liabilities assumed:Accounts
      receivable
                      
                      $
                      -
                      
                      
                      $
                      1,201
                      
                      
                      $
                      -Property
      and equipment
                      
                      
                      -
                      
                      
                      
                      61
                      
                      
                      
                      -Intangible
      assets
                      
                      
                      -
                      
                      
                      
                      1,625
                      
                      
                      
                      -Accounts
      payable
                      
                      
                      -
                      
                      
                      
                      (17
                      )
                      
                      
                      -Other
      current liabilities
                      
                      
                      -
                      
                      
                      
                      (322
                      )
                      
                      
                      -Total
      purchase price, paid in cash
                      
                      $
                      -
                      
                      
                      $
                      2,548
                      
                      
                      $
                      -Supplemental
      non-cash investing and financing activity - acquisition of On Line
      Consulting:Assets
      acquired and liabilities assumed:Property
      and equipment
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      97Intangible
      assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,199Goodwill
      recognized on purchase business combination
                      
                      
                      -
                      
                      
                      
                      200
                      
                      
                      
                      1,845Accounts
      payable, accrued expenses and deferred revenues
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (199
                      )Other
      current liabilities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (46
                      )Total
      purchase price
                      
                      
                      -
                      
                      
                      
                      200
                      
                      
                      
                      2,896Less:
      Cash paid to acquire On Line Consulting
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (988
                      )Non-cash
      consideration to seller
                      
                      $
                      -
                      
                      
                      $
                      200
                      
                      
                      $
                      1,908Non-cash
      consideration consisted of:Common
      stock issued to acquire On Line Consulting
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      1,350Notes
      payable issued to seller
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      558Total
      non-cash consideration
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      1,908Supplemental
      non-cash investing and financing activity - acquisition of
      Bode:Assets
      acquired and liabilities assumed:Accounts
      receivable
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      5,510Inventories
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,519Other
      current assets (including cash of $284)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      560Property
      and equipment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,133Intangible
      assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      310Goodwill
      recognized on purchase business combination
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,377Accounts
      payable, accrued expenses and deferred rent obligations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (1,217
                      )Total
      purchase price
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      13,192Less:
      Cash acquired
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (284
                      )Less:
      Cash paid to acquire Bode
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (12,908
                      )Non-cash
      consideration to seller
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -








F-10





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Cash Flows, continued


(dollars
in thousands)





For
      the Years Ended December 31,2009
                              
                              
                              2008
                              
                              
                              2007Supplemental
      non-cash investing and financing activity - acquisition of
      Facticon:Assets
      acquired and liabilities assumed:Accounts
      receivable
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              759Property
      and equipment
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              34Intangible
      assets
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              120Goodwill
      recognized on purchase business combination
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              3,113Accounts
      payable, accrued expenses and deferred revenues
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (1,226
                              )Total
      purchase price
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              2,800Less:
      Cash paid to acquire Facticon
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (1,300
                              )Non-cash
      consideration to seller
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              1,500Non-cash
      consideration consisted of :Note
      payable issued to seller
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              100Common
      stock issued to acquire Facticon
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,400Total
      non-cash consideration
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              1,500







F-11





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





1. 
Business Organization and Nature of Operations





GlobalOptions,
LLC was formed in November 1998 as a limited liability company (“LLC”) in the
state of Delaware.  On January 24, 2002, the LLC was recapitalized as a
Delaware corporation with the name GlobalOptions, Inc. (“GlobalOptions”). 
On June 24, 2005, GlobalOptions consummated a “reverse merger” transaction with
a non operating public company accounted for as a recapitalization, with the
result that on June 24, 2005, GlobalOptions became the subsidiary of a public
company.   Following the  merger, the public company
changed its name to GlobalOptions Group, Inc. (“GlobalOptions Group” or the
“Company”) and began trading on the OTC (over the counter) Bulletin
Board.





On March
6, 2007 the Company executed a 1 for 8 reverse stock split. All share and per
share information preceding the date of this split has been retroactively
restated.





The
Company is an integrated provider of risk mitigation and management services to
government entities, Fortune 1,000 corporations and high net-worth and
high-profile individuals throughout the world. The Company’s risk
mitigation services currently include (1) risk management and security, (2)
investigations and litigation support, and (3) crisis management and corporate
governance. The Company delivers these services through four business units:
Preparedness Services; Fraud and Special Investigative Unit (“SIU”) Services;
Security Consulting and Investigations; and International Strategies. The
Preparedness Services, Fraud and SIU Services, and Security Consulting and
Investigations units represent the Company’s three financial reporting segments.
The results of the International Strategies unit, on the basis of its relative
materiality, are included in the Fraud and SIU Services segment.





On
January 9, 2007, GlobalOptions Group purchased substantially all of the business
and assets of SPZ Oakland Corporation, dba On Line Consulting Service, Inc. (“On
Line Consulting”), a full service security and fire alarm consulting and design
firm based in Oakland, California (See Note 4).





On
February 28, 2007, GlobalOptions Group acquired substantially all of the
business and assets of Facticon, Inc. (“Facticon”).  Facticon is a
surveillance, investigative and intelligence firm based in Chadds Ford,
Pennsylvania (See Note 4).





On
February 28, 2007, GlobalOptions Group purchased the common stock of The Bode
Technology Group, Inc. ("Bode"). Bode is a leading provider forensic DNA
analysis and proprietary DNA collection tools based in Lorton, Virginia (See
Note 4).





On April 21, 2008, GlobalOptions Group
acquired substantially all of the business and net assets of Omega Insurance
Services, Inc. (d/b/a First Advantage Investigative Services) (“FAIS”). FAIS is
a surveillance, investigative and intelligence firm based in St. Petersburg,
Florida (See Note 4).





2.
Principles of Consolidation




The
consolidated financial statements of the Company include the consolidated
financial statements of GlobalOptions, Inc. and its wholly-owned subsidiary,
Bode. All material intercompany accounts and transactions are eliminated in
consolidation.





F-12





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





3. 
Summary of Significant Accounting Policies





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions. Such estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses. Actual results could differ from
estimated amounts. Significant estimates and assumptions include reserves
related to receivables and inventories, the recoverability of long-term assets,
amortizable lives of intangible assets, purchase accounting, accruals related to
performance based compensation plans, deferred taxes and related valuation
allowances and valuation of equity instruments.   Global and
other economic risks could affect the Company’s estimates.  The
Company’s management monitors these risks and assesses its business and
financial risks on a quarterly basis.





Concentrations
of Credit Risk





Cash: The
Company maintains its cash with high credit quality financial
institutions.  At times, our cash and cash equivalents may be
uninsured or in deposit accounts that exceed the Federal Deposit Insurance
Corporation (“FDIC”) insurance limit.  As of December 31, 2009
substantially all of the Company’s funds are held at one financial
institution.





Accounts
Receivable: The number of clients that comprise the Company’s client base, along
with the different industries, governmental entities and geographic regions,
including foreign clients, in which the Company’s clients operate, limits
concentrations of credit risk with respect to accounts receivable. The Company
does not generally require collateral or other security to support client
receivables, however, the Company may require it’s customers to provide
retainers, up-front deposits or irrevocable letters-of-credit when considered
necessary to mitigate credit risk. The Company has established an allowance for
doubtful accounts based upon facts surrounding the credit risk of specific
clients and past collections history. Credit losses have been within
management’s expectations. At December 31, 2009 and 2008, the Company had
allowances for doubtful accounts of $1,410 and $2,487,
respectively.





Cash
Equivalents: The Company considers all short-term investments with a maturity of
three months or less when purchased to be cash equivalents.





Inventories




Inventories
are stated at the lower of cost or market. Cost is determined by the first-in,
first-out method. Reserves for obsolete inventories are provided for based on
historical experience. At December 31, 2009 and 2008, the Company had reserves
for obsolete inventory of $50 and $55, respectively.





The
Company maintains inventories in connection with its DNA related services. Raw
materials consist mainly of reagents, primers, enzymes, chemicals and plates
used in genotyping and components to assemble DNA collection kits. Work in
progress principally consists of data banking and casework not yet completed and
partially assembled kits. Finished goods principally consist of kits that have
been fully assembled, but have not been shipped.





Property
and Equipment





Property
and equipment is stated at cost and is being depreciated using the straight-line
method over their estimated useful lives, generally five to seven years.
Leasehold improvements are being amortized over the shorter of the useful life
or the remaining lease term. Upon retirement or other disposition of these
assets, the cost and related accumulated depreciation and amortization of these
assets are removed from the accounts and the resulting gains or losses are
reflected in the consolidated results of operations. Expenditures for
maintenance and repairs are charged to operations as incurred. Renewals and
betterments are capitalized.





F-13





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





3. 
Summary of Significant Accounting Policies, continued





Intangible
Assets




The
Company recognizes certain intangible assets acquired in acquisitions, primarily
goodwill, trade names, covenants not to compete, and
client relationships.





The
Company has reviewed the carrying value of intangibles and other long-lived
assets for impairment at least annually or whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of long-lived assets is measured by comparing the
carrying amount of the asset or asset group to the undiscounted cash flows that
the asset or asset group is expected to generate. If the undiscounted cash flows
of such assets are less than the carrying amount, the impairment to be
recognized is measured by the amount by which the carrying amount of the
property, if any, exceeds its fair market value. No impairment was deemed to
exist as of December 31, 2009 and 2008.  The Company intends to
re-evaluate the carrying amounts of its amortizable intangibles at lease
quarterly to identify any triggering events, including those that could arise
from the current national and global economic crisis that would require us to
conduct an impairment review. As described above, if triggering events require
us to undertake an impairment review, it is not possible at this time to
determine whether it would be necessary to record a charge or if such charge
would be material.





Goodwill
and Impairment




The
Company is required to perform a goodwill impairment test at least on an annual basis and whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. The testing forimpairment ofgoodwill is
performed in two steps: (1) potentialimpairment is identified by comparing the fair value of a reporting
unit (based on market capitalization, discounted cash flows, or other acceptable
methods) with its carrying amount; and (2) if fair value is less than the
carrying amount, an impairment loss is estimated as the excess of the carrying
amount of the goodwill over its fair value. Goodwill must be written down when
impaired. The Company has adopted December 31 as the annual date for preparing
its impairment assessment, unless other triggering events occur during the year
which might indicate that an impairment has occurred.





Revenue Recognition and Related Costs




The
Company applies the revenue recognition principles set forth in applicable
accounting guidance with respect to all of its revenue. The Company adheres
strictly to this criteria, which provides for revenue to be recognized when (1)
persuasive evidence of an arrangement exists, (2) delivery or installation has
been completed, (3) the customer accepts and verifies receipt, and (4)
collectability is reasonably assured.





For
investigation, crisis management and non-DNA related security, revenue is
recognized on a time and materials or fixed price arrangement and is recognized
as the services are performed pursuant to the applicable contractual
arrangements. Revenue related to time and materials arrangements is recognized
in the period in which the services are performed. Revenue related to fixed
price arrangements is recognized based upon the achievement of certain
contractual milestones or progress points within the project plan. Expenses
incurred by professional staff in the generation of revenue are billed to the
client and recorded as revenue when incurred.





F-14





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





3. 
Summary of Significant Accounting Policies, continued





Revenue
Recognition and Related Costs, continued




Revenues
earned on DNA related services are derived principally from the following
sources: (1) forensic DNA analysis; (2) research and development
projects; and (3) sales of DNA collection products. The Company recognizes
revenues from forensic DNA analysis at the time tests are completed and the
results are reported to the client. Revenues from research and development
projects are recognized as the related research is completed and when the
Company has satisfied specific obligations under the terms of the respective
agreements. Revenues from the sales of DNA collection products are recognized
upon delivery of the products to the client.




Forensic
DNA analysis is billed on a per sample fixed fee arrangement. Research and
development projects are billed on a cost plus fixed fee
arrangement.




Costs
incurred in the performance of forensic DNA analysis are recorded as inventories
and charged to cost of revenues upon the completion of the project, which
generally ranges from one to three months. Costs related to research and
development projects are expensed as incurred and costs related to DNA
collection products are maintained as inventory and charged to operations when
the products are delivered




Advertising





The
Company expenses the cost of advertising as incurred. Advertising expense for
the years ended December 31, 2009, 2008, and 2007 was approximately $32,
$55 and $126, respectively.





Income
Taxes





The
Company accounts for income taxes using the liability method. Under this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of such assets and liabilities. The
Company establishes a valuation allowance for certain deferred tax assets. The
Company was not required to provide for a provision for income taxes for the
years ended December 31, 2008 and 2007, respectively, as a result of losses
incurred during these periods.





For the
year ended December 31, 2009, the Company recorded a deferred income tax
provision on account of an increase in the net deferred tax liability caused
principally by current income tax deductions related  to the
amortization of goodwill over a 15 year life that have not been recognized for
book purposes.





Deferred
tax assets pertaining to windfall tax benefits on exercise of non-qualified
stock options and the corresponding credit to additional paid-in capital are
recorded if the related tax amount either reduces income taxes payable or
results in an income tax refund. The Company has elected the “with and without
approach” regarding ordering of windfall tax benefits to determine whether the
windfall tax benefit did reduce income taxes payable or resulted in an income
tax refund in the current year. Under this approach, the windfall tax benefits
would be recognized in additional paid-in capital only if an incremental income
tax benefit is realized after considering all other income tax benefits
presently available to the Company.





Effective January 1, 2007, the
Company adopted accounting guidance which clarifies the accounting for
uncertainty in income taxes recognized in the Company’s consolidated financial
statements and prescribes a recognition threshold and measurement process for
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The guidance also provides direction on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.





Management
has evaluated and concluded that there were no material uncertain tax positions
requiring recognition in the Company’s consolidated financial statements for the
years ended December 31, 2007, December 31, 2008 and December 31, 2009. The tax
years ended December 31, 2008, 2007, 2006, 2005, 2004 and 2003 remain subject to
examination for federal, state, and local income tax purposes by various taxing
authorities as of December 31, 2009.





F-15





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





3.
            Summary of Significant
      Accounting Policies,
continued





Income
Taxes, continued





The
Company’s policy is to classify assessments, if any, for tax related interest as
interest expense and penalties as general and administrative
expenses.





Stock-Based
Compensation




The
Company accounts for equity instruments issued to non-employees in accordance
with accounting guidance which requires that such equity instruments are
recorded at their fair value on the measurement  date, which is typically
the date the services are performed.  Stock based compensation for
non-employees is reflected within general and administrative
expenses.




The
Company accounts for equity instruments issued to employees in accordance with
accounting guidance which requires that awards are recorded at their fair value
on the date of grant and are amortized over the vesting period of the
award.  The Company recognizes compensation costs over the requisite
service period of the award, which is generally the vesting term of the options
associated with the underlying employment agreement, where
applicable.




Net
Loss Per Common Share




Basic net loss per common share is computed based on the weighted
average number of shares of common stock outstanding, as adjusted, during the
years presented. Common stock equivalents, consisting of stock options,
restricted stock units (“RSUs”), warrants, Series A, B, C and D convertible
preferred stock were not included in the calculation of the diluted loss per
share because their inclusion would have been anti-dilutive.  The basic
weighted average number of shares was reduced for non-vested restricted stock
awards and contingently returnable escrowed shares issued in connection with
acquisitions, and was increased for non-contingent shares to be issued in
connection with the JLWA modification agreement (See Note 10).




Potentially
dilutive securities outlined in the table below have been excluded from the
computation of diluted net loss per share, because the effect of their inclusion
would have been anti-dilutive.





At December 31,2009
                          
                          
                          2008
                          
                          
                          2007Stock
      Options
                          
                          
                          967,781
                          
                          
                          
                          634,687
                          
                          
                          
                          1,191,665Restricted
      Stock Units
                          
                          
                          228,819
                          
                          
                          
                          366,087
                          
                          
                          
                          -Preferred
      Stock and Warrants
                          
                          
                          -
                          
                          
                          
                          3,692,743
                          
                          
                          
                          3,732,821Potentially
      dilutive securities realizable from the vesting of performance based
      restricted stock
                          
                          
                          470,563
                          
                          
                          
                          558,063
                          
                          
                          
                          175,000Contingently
      returnable shares related to the  acquisitions of Facticon and
      Hyperion
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          78,923Total
      Potentially Dilutive Securities
                          
                          
                          1,667,163
                          
                          
                          
                          5,251,580
                          
                          
                          
                          5,178,409





Subsequent
Events




The
Company evaluates events that have occurred after the balance sheet date but
before the financial statements are issued. Based upon the evaluation, the
Company did not identify any recognized or non-recognized subsequent events that
would have required adjustment or disclosure in the consolidated financial
statements.





F-16





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





3. 
Summary of Significant Accounting Policies, continued





Recent
Accounting Pronouncements





In June
2009, the FASB issued new accounting guidance that established the FASB
Accounting Standards Codification, ("Codification" or “ASC”) as the
single source of authoritative GAAP to be applied by nongovernmental
entities, except for the rules and interpretive releases of the SEC under
authority of federal securities laws, which are sources of authoritative
GAAP for SEC registrants.  The FASB will no longer issue new standards
in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting
Standards Updates will not be authoritative in their own right as they will only
serve to update the Codification. These changes and the Codification itself do
not change GAAP. This new guidance became effective for interim and annual
periods ending after September 15, 2009.  Other than the manner in
which new accounting guidance is referenced, the adoption of these changes did
not have a material effect on the Company’s consolidated financial
statements.





In
February 2007, the FASB issued new accounting guidance, under ASC Topic 825 on
financial instruments, which permits entities to choose to measure many
financial instruments and certain other items at fair value. The fair value
option established by this statement permits all entities to choose to measure
eligible items at fair value at specified election dates. A business entity
shall report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date. Adoption
is required for fiscal years beginning after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of ASC Topic 820 on fair value measurements and disclosures. The
Company did not elect the fair value reporting option for any assets and
liabilities not previously recorded at fair value.





In
December 2007, the FASB issued new accounting guidance, under ASC Topic 805 on
business combinations, which established principles and requirements as to how
acquirers recognize and measure in these financial statements the identifiable
assets acquired, the liabilities assumed, noncontrolling interests and goodwill
acquired in the business combination or a gain from a bargain
purchase.  This guidance is effective for business combinations with
an acquisition date on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.   This guidance
will have an impact on the Company’s accounting for any future business
acquisitions.





In
December 2007, the FASB issued new accounting guidance, under ASC Topic 810 on
consolidations, which establishes the accounting for noncontrolling interests in
a subsidiary and the deconsolidation of a subsidiary. This guidance requires (a)
the ownership interest in the subsidiary held by parties other than the parent
to be clearly identified and presented in the consolidated balance sheet within
equity, but separate from the parent’s equity, (b) the amount of consolidated
net income attributable to the parent and to the noncontrolling interest to be
clearly identified and presented on the face of the consolidated statement of
operations and (c) changes in a parent’s ownership interest while the parent
retains its controlling financial interest in its subsidiary to be accounted for
consistently. Entities must provide sufficient disclosures that clearly identify
and distinguish between the interests of the parent and the interests of the
noncontrolling owners. This guidance is effective for financial statements
issued for fiscal years beginning on or after December 15, 2008, and interim
periods within those fiscal years. This guidance will have an impact on the
Company’s accounting for any future business acquisitions.





F-17





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





3. 
Summary of Significant Accounting Policies, continued





Recent
Accounting Pronouncements, continued





In March
2008, the FASB issued new accounting guidance under ASC Topic 815 on derivatives
and hedging activities, which changes the disclosure requirements for derivative
instruments and hedging activities.  Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance and cash
flow.  The guidance is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged.  This accounting guidance encourages, but does
not require, comparative disclosures for earlier periods at initial adoption.
The adoption of this guidance did not have a material effect on the Company’s
consolidated financial statements.





In April
2008, the FASB issued new accounting guidance, under ASC Topic 350 on
intangibles, which outlines the requirements for determining the useful life of
an intangible asset.  The new guidance is intended to improve the
consistency between the useful life of a recognized intangible asset and the
period of expected cash flows used to measure the fair value of the asset when
the underlying arrangement includes renewal or extension of terms that would
require substantial costs or result in a material modification to the asset upon
renewal or extension. Companies estimating the useful life of a recognized
intangible asset must now consider their historical experience in renewing or
extending similar arrangements or, in the absence of historical experience, must
consider assumptions that market participants would use about renewal or
extension as adjusted for entity-specific factors. This guidance is effective
for financial statements issued for fiscal years beginning on or after December
15, 2008, and interim periods within those fiscal years.  The Company
expects the new guidance to have an impact on the accounting for any future
business acquisitions.





In June
2008, the FASB issued new accounting guidance, under ASC Topic 815 on
derivatives and hedging, as to how an entity should determine whether an
instrument (or an embedded feature) is indexed to an entity's own stock. This
guidance  provides that an entity should use a two-step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. This guidance is effective for financial
statements issued for fiscal years beginning after December 15,
2008.   The adoption of this guidance did not have a material
effect on the Company’s consolidated financial statements.





In June
2008, the FASB issued new accounting guidance, under ASC Topic 260 on earnings
per share, which clarifies that all outstanding unvested share-based payment
awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. The guidance is effective for
financial statements issued for fiscal years beginning on or after December 15,
2008, and interim periods within those fiscal years. The adoption of this
guidance did not have a material effect on the Company’s consolidated financial
statements.





In
November 2008, the FASB issued new accounting guidance, under ASC Topic 323 on
investments— equity method and joint ventures, relating to the accounting for
equity method investments.  This guidance addresses how the initial
carrying value of an equity method investment should be determined, how it
should be tested for impairment, and how changes in classification from equity
method to cost method should be treated.  This guidance is effective
on a prospective basis in fiscal years beginning on or after December 15, 2008,
and interim periods within those fiscal years.  The Company expects
this guidance to have an impact on its accounting for any future business
acquisitions.





F-18





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)




3. 
Summary of Significant Accounting Policies, continued





Recent
Accounting Pronouncements, continued





In
May 2009, the FASB issued new accounting guidance, under ASC Topic 855 on
subsequent events, which sets forth: 1) the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements; 2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements; and 3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. This guidance
was effective for interim and annual periods ending after June 15, 2009.
The adoption of this guidance did not have a material effect on the Company’s
consolidated financial statements.





4. Acquisitions





Acquisition of On Line Consulting





On
January 9, 2007, GlobalOptions Group purchased substantially all of the business
and assets of On Line Consulting.  The acquisition was made pursuant
to a certain Asset Purchase Agreement dated January 9, 2007 (the “On Line
Consulting Agreement”) between GlobalOptions Group and On Line Consulting. The
aggregate purchase price paid for On Line Consulting, which amounted to
approximately $2,896 plus the assumption of certain liabilities, was subject to
a working capital purchase price adjustment that was finalized on November 10,
2008.





Purchase
consideration, excluding the purchase price adjustment (which was finalized in
the amount of $200), consisted of $1,546 in cash and 84,375 shares of common
stock of GlobalOptions Group valued at $16.00 per share for a total value of all
consideration of $2,846. At closing, the Company paid $750 of the cash portion
of the purchase price, and issued promissory notes of which $417 was paid on
January 9, 2008, and $141 was due and paid on January 9, 2009.  On
March 23, 2007, the Company paid cash of $224, and recorded an obligation of
$14, which was paid on August 29, 2007.





Further,
at closing, the Company delivered to the seller 46,875 shares of GlobalOptions
common stock, with 37,500 shares which were held in escrow. On January 9, 2008,
18,750 of the escrow shares were delivered to the seller.  On November
10, 2008, the Company paid $200 of additional purchase consideration to the
sellers of On Line Consulting as a result of having finalized the working
capital purchase price adjustment specified in the OnLine Consulting
Agreement.  The remaining 18,750 escrow shares were delivered to the
seller on January 9, 2009.





All of
the promissory notes issued in connection with the acquisition of On Line
Consulting bear no stated interest rate. Accordingly, the promissory note
obligations were recorded at their net present values discounted at a rate of 6%
per annum.  Discounts amounted to $33 and $9 with respect to the $417
and $141 notes due January 9, 2008 and 2009, respectively. The accreted interest
for the years ended December 31, 2009 and 2008 is approximately $0 and $5,
respectively.





The
assets and liabilities of On Line Consulting were recorded in the Company’s
consolidated balance sheet at their fair values at the date of acquisition. As
part of the purchase of On Line Consulting on January 9, 2007, the Company
acquired identifiable intangible assets of $1,199. Of the identifiable
intangibles acquired, $70 has been assigned to trade names, $59 to non-compete
agreements, and $1,070 to client relationships. The acquired intangibles have
been assigned definite lives and are subject to amortization, as described in
the table below.





F-19





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





4. Acquisitions,
continued





Acquisition
of On Line Consulting, continued





The
following details amortization periods for the identifiable, amortizable
intangibles:





Intangible Asset Category
                
                Amortization PeriodTrade
      names
                
                5
      yearsNon-compete
      agreements
                
                3
      yearsClient
      relationships
                
                7
      years





The
following details the allocation of the purchase price for the acquisition of On
Line Consulting:





Fair ValueProperty
      and equipment
                      
                      $
                      97Intangible
      asset - trade names
                      
                      
                      70Intangible
      asset – non-compete agreements
                      
                      
                      59Intangible
      asset - client relationships
                      
                      
                      1,070Accounts
      payable
                      
                      
                      (75
                      )Accrued
      compensation and related benefits
                      
                      
                      (84
                      )Deferred
      revenues
                      
                      
                      (40
                      )Capital
      lease obligation
                      
                      
                      (34
                      )Other
      liabilities
                      
                      
                      (12
                      )Net
      fair values assigned to assets acquired and liabilities
      assumed
                      
                      
                      1,051Goodwill
                      
                      
                      2,045Total
                      
                      $
                      3,096





The
following represents a summary of the purchase price consideration:





Cash
                      
                      $
                      1,174Common
      stock
                      
                      
                      1,350Amount
      due to seller
                      
                      
                      14Notes
      payable
                      
                      
                      558Total
      Purchase Price Consideration
                      
                      $
                      3,096





The
results of operations for On Line Consulting for the years ended December 31,
2009 and 2008 and for the period from January 10, 2007 to December 31, 2007, are
reflected in the Company’s results for the years ended December 31, 2009, 2008
and 2007 in the accompanying consolidated statements of operations.





F-20





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





4.
Acquisitions, continued





Acquisition
of Bode





On
February 28, 2007, the Company acquired the common stock of Bode. Bode provides
forensic DNA analysis, proprietary DNA collection products, and related research
services to law enforcement agencies, federal and state governments, crime
laboratories and disaster management organizations and is based in Lorton,
Virginia. Bode was a wholly-owned subsidiary of ChoicePoint Inc., a Georgia
corporation ("ChoicePoint"). The acquisition was made pursuant to a certain
Stock Purchase Agreement, dated February 28, 2007, between ChoicePoint
Government Services Inc., ChoicePoint and the Company. On March 8, 2007, Bode
was reincorporated in the state of Delaware.  On September 26, 2007,
the Company recorded a working capital adjustment in connection with the
acquisition of Bode in the amount of $692, paid on October 1, 2007 resulting in
an as adjusted total purchase price of $13,192.  On December 31, 2007
the Company recorded an additional purchase price adjustment of $110 related to
the valuation of the opening inventory balance.  The $692 and $110
adjustment amounts were recorded as additional goodwill.





The
assets and liabilities of Bode have been recorded in the Company’s consolidated
balance sheet at their fair values at the date of acquisition.  As part of
the purchase of Bode on February 28, 2007, the Company acquired identifiable
intangible assets of $310.  Of the identifiable intangibles acquired, $200
has been assigned to trade names and $110 to developed
technology.  The acquired intangibles have been assigned definite
lives and are subject to amortization, as described in the table
below.





The
following details amortization periods for the identifiable, amortizable
intangibles:





Intangible Asset Category
                
                Amortization PeriodTrade
      names
                
                10
      yearsDeveloped
      technology
                
                5  years





The
following details the allocation of the purchase price for the acquisition of
Bode:





Fair ValueCash
      and cash equivalents
                  
                  $
                  284Accounts
      receivable
                  
                  
                  5,510Inventories
                  
                  
                  2,519Other
      current assets
                  
                  
                  276Property
      and equipment
                  
                  
                  4,133Intangible
      asset – trade names
                  
                  
                  200Intangible
      asset – development technology
                  
                  
                  110Accounts
      payable
                  
                  
                  (545
                  )Deferred
      rent obligations
                  
                  
                  (94
                  )Accrued
      expenses
                  
                  
                  (578
                  )Net
      fair values assigned to assets acquired and  liabilities
      assumed
                  
                  
                  11,815Goodwill
                  
                  
                  1,377Total
      purchase price in cash
                  
                  $
                  13,192





The
purchase price was paid entirely in cash.





The
results of operations for Bode for the years ended December 31, 2009 and 2008
and for the period from March 1, 2007 to December 31, 2007, are reflected in the
Company’s results for the years ended December 31, 2009, 2008 and 2007 in the
accompanying consolidated statements of operations.





F-21





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





4.      Acquisitions,
continued





Acquisition
of Facticon





On
February 28, 2007, GlobalOptions Group purchased substantially all of the
business and assets of Facticon.





The
acquisition was made pursuant to a certain Asset Purchase Agreement, dated
February 28, 2007 (the "Facticon Agreement"), between GlobalOptions Group and
Facticon. The aggregate purchase price paid was $2,800, which consisted of
$1,300 in cash, a promissory note payable to the seller of $100 and 87,500
shares of common stock in GlobalOptions Group, valued at $1,400 and the
assumption of certain liabilities.  Of the total purchase price, the
$1,300 cash portion, the $100 promissory note and the stock portion were placed
into an escrow account and pursuant to the escrow agreement (“Facticon Escrow
Agreement”) were to be disbursed upon the satisfaction of claims of certain tax
jurisdictions, creditors and litigants against the seller.   The
Facticon Agreement was amended to extend the period of time allotted to resolve
such claims against Facticon through December 31, 2008.





The
assets and liabilities of Facticon have been recorded in the Company’s
consolidated balance sheet at their fair values at the date of
acquisition.  As part of the purchase of Facticon on February 28, 2007, the
Company acquired identifiable intangible assets of $120, consisting of $60 for a
trade name and $60 for the value of client relationships.  The acquired
intangibles have been assigned definite lives and are subject to amortization,
as described in the table below.  In addition, the Company has
recorded an adjustment of approximately $693 to record additional goodwill and
an accrued liability in connection with the Company’s estimated successor
liability obligations.  The successor liability obligations were shown
net of approximately $270 that the Company estimates may be recoverable from the
seller though amounts held in escrow.





On
December 22, 2008, the Company settled certain successor liabilities, resulting
in the sellers returning to the Company the $100 note payable to seller and
87,500 shares of the Company stock, valued at $158.





The
following details the amortization periods for the identifiable, amortizable
intangibles:





Intangible Asset Category
                
                Amortization PeriodTrade
      name
                
                5
      yearsClient
      relationships
                
                3
      years





The
following details the allocation of the purchase price for the acquisition of
Facticon:




Fair ValueAccounts
      receivable
                    
                    $
                    759Property
      and equipment
                    
                    
                    34Intangible
      assets – trade name
                    
                    
                    60Intangible
      assets – client relationships
                    
                    
                    60Accounts
      payable
                    
                    
                    (185
                    )Accrued
      compensation and related benefits
                    
                    
                    (237
                    )Accrued
      expenses
                    
                    
                    (804
                    )Net
      fair values assigned to assets acquired and liabilities
      assumed
                    
                    
                    (313
                    )Goodwill
                    
                    
                    3,113Total
                    
                    $
                    2,800





F-22





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





4.      Acquisitions,
continued





Acquisition
of Facticon, continued





The
following presents a summary of the purchase price consideration for the
purchase of Facticon:




Cash
                                $
                                1,300Note
      issued to seller
                                
                                100Value
      of common stock issued
                                
                                1,400Total
      Purchase Price Consideration
                                $
                                2,800





The
results of operations for Facticon for the years ended December 31, 2009, 2008
and for the period from March 1, 2007 to December 31, 2007, are reflected in the
Company’s results for the years ended December 31, 2009, 2008 and 2007 in the
accompanying consolidated statements of operations.





Acquisition
of FAIS





On April
21, 2008, GlobalOptions Group acquired substantially all of the business and net
assets of FAIS. The aggregate purchase price paid for the assets and business
was $2,548, consisting of cash in the amount of $2,164, a broker fee of $350 and
acquisition and related legal expenses of $34.





The agreement had provided for the
sellers to obtain up to an additional $2,000 upon the attainment of certain
revenue goals subsequent to the closing of the transaction. On November 20,
2008, the Company determined that the revenue goals under the earnout would not
be achieved and thus FAIS would not qualify for any additional purchase price
consideration.





The assets and liabilities of FAIS were
recorded in the Company’s consolidated balance sheet at their fair values at the
date of acquisition. As part of the purchase of FAIS on April 21, 2008, the
Company acquired certain identifiable intangible assets valued in the aggregate
at $2,790. Of the identifiable intangibles acquired, approximately $290 had been
assigned to a non-compete agreement and $2,500 to client
relationships.





The calculated value of these
intangible assets created an excess of the fair value of assets acquired over
the purchase price  using the purchase method of accounting. Under the
purchase method of accounting, the payment of contingent consideration that
might result in recognition of additional cost of the acquired entity when the
contingency is resolved, an amount equal to the lesser of the maximum contingent
consideration or the excess of fair value over the cost of the acquired entity
is to be  recognized as if it were a liability. Upon the resolution of
the contingency and upon issuance of the consideration, any excess of
consideration over the amount that was recognized as a liability is to be
recognized as additional cost of the acquired entity. If the amount initially
recognized as if it were a liability exceeded the consideration issued, that
excess amount shall be allocated as a pro rata reduction of the amounts assigned
to property and equipment and intangible assets acquired. In accordance with
SFAS 141, the Company had initially recorded a liability of $1,206 representing
the difference between the fair value of the assets acquired and the
consideration transferred to the sellers at the closing date excluding
contingent consideration.  On November 20, 2008, the Company
determined that no earnout was to be paid.  Accordingly, the Company
has recorded an adjustment to the purchase price, reflecting a $41 reduction in
net property and equipment and $1,165 of net identifiable intangible assets
consisting of reductions of $129 for non-compete agreements, $1,145 for client
relationships less $109 of accumulated amortization.  The purchase
price adjustment will affect depreciation and amortization on a prospective
basis.




The
Company also recorded a liability of approximately $274 as a reserve for exit
activities which includes the estimated costs of certain salary and severance
expenses of transitional employees that were accrued and accounted for as part
of the purchase price.





F-23





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





4.Acquisitions,
continued





Acquisition
of FAIS, continued





The following details amortization
periods for the identifiable, amortizable intangibles:





Intangible Asset Category
              
              Amortization PeriodNon-compete
      agreements
              
              3
      yearsClient
      relationships
              
              7
      years





The
following details the allocation of the purchase price for the acquisition of
FAIS as adjusted for the November 20, 2008 determination that the contingent
purchase price earnout would not be paid:


Fair
      ValueAccounts
      receivable
                  
                  $
                  1,201Property
      and equipment
                  
                  
                  61Intangible
      asset – non-complete agreements
                  
                  
                  182Intangible
      asset – client relationships
                  
                  
                  1,443Accounts
      payable
                  
                  
                  (17
                  )Accrued
      liabilities
                  
                  
                  (48
                  )Cost
      of exit activities
                  
                  
                  (274
                  )Net
      fair value assigned to assets acquired and liabilities
    assumed
                  
                  $
                  2,548





The
following represents a summary of the purchase price consideration:


Fair
      ValueCash
                  
                  $
                  2,164Broker
      fee
                  
                  
                  350Legal
      fee
                  
                  
                  34Total
      Purchase Price Consideration
                  
                  $
                  2,548




The
results of operations of FAIS for the years ended December 31, 2009, and the
period from April 21, 2008 to December 31, 2008 are reflected in the Company’s
consolidated results for the year ended December 31, 2009 and 2008 in the
accompanying consolidated statements of operations.





F-24





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





4.Acquisitions,
continued





Unaudited
Pro-Forma Financial Information





The
following presents the unaudited pro-forma combined results of operations of the
Company with On Line Consulting, Bode, Facticon and FAIS from the beginning of
the year of acquisition in addition to the entire fiscal year preceding the
acquisition of their net assets or common stock. The respective acquisition
dates are January 9, 2007 for On Line Consulting, February 28, 2007 for Bode and
Facticon, and April 21, 2008 for FAIS.





For
      the Years Ended December 31,2008
                    
                    
                    2007Revenues
                    
                    $
                    107,178
                    
                    
                    $
                    102,561Net
      loss available to common stockholders
                    
                    $
                    (9,112
                    )
                    
                    $
                    (32,636
                    )Pro-forma
      basic and diluted net loss per common share
                    
                    $
                    (0.93
                    )
                    
                    $
                    (7.81
                    )Pro-forma
      weighted average common shares outstanding - basic and
    diluted
                    
                    
                    9,834
                    
                    
                    
                    4,179





The pro
forma combined results are not necessarily indicative of the results that
actually would have occurred if the acquisitions of On Line Consulting, Bode,
Facticon and FAIS had been completed as of the beginning of 2007, 2008 or 2009,
nor are they necessarily indicative of future consolidated results.





5.
Inventories





Inventories
are comprised of the following:





December
      31,2009
                      
                      
                      2008Raw
      materials
                      
                      $
                      2,099
                      
                      
                      $
                      1,373Work
      in progress – DNA analysis
                      
                      
                      330
                      
                      
                      
                      304Finished
      goods
                      
                      
                      975
                      
                      
                      
                      900$
                      3,404
                      
                      
                      $
                      2,577Less:  Reserve
      for obsolescence
                      
                      
                      (50
                      )
                      
                      
                      (55
                      )Total
                      
                      $
                      3,354
                      
                      
                      $
                      2,522





F-25





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





6. 
Intangible Assets and Goodwill





Intangible
Assets




Intangible
asset activity consists of amounts related to the 2007 acquisitions, consisting
of On Line Consulting, Bode and Facticon and the 2008 acquisition of
FAIS.





Intangible
assets are comprised of the following:





Trade
                                          Names
                                        
                                        
                                        Developed
                                          Technology
                                        
                                        
                                        Non-
                                          Compete
                                          Agreements
                                        
                                        
                                        Client
                                          Relationships
                                        
                                        
                                        Patents
                                        
                                        
                                        Accumulated
                                          Amortization
                                        
                                        
                                        TotalBalance
      as of January 1, 2008
                                        
                                        
                                        2,560
                                        
                                        
                                        
                                        440
                                        
                                        
                                        
                                        1,499
                                        
                                        
                                        
                                        7,360
                                        
                                        
                                        
                                        70
                                        
                                        
                                        
                                        (4,659
                                        )
                                        
                                        
                                        7,270Acquisition
      of FAIS
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        290
                                        
                                        
                                        
                                        2,500
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,790Costs
      of patents
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        45
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        45Purchase
      Price Adjustment - FAIS
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (129
                                        )
                                        
                                        
                                        (1,145
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        109
                                        
                                        
                                        
                                        (1,165
                                        )Amortization
      Expense
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,959
                                        )
                                        
                                        
                                        (2,959
                                        )Balance
      as of  December 31, 2008
                                        
                                        $
                                        2,560
                                        
                                        
                                        $
                                        440
                                        
                                        
                                        $
                                        1,660
                                        
                                        
                                        $
                                        8,715
                                        
                                        
                                        $
                                        115
                                        
                                        
                                        $
                                        (7,509
                                        )
                                        
                                        $
                                        5,981Costs
      of patents
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        68
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        68Impairment
      of non-compete agreement
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (161
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        95
                                        
                                        
                                        
                                        (66
                                        )Amortization
      Expense
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (1,715
                                        )
                                        
                                        
                                        (1,715
                                        )Balance
      as of  December 31, 2009
                                        
                                        $
                                        2,560
                                        
                                        
                                        $
                                        440
                                        
                                        
                                        $
                                        1,499
                                        
                                        
                                        $
                                        8,715
                                        
                                        
                                        $
                                        183
                                        
                                        
                                        $
                                        (9,129
                                        )
                                        
                                        $
                                        4,268Weighted
      average amortization period at December 31, 2009 in years
                                        
                                        
                                        5.4
                                        
                                        
                                        
                                        0.5
                                        
                                        
                                        
                                        0
      .0
                                        
                                        
                                        
                                        1.9
                                        
                                        
                                        
                                        12.0





F-26





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





6. 
Intangible Assets and Goodwill, continued





Intangible
Assets, continued





The
estimated amortization of amortizable intangible assets are comprised of the
following for the five years ending December 31, 2014:





For the
      Years Ending
                      December 31,
                    
                    Trade
                      Names
                    
                    
                    Developed
                      Technology
                    
                    
                    Non-
                      Compete
                      Agreements
                    
                    
                    Client
                      Relationships
                    
                    
                    Patents
                    
                    
                    Total2010
                    
                    $
                    305
                    
                    
                    $
                    22
                    
                    
                    $
                    1
                    
                    
                    $
                    857
                    
                    
                    $
                    7
                    
                    
                    $
                    1,1922011
                    
                    
                    251
                    
                    
                    
                    22
                    
                    
                    
                    -
                    
                    
                    
                    637
                    
                    
                    
                    8
                    
                    
                    
                    9182012
                    
                    
                    207
                    
                    
                    
                    4
                    
                    
                    
                    -
                    
                    
                    
                    508
                    
                    
                    
                    7
                    
                    
                    
                    7262013
                    
                    
                    207
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    346
                    
                    
                    
                    8
                    
                    
                    
                    5612014
                    
                    
                    207
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    197
                    
                    
                    
                    8
                    
                    
                    
                    412thereafter
                    
                    
                    265
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    52
                    
                    
                    
                    142
                    
                    
                    
                    459Totals
                    
                    $
                    1,442
                    
                    
                    $
                    48
                    
                    
                    $
                    1
                    
                    
                    $
                    2,597
                    
                    
                    $
                    180
                    
                    
                    $
                    4,268





During
the years ended December 31, 2009, 2008 and 2007, the Company recorded
amortization expense related to the acquired amortizable intangibles of
approximately $1,715,  $2,959 and $2,909, respectively.  For the
year ended December 31, 2009, the Company recorded a charge to general and
administrative expenses of approximately $66 for the impairment of the value of
a non-compete agreement within the Fraud and SIU Services
Segment.  For the year ended December 31, 2007, the Company recorded a
charge to general and administrative expense of approximately $186 (which was
included in amortization expense) in connection with the abandonment of the
trade names previously used within Hyperion, Secure Source and
Facticon.





On December 17, 2007, the Company
entered into a five year agreement with an insurance service company to provide
Fraud and SIU services.  In connection with the agreement, the Company
paid a cash inducement fee of $850, which has been recorded as an intangible
asset – client relationships, as a fee paid to obtain revenue generating client
relationship.  This intangible asset is being amortized on a straight
line basis over the term of agreement.  In addition, the agreement
included a contingent fee of $150, payable 15 months from closing, for which a
portion is subject to forfeiture if revenues under the agreement do not meet
certain agreed upon goals.  Under the terms of the agreement, the
Company will pay a commission upon the achievement of certain gross revenues at
rates ranging from 3% to 7%.  For each twelve month period ending on
the first, second, third, fourth, and fifth anniversaries of the agreement, the
Company will pay an additional commission in an amount equal to 3% of all
revenues in excess of $2,100 up to $3,000; 5% of all revenues in excess of
$3,000 up to $4,000; and 7% of all revenues in excess of $4,000.For the commission
period ended December 17, 2008, no commission was incurred under this
agreement.





Goodwill
Impairment




At
December 31, 2009, 2008 and 2007, the Company performed an annual evaluation of
its goodwill. The Company performed its annual impairment tests of goodwill for
its three reporting segments: Preparedness Services, Fraud and SIU Services
and Security Consulting Investigations,





As a
result of these tests the Company determined that for the year ended December
31, 2007 that the amount of goodwill recorded in connection with the Fraud and
SIU Services segment was impaired or not fully recoverable, as the current
performance and future expectations do not support the carrying value of
goodwill.  As a result, the Company recorded a $5,144 impairment
charge during the year ended December 31, 2007 for the Fraud and SIU Services
segment.





F-27





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





6. 
Intangible Assets and Goodwill, continued





Goodwill





A summary
of Goodwill is comprised of the following for the years ended December 31, 2009
and 2008:





Preparedness
                      Services
                    
                    
                    Fraud
      and
                      SIU Services
                    
                    
                    Security
                      Consulting and
                      Investigations
                    
                    
                    ConsolidatedBalance
      as of  January 1, 2008
                    
                    $
                    883
                    
                    
                    $
                    6,022
                    
                    
                    $
                    12,863
                    
                    
                    $
                    19,768Purchase
      Price  Adjustment- On LineConsulting
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    200
                    
                    
                    
                    200Balance
      as of December 31, 2009 and 2008
                    
                    $
                    883
                    
                    
                    $
                    6,022
                    
                    
                    $
                    13,063
                    
                    
                    $
                    19,968





Of the total goodwill of $19,968 at
December 31, 2009 and 2008, $18,591 is tax deductible.  The amount of
goodwill recorded in 2007 upon the acquisition of Bode,  which
amounted to $1,377,  is not tax deductible.





F-28





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





7.   Property and
Equipment




A summary
of property and equipment is comprised of the following:





December 31,2009
                
                
                2008Computer
      hardware and software
                
                $
                5,993
                
                
                $
                3,453Laboratory
      equipment
                
                
                1,844
                
                
                
                1,648Furniture
      and fixtures
                
                
                915
                
                
                
                895Vehicles
                
                
                134
                
                
                
                134Leasehold
      improvements
                
                
                2,718
                
                
                
                2,677$
                11,604
                
                
                $
                8,807Less:
      accumulated depreciation and amortization
                
                $
                (4,610
                )
                
                $
                (2,973
                )Property
      and equipment, net
                
                $
                6,994
                
                
                $
                5,834





Depreciation
and amortization of property and equipment for the years ended December 31,
2009, 2008 and 2007 was approximately $1,637, $1,407 and $1,012,
respectively.





8.   Accrued Compensation and Related
Benefits





A summary of accrued compensation and
related benefits is comprised of the following:





December
      31,2009
                      
                      
                      2008Performance
      based bonuses
                      
                      $
                      1,429
                      
                      
                      $
                      1,237Payroll
      and commissions
                      
                      
                      1,499
                      
                      
                      
                      1,172Employee
      benefits
                      
                      
                      715
                      
                      
                      
                      746Total
                      
                      $
                      3.643
                      
                      
                      $
                      3,155





9. 
Line of Credit





The
Company maintains a working capital line of credit (the “Facility”) which is
secured by accounts receivable and is subject to certain liquidity and earnings
financial covenants. The Company has granted a first priority security interest
in substantially all of its assets to the financial institution that provides
this Facility





Effective
as of March 30, 2009, the financial institution that provides the Facility
entered into an amendment to the Company’s working capital line of credit to (i)
reduce the maximum amount available under the Facility to $10,000 (ii) increase
the range of the applicable interest rate with respect to the amount outstanding
under the line of credit  to 1.00% to 1.75% based upon the Company’s
liquidity, plus the greater of 6.25% or the lender’s most recently announced
“prime rate”, and (iii) extend the maturity of the Facility to March 30,
2010.  The Company paid a one-time fee of $55 in connection with the
March 30, 2009 modification, which is included in general and administrative
expenses.  The interest rate on the line of credit at December 31,
2009 was 7.25%.  As of December 31, 2009, the Company’s net borrowings
were $2,163 under the line of credit and based upon the amount of qualifying
accounts receivable, the Company was eligible to draw an additional $7,837 for
up to a total of $10,000, under the Facility.





F-29





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





9.  Line of Credit,
continued





All
obligations outstanding under the Facility are due and payable no later than
March 30, 2010.  The Company is currently in discussions with respect
to the renewal or replacement of the Facility, and anticipates that any renewal
or replacement would be in an aggregate amount sufficient for its current
working capital requirements.  There can be no assurance that the
Facility will be successfully renewed or replaced.





10. 
Due to Former Members of JLWA for Earnout and JLWA Modification
Agreement




In
connection with the purchase of James Lee Witt Associates, LLC (“JLWA”) on March
10, 2006, the Initial JLWA Agreement provided for the Company to pay up to
$15,400 in compensatory Earnout payments to the sellers of JLWA upon the
attainment of certain contractual annual revenue goals to be measured on the
first, second and third anniversaries of the closing date of this transaction.
  Prepayment of the Earnout was subject to the continued employment of the
JLWA sellers and has therefore been characterized as compensation.  In
accordance with the provisions of the agreement, the Earnout was to be paid to
JLWA Sellers within sixty (60) days of the dates of the respective anniversaries
of March 31, 2006, with the first $4,000 of the Earnout to be paid in cash and
the remainder to be paid 50% in cash and 50% in shares of common stock of the
Company.




On
May 11, 2007, the Company reached an agreement with the JLWA Sellers to
enter into a second amendment to the JLWA purchase agreement (“JLWA 2007
Modification Agreement”). Under the JLWA 2007 Modification Agreement, the
Company agreed to make additional payments in the form of cash, promissory notes
and common stock to the JLWA Sellers in exchange for eliminating the earnout
provisions of the asset purchase agreement. The additional payments under the
JLWA 2007 Modification Agreement consisted of (i) a note in the amount of
$2,000, which was paid on May 14, 2007, (ii) a $4,500 promissory note
accruing interest at 5.65% per annum, due on January 15, 2008, subject
to a 5% penalty fee if not paid on that due date (see below), (iii) 300,000
shares of common stock with an aggregate fair value on May 11, 2007 of $2,880,
issued on January 30, 2008, with 75,000 of these shares with a fair value
of $720 subject to the Clawback Provision (See below) and (iv) a $4,300
promissory note accruing interest at 11.0% per annum, due on
August 11, 2008.  The JLWA Sellers had the right to request
acceleration of the $4,300 promissory note upon the consummation of a public
offering (see below).





Further,
in connection with the execution of the JLWA Modification Agreement, the Company
executed an amendment of the employment and non-competition agreement with James
Lee Witt. Under the terms of the amendment, upon his voluntary termination of
employment without good reason, Mr. Witt would be obligated to reimburse
the Company in an amount equal to (i) 25% of any shares received by the
JLWA Sellers within 12 months prior to such termination and (ii) 25% of the
base salary of Mr. Witt paid within 12 months prior to such termination,
payable in cash (“Clawback Provision”).





The JLWA
Modification Agreement resulted in $12,960 of non-contingent earnout
consideration, of which approximately $6,630 was deemed as earnout accrued
through May 10, 2007 and $6,330 was deemed to be accelerated earnout
expense.  Earnout expense under the JLWA Agreement (as amended) was
approximately $7,745 for the year ended December 31, 2007.  On
December 15, 2008, the Company waived the Clawback Provision under the
employment agreement of Mr. Witt.   The result was that on
December 15, 2008, $720 of contingent consideration was recognized and recorded
as earnout expense based upon the issuance on January 30, 2008 of 75,000 shares
of stock, pursuant to the terms of the JLWA 2007 Modification
Agreement.





On
October 20, 2007, the Company reached an agreement with the JLWA Sellers
under which the JLWA Sellers agreed to the prepayment of the principal and
accrued interest on the $4,500 promissory note, originally due on
January 15, 2008, that the Company had issued pursuant to the terms of the
JLWA Modification Agreement. In connection with this acceleration, on October
29, 2007, the Company made a negotiated prepayment premium of $800 to compensate
the JLWA Sellers for, among other things, foregone interest and the cost of
accelerated tax payments. The Company borrowed approximately $5,400 from its
line of credit to fund these payments, plus interest of $121, prior to the
completion of the underwritten public offering (See Note 14).





On
October 29, 2007, pursuant to the terms of the JLWA Modification Agreement, the
JLWA Sellers requested and were granted accelerated payment of the $4,300
promissory note, plus interest of $38, in connection with the October 29, 2007
completion of the Company’s underwritten public offering.





F-30





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





11. 
Notes Payable




On March
9, 2007, the Company repaid an obligation of $400 in connection with the
acquisition of JLWA.




On May
14, 2007, the Company made a cash payment of $2,000 related to the JLWA
Modification Agreement (See Note 10).




On May
30, 2007, the Company paid the $750 note payable installment in connection with
the acquisition of Secure Source.




On
October 29, 2007 the Company paid $8,800 in full satisfaction of the notes
issued related to the JLWA Modification Agreement.




During
the year ended December 31, 2007, the Company paid $281 in full satisfaction of
the note payable to the former owners of Safir for the Safir
acquisition.




On
January 7, 2008, the Company repaid $450, consisting of $417 and $33 of
principal and interest, respectively, and on January 6, 2009 the Company repaid
$150, consisting of $141 and $9 of principal and interest, respectively, in full
satisfaction of the notes payable issued in connection with the purchase of On
Line Consulting.




On May 6,
2008, the Company repaid $275, consisting of $250 and $25 of principal and
interest, respectively, in satisfaction of a note payable issued in connection
with the purchase of Secure Source.




On May 6,
2009, the Company repaid $288, consisting of $250 and $38 of principal and
interest, respectively, in satisfaction of a note payable issued in connection
with the purchase of Secure Source.





F-31





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





12.
Income Taxes





For the
year ended December 31, 2009, we incurred losses before income taxes of $4,800,
while recording a tax provision of $511, representing an effective tax rate of
(11%). This tax provision primarily represented an increase in the net deferred
tax liability caused principally by current income tax deductions related to
amortization of goodwill over a 15 year life that have not been recognized for
book purposes.  Goodwill is not amortized for book purposes and is not
written down unless impaired, which has not been the case for the Company for
the years 2009 and 2008.   As a result, the deferred tax
liability will not reverse until such time, if any, that our goodwill becomes
impaired or sold. As such, this deferred income tax liability, which is expected
to continue to increase, will have an indefinite life, resulting in what is
referred to as a “naked credit.”





For the
year ended December 31, 2009, on account of the “naked credit” for the deferred
tax liability relating to the basis difference in goodwill, this deferred tax
liability is not considered in the determination of the valuation allowance due
to the indefinite life of the goodwill intangible
assets.   Accordingly, the remaining net deferred tax asset of
approximately $19,617 at December 31, 2009 is subject to a  100%
valuation allowance because it is currently more likely than not that the
benefit of the net deferred tax asset will not be realized in future
periods.





The
valuation allowances related to the Company’s deferred tax asset increased by
approximately $9, $3,054 and $10,693 for the years ended December 31, 2009,
2008 and 2007, respectively.





Significant
components of the Company’s net deferred tax assets and liability at December
31, 2009 and 2008 is as follows:





2009
                              
                              
                              2008Deferred
      tax assets:Net
      operating loss carryforwards
                              
                              $
                              7,358
                              
                              
                              $
                              5,846Stock-based
      compensation
                              
                              
                              3,127
                              
                              
                              
                              3,865Allowance
      for doubtful accounts
                              
                              
                              550
                              
                              
                              
                              995Intangible
      assets
                              
                              
                              2,277
                              
                              
                              
                              2,306Goodwill
                              
                              
                              5,235
                              
                              
                              
                              6,104Other
      accruals
                              
                              
                              1,286
                              
                              
                              
                              1,146Total
      gross deferred tax assets
                              
                              
                              19,833
                              
                              
                              
                              20,262Deferred
      tax liability:Excess
      of book over tax basis of:Property
      and equipment
                              
                              
                              (216
                              )
                              
                              
                              (655
                              )Goodwill
                              
                              
                              (511
                              )
                              
                              
                              -Net
      deferred tax assets before valuation allowance
                              
                              
                              19,106
                              
                              
                              
                              19,607Less:
      valuation allowance
                              
                              
                              (19,617
                              )
                              
                              
                              (19,607
                              )Deferred
      tax assets, net
                              
                              $
                              (511
                              )
                              
                              $
                              -





As of
December 31, 2009, the Company had approximately $19,100 and $17,200 of
federal and state net operating losses (“NOL”), respectively, available for
income tax purposes that may be carried forward to offset future taxable income,
if any. The federal carryforwards expire in years 2022 through 2029. The Company
conducted a change in ownership study in accordance
with  Section 382 of the Internal Revenue Code (“IRC”) and
determined that its ability to use approximately $13,900 of its federal and
state NOL carryforwards generated prior to October, 2008 is subject to an annual
limitation.





F-32





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)




A
reconciliation of the statutory federal income tax rate to the Company’s
effective tax rate is as follows:





As
      of December 31,2009
                    
                    
                    2008
                    
                    
                    2007Tax
      benefit at federal statutory rate
                    
                    
                    (34.0
                    )%
                    
                    
                    (34.0
                    )%
                    
                    
                    (34.0
                    )%State
      income taxes
                    
                    
                    (5.0
                    )
                    
                    
                    (6.0
                    )
                    
                    
                    (6.0
                    )Permanent
      differences:Stock-based
      compensation
                    
                    
                    31.8
                    
                    
                    
                    4.0
                    
                    
                    
                    0.0Other
                    
                    
                    3.2
                    
                    
                    
                    0.5
                    
                    
                    
                    1.7Adjustments
      of deferred tax assets:Stock-based
      compensation
                    
                    
                    0.0
                    
                    
                    
                    (9.0
                    )
                    
                    
                    0.0Net
      operating loss carry forwards
                    
                    
                    5.1
                    
                    
                    
                    6.1
                    
                    
                    
                    0.0Tax
      rate change
                    
                    
                    9.4
                    
                    
                    
                    0.0
                    
                    
                    
                    0.0Increase
      in valuation allowance
                    
                    
                    0.2
                    
                    
                    
                    38.4
                    
                    
                    
                    38.3Effective
      income tax rate
                    
                    
                    10.7
                    %
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %
  During
the year ended December 31, 2008, the income tax status of certain share based
payment awards was recharacterized as a result of issuing restricted stock units
in exchange for certain incentive stock options, for which compensation expense
was previously treated as a permanent difference because they would not be
expected to generate a tax deduction for the Company.  Accordingly,
the Company recorded an increase to its gross deferred tax assets at December
31, 2008 for the cumulative compensation expense associated with the incentive
stock options which were exchanged, as well as a corresponding increase in the
valuation allowance.  In addition, as a result of the vesting of restricted
stock units and certain other share based payment awards during the year ended
December 31, 2009, the ultimate tax deduction realized by the Company at the
vesting date was substantially lower than the cumulative compensation expense
recorded for financial reporting purposes, which is commonly referred to as a
“shortfall”.  Accordingly, the effective tax rate reconciliation for the
year ended December 31, 2009 includes the effect of derecognizing the gross
deferred tax asset and the related valuation allowance associated with the book
compensation expense of these vested awards and correspondingly, the set-up of
the gross deferred tax asset and the corresponding valuation allowance
associated with the final tax deduction .
 
 In 2009,
the Company re-evaluated its effective state tax rate  as a result of
significant operations in new state jurisdictions and a reduction of operations
in the previously filed state
jurisdictions.


F-33





GLOBALOPTIONS GROUP, INC. AND
SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





13.  Commitments and Contingencies




Employment
Agreements





The
Company has entered into employment agreements with six of its key executives,
expiring through January, 2012. The contractual agreements provide, among other
things, for the payment of up to twenty-five months of
contractual compensation to certain of these executives for termination
under certain circumstances. Aggregate potential contractual compensation
commitments related to these agreements were $1,883 at December 31,
2009.





At
December 31, 2009, aggregate salaries related to these agreements amounted to
$2,175.





The
Company’s two top executives are eligible for a performance bonus payable 50% in
cash and 50% in restricted common stock, pursuant to the Incentive Plan, which
vests upon the achievement of goals agreed upon mutually between the executives
and the Board’s compensation committee (the “Compensation Committee”). The
executives have been awarded shares of restricted common stock under the
Incentive Plan, which form a pool of eligible restricted common stock shares
that will be earned (or vested) pursuant solely to the achievement of the
performance goals agreed upon between the executives and the Compensation
Committee (see Note 14).





Operating
Leases





In
connection with the Company’s acquisitions, GlobalOptions assumed the
obligations for various office leases. Such lease obligations expire at various
dates through August 2016.





On July
19, 2007, the Company entered into an agreement to lease 15,294 rentable square
feet of office space in Washington, D.C., which replaces the Company’s expiring
Washington D.C. office lease. The lease commenced on February 27, 2008 and
expires on November 30, 2015. The Company has the option to extend the lease for
an additional five years. Rent payments have been abated during the first six
months of the lease.





On
September 12, 2008, effective on August 1, 2008, the Company entered into an
agreement to lease 8,204 of rentable square feet of office space in Carrollton,
TX, to replace the Company’s prior Carrollton, TX office lease. The new lease
effectively terminated the old lease without penalty. The new lease expires on
May 31, 2014.





Future
minimum lease payments under these operating leases are as follows:





For
      the Year Ending December 31,
                  
                  Amount2010
                  
                  $
                  2,8062011
                  
                  $
                  2,5322012
                  
                  $
                  2,1732013
                  
                  $
                  2,0192014
                  
                  $
                  2,066Thereafter
                  
                  $
                  2,341Total
                  
                  $
                  13,937





Rent
expense charged to operations amounted to approximately $3,641, $3,745 and
$3,103 for the years ended December 31, 2009, 2008 and 2007,
respectively.





The terms
of certain of the Company’s lease obligations provide for scheduled escalations
in the monthly rent. Non-contingent rent increases are being amortized over the
life of the leases on a straight line basis. Deferred rent of $782 and $824
represents the long-term unamortized rent adjustment amount at December 31, 2009
and 2008, respectively and is reflected in other long-term obligations in the
accompanying consolidated balance sheets. In addition, the current portion of
deferred rent was $70 and $41 at December 31, 2009 and 2008, respectively and is
reflected within other current liabilities in the consolidated balance
sheets.





Included
in other current liabilities at December 31, 2009 and 2008, are obligations of
$515 and $517, respectively, for restructuring costs, which include
principally rent obligations for closed offices.





F-34





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





13. Commitments and Contingencies,
continued





Advisory
Agreements





On June
12, 2007, the Company entered into an agreement with Burnham Hill Partners
(“BHP”) a division of Pale Capital, to provide certain financial advisory
services.  In connection with this agreement, on July 26, 2007, the
Company paid BHP a fee of $200, which was included in general and administrative
expenses.





On August
17, 2007, the Company entered into a financial advisory agreement with BHP to
provide general advisory services including, but not limited to, identifying
strategic transactions and providing capital market advice.  The
agreement commenced on September 1, 2007 and expired on December 31, 2007 and
provided for compensation of $50 per month, which was included in general and
administrative expenses.





Litigation,
Claims and Assessments





From time
to time, in the normal course of business, the Company may be involved in
litigation.  Except for certain claims as described below, the
Company’s management has determined any asserted or unasserted claims to be
immaterial to the consolidated financial statements.





The
Company was added as a defendant in federal and state litigation matters related
to Facticon, which were initially filed prior to the Company’s acquisition
of the assets of Facticon.





In the
federal matter, Anchondo vs.
FacticonInc. and
GlobalOptions Group, Inc. in the U.S. District Court for the Central
District of California, Peter Anchondo (the “Federal Plaintiff”), in a class
action, alleged that Facticon failed to pay overtime
wages.  Subsequent to the acquisition of the assets of Facticon by the
Company, the Company was added as a defendant in said case, under the successor
liability theory. A Motion for Summary Judgment was filed with the Court to
contest the Company’s liability as a successor liable company.  On
March 7, 2008, the Court issued a ruling denying the Company’s Motion for
Summary Judgment and issued a ruling granting a Motion for Summary Judgment in
favor of the Federal Plaintiff ruling that the Company was in fact a successor
party to the Federal Plaintiff’s actions.  This ruling by the Court
was in opposition to the Court’s original ruling dated March 3, 2008, wherein it
granted the Company’s Motion for Summary Judgment. The Company filed a Motion
for Reconsideration and the Judge reversed his opinion but ruled that the issue
of successor liability must be litigated.  In July 2008, the Company
reached a tentative agreement with the Federal Plaintiff to settle this matter
and on December 22, 2008, the matter was settled in full with a cash payment of
$657.





In the
State Court matter, Wonsch, et al. vs.
FacticonInc. and
GlobalOptions Group, Inc., filed in the State Court for the Central
District of California, the plaintiffs in a class action (the “State
Plaintiffs”), alleged that Facticon failed to pay overtime wages under the
California Civil Code. This action was similar to the Anchondo case, but was
limited to the state laws of California. Subsequent to the acquisition, the
Company was added as a defendant in said case, under the successor liability
theory.  On May 12, 2009, the State Court matter was settled in full
with a cash payment of $118.





Under the
terms of an escrow agreement, as amended, by and between GlobalOptions and
Facticon, 85,700 shares of common stock and a note payable of $100 were held in
escrow to satisfy the above mentioned legal matters and other pre-acquisition
obligations of Facticon.  In connection with the Company’s payment for
these pre-acquisition obligations of Facticon, on December 22, 2008, the 85,700
shares of the Company’s common stock reverted back to the Company as treasury
stock with a cost basis of $158 and the $100 note payable obligation to Facticon
was canceled.





F-35





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





14. 
Stockholders’
Equity





Description
of Authorized Capital





The
Company is authorized to issue up to 100,000,000 shares of common stock. The
holders of the Company’s common stock are entitled to one vote per share. The
holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of legally available funds.
However, the current policy of the Board of Directors is to retain earnings, if
any, for the operation and expansion of the business. Upon liquidation,
dissolution or winding-up of the Company, the holders of common stock are
entitled to share ratably in all assets of the Company that are legally
available for distribution. The holders of common stock have no preemptive,
subscription, redemption or conversion rights.





The
Company is authorized to issue 15,000,000 of preferred stock, of which 100,000
shares have been designated as Series D convertible preferred
stock.   Shares previously issued for other classes of preferred
stock, for which shares are no longer outstanding, have been canceled and
returned to undesignated preferred stock that is available for future
issuance..





Common
Stock Issued





On
January 1, 2007, the Company issued 3,471 shares of common stock with a value of
$42 to various employees under the 2006 Long-Term Incentive Plan.





On
February 1, 2007, the Company issued 39,706 shares of common stock in connection
with the cashless exercise of 110,294 stock options.  On February 7,
2007 and February 21, 2007, the Company issued an aggregate of 88,236 shares of
common stock in connection with the standard exercise of stock options resulting
in total proceeds of approximately $48.





On
February 21, 2007, the Company issued 3,125 shares of its common stock upon the
conversion of 50 shares of Series A convertible preferred
stock.





F-36


GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





14. 
Stockholders’ Equity,
continued





Common Stock Issued,
continued





On
September 25, 2007, pursuant to a stock purchase agreement dated March 1, 2007,
the Company issued 850 shares of common stock to Verus International Group, of
which John Oswald, one of our Directors, is Chief Executive Officer, valued at
$15, 1,699 shares of common stock to Athorn, Clark and Partners, Inc. valued at
$30 and 1,274 shares of common stock to Lippert/Heilshorn and Associates, Inc.
valued at $23 in connection with services provided to the Company.




On
January 30, 2008, the Company issued 300,000 shares of common stock to the JLWA
Sellers including 225,000 shares of common stock, in full satisfaction of the
$2,160 obligation to issue common stock. The remaining 75,000 shares were
initially subject to the Clawback Provision, whereby Mr. Witt would be obligated
to reimburse these shares to the Company upon his voluntary termination of
employment without good reason.  The Company agreed to relinquish the
clawback as of December 15, 2008, and the value for the shares of $720 was
recorded as earnout expense and is included in selling and marketing
expenses.




On
February 15, 2008, the Company issued 21,843 shares of common stock, valued at
$153 for services rendered during the year ended December 31, 2007, and 5,141
shares of common stock valued at $15 for services rendered during January and
February 2008, to a group of the Company’s service providers including 1,567
shares of common stock valued at $15 to Verus International Group.




On May
29, 2008, the Company issued 40,064 shares of its common stock upon the
conversion of 600.95 shares of Series D convertible preferred
stock.




On April
14, 2009, the Company issued 36,900 shares valued at $75 to Lippert/Heilshorn
and Associates for services rendered during 2008, and 12,900 shares valued at
$23 for services rendered during 2009.  On December 24, 2009 the
Company issued 39,777 shares of its common stock valued at $67 to
Lippert/Heilshorn and Associates, for services rendered during
2009.




On July
23, 2009, the Company issued 44 shares of its common stock in connection with
the exercise of a stock option.




During
the year ended December 31, 2009, the Company issued 3,692,552 shares of common
stock upon the conversion of 55,388 shares of Series D convertible preferred
stock.  No shares of Series D convertible preferred stock remain
outstanding at December 31, 2009.




During
the year ended December 31, 2009, the Company issued 134,274 shares of its
common stock pursuant to the vesting of RSUs under the 2006 Long Term Incentive
Plan (the “Incentive Plan”).  Of the 134,274 shares issued, 31,912 and
14,094 shares were issued to the Chief Executive Officer and Chief Financial
Officer, respectively.  The Chief Executive Office and Chief Financial
Officer elected to have the Company withhold 12,063 and 4,764 shares,
respectively, in satisfaction of their tax obligations in connection with the
vesting of these RSUs.  Such withheld shares valued at $25 and $10,
respectively are reflected as treasury shares in the Company’s books and
records.




During
the years ended December 31, 2009 and 2008, the Company issued 68,981 and 22,118
shares of its common stock respectfully under the Amended and Restated 2006
Employee Stock Purchase Plan (the “Stock Purchase Plan”).  The Company
realized proceeds of $92 and $35 and recognized stock based compensation of $32
and $11, respectively in connection with the issuance of these
shares.





F-37





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





14. 
Stockholders’ Equity,
continued





Equity
Restructuring





On July
25, 2007, the Company completed an equity restructuring (the “Equity
Restructuring”) in which holders of its Series A convertible preferred stock and
Series B convertible preferred stock received, in consideration of the
cancellation of those shares and all Series A, B-1 and B-2 warrants held by
them, (1) one share of the Company’s newly created Series C convertible
preferred stock for each share of Series A convertible preferred stock and
Series B convertible preferred stock held by them and (2) 0.5 shares of
common stock for each share into which the holder’s Series A convertible
preferred stock and Series B convertible preferred stock was then convertible.
In addition, holders of (a) the Company’s Series A warrants who did not
also hold any shares of Series A convertible preferred stock and
(b) the Company’s Series B warrants, Series C warrants and certain
placement agent warrants received, in consideration of the cancellation of those
warrants, 0.2 shares of common stock for each share subject to those warrants.
Each share of Series C convertible preferred stock would automatically convert
into 66.67 shares of common stock upon the consummation of a firm commitment
underwritten public offering generating at least $20,000 in gross proceeds to
the Company (a “Qualified Public Offering”). A limited number of holders whose
receipt of common stock, whether in the Equity Restructuring or upon the
conversion of the Series C convertible preferred stock, would cause them to
beneficially own in excess of 4.99% of the Company’s outstanding common stock,
would receive shares of the Company’s Series D convertible preferred stock upon
the conversion of the Series C convertible preferred stock, in lieu of shares of
common stock.





In
summary, as a result of the Equity Restructuring, (i) 6,330 shares of
Series A convertible preferred stock, (ii) 53,070 shares of Series B
convertible preferred stock and (iii) warrants to purchase an aggregate of
2,913,041 shares of common stock were restructured into (x) 630,765 shares
of common stock, (y) 59,400 shares of Series C convertible preferred stock
and (z) 19,706.52 shares of Series D convertible preferred stock. On July
26, 2007, the Company filed certificates with the Secretary of the State of
Delaware eliminating the Series A and B convertible preferred
stock.




Upon the
closing of the underwritten public offering on October 29, 2007, the then
outstanding 59,400 shares of Series C convertible preferred stock were
automatically converted into 1,541,167 shares of common stock and 36,282.8
shares of Series D convertible preferred stock. On November 8, 2007, the Company
filed a certificate with the State of Delaware, eliminating the Series C
convertible preferred stock.





Underwritten
Public Offering





On
October 29, 2007, the Company completed an underwritten public offering of
4,500,000 shares of its common stock receiving approximately $20,025 in gross
proceeds and, resulting in $18,200 in net proceeds. The Company used a portion
of the net proceeds from the underwritten public offering to repay certain
indebtedness, including $4,300 of notes and $38 of related accrued interest, and
is using the balance of the net proceeds for working capital, general corporate
purposes, and strategic acquisitions.





In
connection with this underwritten public offering, the Company entered into an
October 29, 2007 agreement with Canaccord Adams Inc. and Morgan Keegan
& Company, Inc., as underwriters, who were paid aggregate fees of $1,418.
The underwriters for the offering had a 30-day over-allotment option to purchase
up to an additional 675,000 shares of common stock from GlobalOptions at the
offering price of $4.50 per share, which expired unexercised.




F-38





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





15.
Stock Based Compensation




On July
24, 2008, at the Company’s 2008 Annual Meeting of Stockholders (the “2008 Annual
Meeting”), stockholders approved the Amended and Restated 2006 Long-Term
Incentive Plan (the “Incentive Plan”), which became effective immediately
following its approval and replaced the Company’s original 2006 Long-Term
Incentive Plan.  The Incentive Plan provides for the issuance of up to
3,000,000 shares of the Company’s common stock, increased from 1,500,000 under
the Company’s original 2006 Long-Term Incentive Plan. The Compensation Committee
has the authority to determine the amount, type and terms of each award, but may
not grant awards under the Incentive Plan, in any combination, for more than
625,000 shares of the Company’s common stock to any individual during any
calendar year, increased from 312,500 under the Company’s original 2006
Long-Term Incentive Plan.




As of
December 31, 2009, 1,063,075 shares of common stock remain eligible to be issued
under the Incentive Plan.




At the
2008 Annual Meeting, stockholders approved the Amended and Restated Employee
Stock Purchase Plan (the “Stock Purchase Plan”), which became effective
immediately following its approval and replaced the Company’s original 2006
Employee Stock Purchase Plan.  The Stock Purchase Plan permits
eligible employees of the Company to automatically purchase at the end of each
month at a discounted price, a certain number of shares of the Company’s common
stock by having the effective purchase price of such shares withheld from their
base pay.  The Stock Purchase Plan provides for the issuance of up to
2,000,000 shares of the Company’s common stock, increased from 250,000 under the
Company’s original 2006 Employee Stock Purchase Plan.  The 2006
Employee Stock Purchase Plan was implemented during July 2008.




On
August 20, 2008, the Company filed a registration statement on Form S-8 under
the Securities Act covering 1,750,000 shares reserved for issuance under the
Stock Purchase Plan.




As of
December 31, 2009, 1,908,901 shares of common stock remain unissued under the
Stock Purchase Plan.




Equity
instruments issued to employees are recorded at their fair value on the date of
grant and are amortized over the vesting period of the award.  Stock
based compensation for employees was approximately $2,566, $3,246 and $3,199 for
the years ended December 31, 2009, 2008 and 2007,
respectively.   For the years ended December 31, 2009, 2008 and
2007, respectively, stock based compensation for employees of $418, $222 and $0
were reflected in selling and marketing expenses, and $2,148, $3,024 and $3,199,
respectively, were reflected in general and administrative
expenses.





Equity
instruments issued to non-employees are recorded at their fair value on the
grant date. The non-vested portions of the award are adjusted based on
market value on a quarterly basis and the adjusted value of award is amortized
over the expected service period.  Stock based compensation for
non-employees was approximately $265, $292, and $131 for the years ended
December 31, 2009, 2008 and 2007, respectively.   For the years
ended December 31, 2009, 2008 and 2007, respectively, stock based compensation
for non-employees of $120, $0 and $0 were reflected in selling and marketing
expenses, and $145, $292 and $131, respectively, were reflected in general and
administrative expenses.





F-39





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





15. Stock
Based Compensation, continued





Stock-Based
Compensation, continued





The
following table summarizes total stock based compensation costs for the years
ended December 31, 2009, 2008 and 2007.




For
      the Year Ended December 30, 2009Advisors
                                            and
                                            Consultants
                                          
                                          
                                          Employees
                                            and
                                            Directors
                                          
                                          
                                          TotalStock
      Options
                                          
                                          $
                                          96
                                          
                                          
                                          $
                                          394
                                          
                                          
                                          $
                                          490RSUs
                                          
                                          
                                          4
                                          
                                          
                                          
                                          1,100
                                          
                                          
                                          
                                          1,104Stock
      issued to consultants for services
                                          
                                          
                                          165
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          165Stock
      purchase plan
                                          
                                          
                                          -
                                          
                                          
                                          
                                          31
                                          
                                          
                                          
                                          31Vesting
      of restricted shares under performance basedexecutive
      bonus award
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,041
                                          
                                          
                                          
                                          1,041Total
                                          
                                          $
                                          265
                                          
                                          
                                          $
                                          2,566
                                          
                                          
                                          $
                                          2,831For
      the Year Ended December 30, 2008Advisors
                                            and
                                            Consultants
                                          
                                          
                                          Employees
                                            and
                                            Directors
                                          
                                          
                                          TotalStock
      Options
                                          
                                          $
                                          121
                                          
                                          
                                          $
                                          1,650
                                          
                                          
                                          $
                                          1,771RSUs
                                          
                                          
                                          4
                                          
                                          
                                          
                                          526
                                          
                                          
                                          
                                          530Stock
      issued to consultants for services
                                          
                                          
                                          167
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          167Stock
      purchase plan
                                          
                                          
                                          -
                                          
                                          
                                          
                                          11
                                          
                                          
                                          
                                          11Earnout
      (JLWA acquisition)
                                          
                                          
                                          720
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          720Vesting
      of restricted shares under performance basedexecutive
      bonus award
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,059
                                          
                                          
                                          
                                          1,059Total
                                          
                                          $
                                          1,012
                                          
                                          
                                          $
                                          3,246
                                          
                                          
                                          $
                                          4,258For
      the Year Ended December 30, 2007Advisors
                                            and
                                            Consultants
                                          
                                          
                                          Employees
                                            and
                                            Directors
                                          
                                          
                                          TotalStock
      Options
                                          
                                          $
                                          64
                                          
                                          
                                          $
                                          2,480
                                          
                                          
                                          $
                                          2,544Stock
      issued to consultants for services
                                          
                                          
                                          67
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          67Bonus
      shares issued to employees
                                          
                                          
                                          -
                                          
                                          
                                          
                                          42
                                          
                                          
                                          
                                          42Vesting
      of restricted shares under performance basedexecutive
      bonus award
                                          
                                          
                                          -
                                          
                                          
                                          
                                          677
                                          
                                          
                                          
                                          677Total
                                          
                                          $
                                          131
                                          
                                          
                                          $
                                          3,199
                                          
                                          
                                          $
                                          3,330




F-40





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





15. Stock
Based Compensation, continued





Stock
Options





The fair
value of each option grant during the years ended December 31, 2009, 2008 and
2007 was estimated on the date of grant using the Black-Scholes option pricing
model.  The weighted average of the assumptions used to compute the
grant date value of the options granted during the years ended December 31,
2009, 2008 and 2007 were as follows:




Years Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Dividend
      yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %
                  
                  
                  0
                  %Expected
      volatility
                  
                  
                  104
                  %
                  
                  
                  87
                  %
                  
                  
                  87
                  %Risk-free
      interest rate
                  
                  
                  1.86
                  %
                  
                  
                  3.0
                  %
                  
                  
                  4.3
                  %Expected
      lives
                  
                  3.6 years
                  
                  
                  5 years
                  
                  
                  5 years





The
Company has determined that the expected life of options granted is the same as
the contractual term for options granted prior to July 1, 2008, because the
employees were expected to remain with the Company for the full term of the
option award.  The expected life of options granted after June 30,
2008 was calculated using the simplified method set out in SEC Staff Accounting
Bulleting No. 110 using the vesting term of 3 years and the contractual term of
5 years.  The simplified method defines the expected life as the
average of the contractual term and the vesting period.





The
weighted average fair value of the options on the date of grant, using the fair
value based methodology for years ended December 31, 2009, 2008 and 2007 was
$1.24, $1.80 and $6.05 per share, respectively.




Effective
August 1, 2007, the Company terminated its consulting agreement and entered into
an employment agreement with its Chief Financial Officer.  As of
August 1, 2007, the unvested portion of the officer’s options was valued at
$268, and is being amortized to stock based compensation expense over the
remaining vesting periods due to his change in status from consultant to
employee.  During the years ended December 31, 2008 and 2007, $71 and
$72, respectively, was amortized to stock based compensation  in
connection with these options.




During
the years ended December 31, 2009, 2008 and 2007, the Company issued 100,000,
100,000 and 13,750 stock options respectively, to certain members of its
advisory boards in exchange for their advisory services to the
Company.  The options issued during each such year were valued at
$128, $314 and $117, respectively. The options have a five year term and vest
ratably at the end of each of the four quarterly periods following the date of
grant. The fair value of the options granted during the year ended December 31,
2009 was calculated using the Black-Scholes option pricing model with the
following assumptions:  dividend yield of 0%, expected volatility of
104%, risk-free interest rate of 1.55% and an expected term of five
years.  Options granted during the year ended December 31, 2008 were
valued under the Black-Scholes pricing model with the following assumptions:
dividend yield of 0%, expected volatility of 87%, risk-free interest rate of
3.45% and an expected term of three years. Options granted during the year ended
December 31, 2007 were valued under the Black-Scholes pricing model with the
following assumptions: dividend yield of 0%, expected volatility of 87%,
risk-free interest rate of 4.7% and an expected term of five
years.   For the years ended December 31, 2009, 2008 and 2007,
$96, $122 and $85, respectively was amortized to stock based compensation
related to these options.





F-41





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





15.
Stock Based Compensation, continued





Stock
Options, continued





On
January 1, 2007, the Company issued stock options for the purchase of 13,750
shares of its common stock at an exercise price of $12.00 per share, under the
2006 Long-Term Incentive Plan to certain members of its advisory boards for
their advisory services to the Company.   The options have a five
year term and vest ratably at the end of each of the four quarterly periods
following the date of grant.  In the aggregate, these options have a
value of approximately $117 utilizing the Black-Scholes option pricing model
with the following assumptions used: expected life of five years, volatility of
87%, dividends of 0%, and a risk free interest rate of 4.70%.





On
January 9, 2007, the Company granted, in the aggregate, options for the purchase
of 26,423 shares of its common stock at an exercise price of $11.36 per share
under the 2006 Long-Term Incentive Plan to employees and officers of On Line
Consulting.   The options have a five year term and vest ratably
upon the first, second and third anniversaries of the date of grant and have a
value of approximately $212 utilizing the Black-Scholes option pricing model
with the following assumptions used: expected life of five years, volatility of
87%, dividends of 0%, and risk free interest rate of 4.65%.





On
February 28, 2007, the Company granted, in the aggregate, options for the
purchase of 38,894 shares of its common stock at an exercise price of $10.80 per
share under the 2006 Long-Term Incentive Plan to employees and officers of
Facticon.   The options have a five year term and vest ratably
upon the first, second and third anniversaries of the date of grant and have a
value of approximately $296 utilizing the Black-Scholes option pricing model
with the following assumptions used: expected life of five years, volatility of
87%, dividends of 0%, and a risk free interest rate of 4.52%.





On
February 28, 2007, the Company granted, in the aggregate, options for the
purchase of 62,504 shares of its common stock at an exercise price of $10.80 per
share under the 2006 Long-Term Incentive Plan to employees and officers of
Bode.   The options have a five year term and vest ratably upon
the first, second and third anniversaries of the date of grant and have a value
of approximately $476 utilizing the Black-Scholes option pricing model with the
following assumptions used: expected life of five years, volatility of 87%,
dividends of 0%, and a risk free interest rate of 4.52%.





On
September 28, 2007, the Company granted, in the aggregate, options for the
purchase of 300,000 shares of its common stock at an exercise price of $7.24 to
the Chief Executive Officers of the Preparedness Services Unit, the Fraud and
SIU Services Unit, and the Security Consulting and Investigations
Unit.  The options were granted under the 2006 Long-Term Incentive
plan.  The options have a five year term, and vest ratably upon the
first second and third anniversaries of the date of grant and have a value of
approximately $1,526 utilizing the Black-Scholes option pricing model with the
following assumptions used: expected life of five years, volatility of 87%,
dividends of 0%, and a risk free interest rate of 4.22%.





On
January 1, 2008, the Company issued stock options for the purchase of 100,000
shares of its common stock at an exercise price of $4.50 per share, under the
2006 Long-Term Incentive Plan to certain members of its advisory boards for
their advisory services to the Company.   The options have a five
year term and vest ratably at the end of each of the four quarterly periods
following the date of grant.  In the aggregate, these options have a
value of approximately $314 utilizing the Black-Scholes option pricing model
with the following assumptions used: expected life of five years, volatility of
87%, dividends of 0%, and a risk free interest rate of 3.45%.





On
February 13, 2008, the Company granted, in the aggregate, options for the
purchase of 295,000 shares of its common stock at an exercise price of $1.70 per
share under the 2006 Long-Term Incentive Plan to certain employees and
officers.   The options have a five year term and vest ratably
upon the first, second and third anniversaries of the date of grant and have a
value of approximately $347 utilizing the Black-Scholes option pricing model
with the following assumptions used: expected life of five years, volatility of
87%, dividends of 0%, and a risk free interest rate of 2.71%.





F-42





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





15.
Stock Based Compensation, continued





Stock
Options, continued





On March
5, 2008, the Company granted, in the aggregate, options for the purchase of
50,000 shares of its common stock at an exercise price of $1.86 per share under
the 2006 Long-Term Incentive Plan to an executive of Bode.   The
options have a five year term and vest ratably upon the first, second and third
anniversaries of the date of grant and have a value of approximately $64
utilizing the Black-Scholes option pricing model with the following assumptions
used: expected life of five years, volatility of 87%, dividends of 0%, and a
risk free interest rate of 2.59%.





On May 7,
2008, the Company granted, in the aggregate, options for the purchase of 97,000
shares of its common stock at an exercise price of $2.23 per share under the
2006 Long-Term Incentive Plan to certain employees of Safir and
FAIS.   The options have a five year term and vest ratably upon
the first, second and third anniversaries of the date of grant and have a value
of approximately $150 utilizing the Black-Scholes option pricing model with the
following assumptions used: expected life of five years, volatility of 87%,
dividends of 0%, and a risk free interest rate of 3.09%.





On May
28, 2008, the Company issued a tender offer to holders of outstanding stock
options issued prior to January 1, 2008, deemed Eligible Options, to exchange
their Eligible Options for Restricted Stock Units (“RSUs”) on a 3 for 1
basis.    As a result of this offer, on June 26, 2008,
1,105,188 stock options were accepted for exchange and cancellation, and the
Company issued 368,475 RSUs.  (See “Restricted Stock Units”,
below).





On July
24, 2008, the Company granted, in the aggregate, options for the purchase of
2,334 shares of its common stock at an exercise price of $2.33 per share under
the Incentive Plan to certain employees of Facticon.   The
options have a five year term and vest ratably upon the first, second and third
anniversaries of the date of grant and have a value of approximately $4
utilizing the Black-Scholes option pricing model with the following assumptions
used: expected life of five years, volatility of 87%, dividends of 0%, and a
risk free interest rate of 3.37%.





On
January 1, 2009, the Company granted, in the aggregate, options for the purchase
of 75,000 shares of its common stock at an exercise price of $1.99 per share,
under the Incentive Plan, to three members of the Board of Directors. The
options have a five year term and vest ratably at the end of each of the four
quarterly periods following the date of grant.  In the aggregate,
these options have a value of approximately $96 utilizing the Black-Scholes
option pricing model with the following assumptions used: expected life of three
years, volatility of 104%, dividends of 0%, and a risk free interest rate of
1.55%.





On
January 1, 2009, the Company granted, in the aggregate, options for the purchase
of 100,000 shares of its common stock at an exercise price of $1.99 per share,
under the Incentive Plan, to certain members of its advisory boards for their
advisory services to the Company.  The options have a five year term and
vest ratably at the end of each of the four quarterly periods following the date
of grant.  In the aggregate, these options have a value of
approximately $128 utilizing the Black-Scholes option pricing model with the
following assumptions used: expected life of three years, volatility of 104%,
dividends of 0%, and a risk free interest rate of 1.55%.





On
February 25, 2009, the Company granted, in the aggregate, options for the
purchase of 267,500 shares of its common stock at an exercise price of $1.70 per
share, under the Incentive Plan, to certain officers and employees.  The
options have a five year term and vest ratably upon the first, second and third
anniversaries of the date of grant.  In the aggregate, these options
have a value of approximately $325 utilizing the Black-Scholes option pricing
model with the following assumptions used: expected life of four years,
volatility of 104%, dividends of 0%, and a risk free interest rate of
2.06%.





At
December 31, 2009, 2008, and 2007 the unamortized value of employee stock
options outstanding under SFAS 123R was approximately $406, $353 and $4,671,
respectively. The unamortized portion at December 31, 2009 will be expensed over
a weighted average period of 1.0 years. For the years ended December 31, 2009,
2008 and 2007 costs of approximately $394, $1,650, and $2,480, respectively,
were recognized in connection with the vesting of these employee stock
options.





F-43





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





15.
Stock Based Compensation, continued





Stock
Options, continued





A summary
of the status of the Company’s stock option plans and the changes during the
years ended December 31, 2009 2008 and 2007, respectively, is presented in the
table below:





Number
      of
                          Options
                        
                        
                        Weighted
                          Average
                          Exercise
                          Price
                        
                        Weighted
                          Average
                          remaining
                          contractual
                          life
                        
                        Intrinsic
                          ValueOptions
      outstanding at January 1, 2007
                        
                        
                        1,028,793Granted
                        
                        
                        460,321Exercised
                        
                        
                        (198,530
                        )Forfeited
                        
                        
                        (98,919
                        )Options
      outstanding at December 31, 2007
                        
                        
                        1,191,665
                        
                        
                        $
                        13.72Granted
                        
                        
                        619,334Forfeited
                        
                        
                        (71,124
                        )Canceled/Exchanged
                        
                        
                        (1,105,188
                        )Options
      outstanding at December 31, 2008
                        
                        
                        634,687
                        
                        
                        $
                        3.62Granted
                        
                        
                        442,500
                        
                        
                        $
                        1.81Exercised
                        
                        
                        (44
                        )
                        
                        $
                        1.70Forfeited
                        
                        
                        (109,362
                        )
                        
                        $
                        2.64Options
      outstanding at December 31, 2009
                        
                        
                        967,781
                        
                        
                        $
                        2.57
                        
                        3.5
      years
                        
                        $
                        -Exercisable,
      December 31, 2009
                        
                        
                        475,919
                        
                        
                        $
                        3.27
                        
                        3.4
      years
                        
                        $
                        -Options
      vested during the year ended December 31, 2009
                        
                        
                        326,572
                        
                        
                        $
                        2.14





Restricted
Stock Units (“RSUs”)





On
May 28, 2008, the Company issued an offer to holders of outstanding stock
options issued prior to January 1, 2008 (“Eligible Options”), to exchange their
Eligible Options for RSUs on a 3 for 1 basis.  Each RSU represents one
share of the Company’s common stock to be issued in the future, based on certain
vesting requirements.  The offer expired on June 25, 2008. As result
of this offer, as of June 26, 2008, 1,105,188 stock options were accepted for
exchange and cancellation, and the Company issued 368,475 RSUs with a grant date
fair value of $2.12 per share to participants in the offer.  The grant
date fair value of the restricted stock units was determined by using the
closing price of the Company’s common stock on the day immediately preceding the
grant date.





All of
the Company’s executive officers and directors participated in the exchange
offer, as a group accounting for approximately 78% of the stock options
exchanged and cancelled and RSUs issued in the offer.





The
excess of the aggregate grant date fair value of the RSUs of $781 over the fair
value of the stock options canceled of $672, was added to the unamortized value
of the options canceled on May 28, 2008, which amounted to $2,863 and is being
amortized over the vesting period of the RSUs.





F-44





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





15.
Stock Based Compensation, continued





Restricted
Stock Units (“RSUs”), continued





RSUs held
by executive officers and directors vest ratably on each of the first, second
and third anniversaries of the grant date.  RSUs held by all other
employees and consultants vest ratably on the first and second anniversaries of
the grant date.





At
December 31, 2009, the unamortized value of RSUs held by employees was
approximately $1,236. The unamortized portion will be expensed over a weighted
average period of 1.3 years.  For the year ended December 31, 2009, a
cost of $1,100 was recognized in connection with the vesting of these employee
RSUs.





A summary of the activity related to
RSUs for the year ended December 31, 2009 is presented
below:




Total
                
                
                Weighted
                  Average Grant
                  Date Fair ValueNonvested at
      January 1, 2008
                
                
                -
                
                
                
                -RSUs
      issued upon cancellation of optionstendered,
      June 26, 2008
                
                
                368,475
                
                
                $
                2.12RSUs
      vested
                
                
                -RSUs
      forfeited
                
                
                (2,388
                )Nonvested
      at December 31, 2008
                
                
                366,087RSUs
      vested
                
                
                (134,274
                )RSUs
      forfeited
                
                
                (2,994
                )Nonvested
      at December 31, 2009
                
                
                228,819
                
                
                $
                2.12





Stock
Purchase Plan





The Stock
Purchase Plan was established for eligible employees to purchase shares of the
Company’s common stock on a monthly basis at 85% of the lower of the market
value of the Company’s common stock on the first or last business day of each
month. Under the Stock Purchase Plan, employees may authorize the Company to
withhold up to 15% of their compensation during any monthly offering period for
common stock purchases, subject to certain limitations. The Stock Purchase Plan
was implemented during July 2008 and is qualified under Section 423 of the
Internal Revenue Code.  For the years ended December 31, 2009 and
2008, 68,981 and 22,118 shares respectively, were issued under the Stock
Purchase Plan, resulting in total proceeds of $93 and $34 respectively. Stock
based compensation recognized in connection with the issuance of these shares
was $31 and $11 for the years ended December 31, 2009 and 2008
respectively.





F-45





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





15.
Stock Based Compensation, continued





Restricted
Stock Issued Under Performance Based Executive Bonus Plan




On
December 19, 2006, the Company awarded 175,000 shares of restricted stock to two
senior officers under the terms of the renewal of their respective employment
and consulting agreements.  On December 13, 2007, the Compensation
Committee determined that 10,939 shares would vest, effective January 1,
2008.




On July
24, 2008 the Company awarded 250,000 and 187,500 shares of unvested restricted
stock to its Chief Executive Office and Chief Financial Officer, respectively,
in connection with the 2006 Executive Compensation Performance Bonus
Plan.




On
December 12, 2007, the Compensation Committee determined that, effective January
1, 2008, 6,250 shares and 4,687 shares of restricted stock held by its Chief
Executive Officer and Chief Financial Officer, respectively, were no longer
subject to forfeiture. The Chief Executive Office, and Chief Financial Officer
elected to have the Company withhold 2,278 and 1,585 shares, respectively, in
satisfaction of their tax obligations in connection with the vesting of their
restricted stock. Such withheld shares valued at $10 and $7, respectively, are
reflected as treasury shares in the Company’s books and records.




Effective
August 19, 2008, an additional 25,000 and 18,500 shares of restricted stock held
by the Chief Executive Officer and Chief Financial Officer respectively, were no
longer subject to forfeiture.  The Chief Executive Office and Chief
Financial Officer elected to have the Company withhold 9,451 and 6,253 shares,
respectively, in satisfaction of their tax obligations in connection with the
August 19, 2008 vesting of their restricted stock.  Such withheld
shares valued at $20 and $13, respectively are reflected as treasury shares in
the Company’s books and records.




On
December 14, 2009, the Compensation Committee determined that an additional
50,000 shares and 37,500 shares of restricted stock held by its Chief Executive
Officer and Chief Financial Officer, respectively, were no longer subject to
forfeiture.  As of December 31, 2009, an aggregate 470,563 of the
restricted shares awarded to these executives remain subject to vesting based on
certain performance and stock price targets that have been established by the
Compensation Committee.




During
the year ended December 31, 2008, in connection with expected performance under
a bonus program for senior executives, stock-based compensation of approximately
$1,059 was recognized for the estimated pro rata vesting of restricted
stock.  Of this amount, $899 is associated with the amortization over
the derived service period of the $1,303 grant date value of a restricted stock
award that is based on the achievement of certain common stock market price
milestones.   The remaining amount of $160 is associated with the
amortization over the service period of the probable outcome at each reporting
date of a restricted stock award that is based on the achievement of certain
performance criteria.




During
the year ended December 31, 2009, in connection with expected performance under
a bonus program for senior executives, stock-based compensation of approximately
$1,041 was recognized for the estimated pro rata vesting of restricted
stock.  Of this amount, $946 is associated with the amortization over
the derived service period of the $975 grant date value of a restricted stock
award that is based on the achievement of certain common stock market price
milestones.   The remaining amount of $95 is associated with the
amortization over the service period of the probable outcome at each reporting
date of a restricted stock award that is based on the achievement of certain
performance criteria.





F-46





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





16.   Client
and Segment Data





The
Company’s reportable operating segments consist of the following three
business segments: Preparedness Services, Fraud and SIU Services, and Security
Consulting and Investigations. The Company’s reportable segments are
organized, managed and operated along key product and service lines. These
product and service lines are provided to similar clients, are offered together
as packaged offerings, generally produce similar margins and are managed under a
consolidated operations management.





The
Preparedness Services segment develops and implements crisis management and
emergency response plans for disaster mitigation, continuity of operations and
other emergency management issues for governments, corporations and
individuals.





The Fraud
and SIU Services segment provides investigative surveillance, anti-fraud
solutions and business intelligence services to the insurance industry, law
firms and multinational organizations. The results of the Company’s
International Strategies business unit, on the basis of its relative
materiality, are included in the Fraud and SIU Services segment.





The
Security Consulting and Investigations segment delivers specialized security and
investigative services to governments, corporations and
individuals.





The
Company’s reportable segments have changed from the prior year, to accommodate
the acquisitions that were consummated.





Total
revenues by segment include revenues to unaffiliated clients. The Company
evaluates performance based on income (loss) from operations. Operating
income (loss) is gross profit less operating expenses.





The
following tables summarize financial information about the Company’s business
segments for the years ended December 31, 2009, 2008 and 2007.  The
Company’s segment information for the year ended December 31, 2009 is presented
on a basis different than for the years ended December 31, 2008 and
2007.





For the Year Ended December 31,
      2009Preparedness
                                                        Services
                                                      
                                                      
                                                      Fraud & SIU
                                                        Services
                                                      
                                                      
                                                      Security
                                                        Consulting &
    Investigations
                                                      
                                                      
                                                      Corporate
                                                      
                                                      
                                                      ConsolidatedRevenues
                                                      
                                                      $
                                                      39,003
                                                      
                                                      
                                                      $
                                                      29,593
                                                      
                                                      
                                                      $
                                                      33,534
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      102,130Income
      (loss) fromOperations
                                                      
                                                      $
                                                      3,585
                                                      
                                                      
                                                      $
                                                      (6,030
                                                      )
                                                      
                                                      $
                                                      (1,815
                                                      )
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      (4,260
                                                      )Identifiable
      Assets
                                                      
                                                      $
                                                      10,492
                                                      
                                                      
                                                      $
                                                      17,916
                                                      
                                                      
                                                      $
                                                      30,406
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      58,814Depreciation
      andAmortization
                                                      
                                                      $
                                                      438
                                                      
                                                      
                                                      $
                                                      1,130
                                                      
                                                      
                                                      $
                                                      1,784
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      3,352Interest
      Expense
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      552
                                                      
                                                      
                                                      $
                                                      552Income
      Tax Expense
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      511
                                                      
                                                      
                                                      $
                                                      511Capital
      Expenditures
                                                      
                                                      $
                                                      102
                                                      
                                                      
                                                      $
                                                      2,023
                                                      
                                                      
                                                      $
                                                      740
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      2,865




F-47





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





16.   Client
and Segment Data, continued





For the Year Ended December 31,
      2008Preparedness
                                                  Services
                                                
                                                
                                                Fraud & SIU
                                                  Services
                                                
                                                
                                                Security
                                                  Consulting &
    Investigations
                                                
                                                
                                                Corporate
                                                
                                                
                                                ConsolidatedRevenues
                                                
                                                $
                                                39,117
                                                
                                                
                                                $
                                                31,388
                                                
                                                
                                                $
                                                33,682
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                104,187Income
      (Loss) fromOperations
                                                
                                                $
                                                1,712
                                                
                                                
                                                $
                                                ( 4,488
                                                )
                                                
                                                $
                                                ( 4,828
                                                )
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                ( 7,604
                                                )Identifiable
      Assets
                                                
                                                $
                                                17,331
                                                
                                                
                                                $
                                                18,967
                                                
                                                
                                                $
                                                32,183
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                68,481Depreciation
      andAmortization
                                                
                                                $
                                                1,267
                                                
                                                
                                                $
                                                1,379
                                                
                                                
                                                $
                                                1,720
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                4,366Interest
      Expense
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                379
                                                
                                                
                                                $
                                                379Capital
      Expenditures
                                                
                                                $
                                                144
                                                
                                                
                                                $
                                                662
                                                
                                                
                                                $
                                                876
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                1,682





For the Year Ended December 31,
      2007Preparedness
                                                          Services
                                                        
                                                        
                                                        Fraud & SIU
                                                          Services
                                                        
                                                        
                                                        Security
                                                          Consulting &
      Investigations
                                                        
                                                        
                                                        Corporate
                                                        
                                                        
                                                        ConsolidatedRevenues
                                                        
                                                        $
                                                        30,823
                                                        
                                                        
                                                        $
                                                        24,493
                                                        
                                                        
                                                        $
                                                        31,815
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        87,131Loss
      fromOperations
                                                        
                                                        $
                                                        (8,057
                                                        )
                                                        
                                                        $
                                                        (11,543
                                                        )
                                                        
                                                        $
                                                        ( 7,111
                                                        )
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        (26,711
                                                        )Identifiable
      Assets
                                                        
                                                        $
                                                        13,882
                                                        
                                                        
                                                        $
                                                        17,250
                                                        
                                                        
                                                        $
                                                        34,811
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        65,943Depreciation
      andAmortization
                                                        
                                                        $
                                                        1,244
                                                        
                                                        
                                                        $
                                                        1,313
                                                        
                                                        
                                                        $
                                                        1,360
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        3,917Interest
      Expense
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        814
                                                        
                                                        
                                                        $
                                                        814Other
      Income
                                                        
                                                        $
                                                        100
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        100Prepayment
      Premium
                                                        
                                                        $
                                                        800
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        800Capital
      Expenditures
                                                        
                                                        $
                                                        8
                                                        
                                                        
                                                        $
                                                        1,055
                                                        
                                                        
                                                        $
                                                        1,377
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        2,440




F-48





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





17.  Major
Clients




Revenues
from the Company’s services to a limited number of clients have accounted for a
substantial percentage of the Company’s total revenues. The Company’s largest
client, which is within the Preparedness Services segment, accounted for
approximately 24% of the Company’s revenues for the year ended December 31,
2009, and represented work performed under government contracts.  For
the year ended December 31, 2008, the Company’s largest client, which is
within the Preparedness Services segment, accounted for approximately 26% of the
Company’s revenues and represented work performed under government
contracts.  For the year ended December 31, 2007, the Company’s
largest client, which is with the Preparedness Services segment  and
represented work performed under government contracts, accounted for 29% of the
Company’s revenues, and the Company’s second largest client, which was within
the Fraud and SIU services segment accounted for approximately 11% of the
Company’s revenues.





For the
years ended December 31, 2009, 2008 and 2007, government contracts
represented 53%, 49% and 48% of the Company’s net revenues, respectively, the
most significant of which, in 2009, 2008 and 2007, represented 63%, 68% and
83%,  respectively, of the Company’s net revenues within the
Preparedness Services segment.





As of
December 31, 2009 and 2008, accounts receivable from a significant single
customer was $5,362 and $10,151, respectively.





On July
22, 2009, the Company was notified that the State of Louisiana, Governor's
Office of Homeland Security and Emergency Preparedness ("GOHSEP") exercised its
option in the Company’s Consulting Services Contract with GOHSEP (the “Louisiana
Contract”) to extend the term of the Louisiana Contract, which provides for up
to $34 million in potential revenue per contract year, through August 23, 2010.
Under the Louisiana Contract, the State chose to expand the Company's role to be
the State's lead disaster advisor and recovery manager. The Company also
continues to provide recovery relief to the State in the aftermath of Hurricanes
Katrina and Rita, as well as Hurricanes Gustav and Ike, and provides these same
services for other new and/or pre-existing disasters.  The Company
also provides programmatic and policy advice on FEMA and assists with the
development and dissemination of the State's disaster-related policies and
procedures. As described above, the term of the Louisiana Contract is through
August 23, 2010 and is terminable by GOHSEP upon 30 days' written
notice.





18.  Related Party
Transactions




Issuances to Verus International Group,
Ltd.




On
September 25, 2007, pursuant to a stock purchase agreement dated March 1, 2007
by and between the Company and Verus Support Services, Inc., Verus International
Group, Ltd. received 850 shares of common stock in consideration of services
performed from July 2006 through September 2006.




On
February 25, 2008, pursuant to a stock purchase agreement dated February 1, 2008
by and between the Company and Versus Support Services, Inc., Verus
International Group, Ltd. received 1,567 shares of common stock in consideration
of services performed from April 2007 through June 2007.




19. 
Defined Contribution Plan





The
Company has a 401(k) profit sharing plan (the “401(k) Plan”), covering employees
who have completed three months of service and meet certain other eligibility
requirements. The 401(k) Plan provides for a discretionary matching contribution
by the Company, based on employee elective deferrals, determined each payroll
period. The 401(k) Plan also provides for an employer discretionary profit
sharing contribution. Employees vest at a rate of 25% per year in discretionary
employer contributions. The 401(k) Plan expense amounted to approximately $788,
$776 and $290 for the years ended December 31, 2009, 2008 and 2007,
respectively.








F-49





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Dollars
in thousands except share and per share amounts)





20. Subsequent
Events





On
January 1, 2010, the Company granted, in the aggregate, options for the purchase
of 75,000 shares of its common stock at an exercise price of $1.65 per share,
under the Incentive Plan, to three members of the Board of Directors. The
options have a five year term and vest ratably at the end of each of the four
quarterly periods following the date of grant.  In the aggregate,
these options have a value of approximately $80 utilizing the Black-Scholes
option pricing model with the following assumptions used: expected life of three
years, volatility of 103.2%, dividends of 0%, and a risk free interest rate of
2.69%.





On
January 1, 2010, the Company granted, in the aggregate, options for the purchase
of 100,000 shares of its common stock at an exercise price of $1.65 per share,
under the Incentive Plan, to certain members of its advisory boards for their
advisory services to the Company.  The options have a five year term and
vest ratably at the end of each of the four quarterly periods following the date
of grant.  In the aggregate, these options have a value of
approximately $106 utilizing the Black-Scholes option pricing model with the
following assumptions used: expected life of three years, volatility of 103.2%,
dividends of 0%, and a risk free interest rate of 2.69%.




During
January and February of 2010, the Company issued 8,785 shares of its common
stock under the Stock Purchase Plan.  The Company realized proceeds of
$11 and recognized stock based compensation of $5 in connection with the
issuance of these shares.




On March
8, 2010, the United States Postal Service Office of Inspector General (“USPS”)
executed a Delivery Order ordering up to approximately $1.839 million of Workers
Compensation Analyst Program Management Services for the period commencing on
March 3, 2010 and ending on September 25, 2010, which the Company will provide
through its FSIU unit.
  On March
9, 2010, effective as of April 1, 2010, the Company entered into consulting
agreements with each of Howard Safir, the Chief Executive Officer of our
Security Consulting and Investigations unit and Adam Safir, Howard Safir’s son
and an officer of the Company’s Security Consulting and Investigations
unit.  Pursuant to the terms of their respective consulting
agreements, as of April 1, 2010 Messrs. Safir and Safir will no longer be
employees of the Company, but will provide consulting services to the Security
Consulting and Investigations business unit, including assistance in the
Company’s exploration of strategic alternatives and certain marketing
assistance.  The terms of the consulting agreements are 12 months,
provided, however, that the Company may terminate each of the consulting
agreements after three months and/or each month thereafter.  Messrs.
Howard Safir and Adam Safir shall receive, $30,000 per month and $20,000 per
month respectively for their consulting services.  In addition, if the
Company sells its Security Consulting and Investigations unit or any assets
thereof, each of Messrs. Howard Safir and Adam Safir shall receive up to
$600,000 and $300,000, respectively, based upon the sales price received for the
business or such assets.  Also included in the consulting agreements
are 12 month non-solicitation and non-servicing provisions.




F-50




Item
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.





None.





Item
 9A (T). Controls and Procedures.





Disclosure
Controls and Procedures




Disclosure
controls and procedures (as defined in Rule 13(a) -15(e)) are controls and other
procedures that are designed to ensure that information required to be disclosed
by a public company in the reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a public company in the reports that it
files or submits under the Exchange Act is accumulated and communicated to the
company’s management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. Disclosure controls and
procedures include many aspects of internal control over financial
reporting.




Based on
their evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures were effective at December
31, 2009.




Management’s
Report on Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the Exchange
Act. Internal control over financial reporting refers to a process designed by,
or under the supervision of, our Chief Executive Officer and Chief Financial
Officer and effected by our Board, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, including those policies and
procedures that:




·
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of our
      assets;




·
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of our management and
      directors; and




·
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on our consolidated financial
  statements.




It should
be noted, however, that because of its inherent limitations, internal control
over financial reporting cannot provide absolute assurance of the prevention or
detection of misstatements.  In addition, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.




In
connection with the preparation of this Annual Report on Form 10-K for the year
ended December 31, 2009, management, with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of our disclosure controls and procedures and internal controls over financial
reporting, pursuant to Rule 13a-15 under the Exchange Act, based on criteria for
effective internal control over financial reporting described in Internal
Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.  Based on their evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that our
internal control over financial reporting was effective as of December 31,
2009.




This Annual Report on Form 10-K does
not include an attestation report of Marcum LLP, our independent registered
public accounting firm, regarding internal control over financial
reporting.  Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this Annual Report on Form
10-K.




29




Changes
in Internal Control Over Financial Reporting




There were no changes in our internal
controls or in other factors that could significantly affect these controls,
during our fourth quarter ended December 31, 2009, that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.





Item
9B.  Other Information





The
Company held its Annual Meeting on December 14, 2009. A quorum was present at
the Annual Meeting, with 9,507,940 outstanding shares of the Company’s common
stock entitled to vote represented in person or by proxy.




At the
Annual Meeting, the Company’s stockholders re-elected each of our incumbent
directors, to serve until our 2010 annual meeting of stockholders and until
their successors are duly elected and qualify, by the following
votes:




Shares For
                  
                  
                  Shares WithheldHarvey
      W. Schiller, Ph.D.
                  
                  
                  9,476,999
                  
                  
                  
                  30,941Per-Olof
      Lööf
                  
                  
                  9,497,207
                  
                  
                  
                  10,733John
      P. Oswald
                  
                  
                  9,499,161
                  
                  
                  
                  10,733Ronald
      M. Starr
                  
                  
                  9,499,161
                  
                  
                  
                  10,733John
      P. Bujouves
                  
                  
                  9,499,161
                  
                  
                  
                  10,733




The
Company’s stockholders voted to ratify the appointment of Marcum LLP as the
Company’s independent registered public accounting firm for the fiscal year
ending December 31, 2009, by the following votes:




SharesFor:
                  
                  
                  9,507,561Against:
                  
                  
                  0Abstain:
                  
                  
                  379


30





PART
III





Item 10.   Directors, Executive Officers and
Corporate Governance.





The
following table sets forth information regarding the members of our Board of
Directors and our executive officers. Harvey W. Schiller, Ph.D., Per-Olof Lööf,
and Ronald M. Starr became directors and officers on June 24, 2005. John P.
Bujouves was subsequently appointed to the Board of Directors on June 27, 2005
and John P. Oswald on January 28, 2008.  All directors hold office
until the next annual meeting of shareholders and the election and qualification
of their successors. Officers are elected annually by the Board of Directors and
serve at the discretion of the Board.





Name
                  
                  Age
                  
                  PositionExecutive
      Officers and DirectorsHarvey
      W. Schiller, Ph.D.
                  
                  70
                  
                  Chairman
      of the Board of Directors and Chief Executive OfficerJeffrey
      O. Nyweide
                  
                  54
                  
                  Chief
      Financial Officer, Executive Vice President-Corporate Development,
      Treasurer and SecretaryThomas
      P. Ondeck
                  
                  63
                  
                  President,
      International Strategies UnitHalsey
      Fischer
                  
                  61
                  
                  Chief
      Executive Officer, Fraud and SIU Services UnitJames
      Lee Witt
                  
                  66
                  
                  Chief
      Executive Officer, Preparedness Services UnitHoward
      Safir
                  
                  68
                  
                  Chief
      Executive Officer, Security Consulting and Investigations
    UnitPer-Olof
      Lööf
                  
                  59
                  
                  Vice
      Chairman of the Board of DirectorsJohn
      P. Oswald
                  
                  50
                  
                  Director
      and Chairman of the Compensation and the Nominating
    CommitteesRonald
      M. Starr
                  
                  40
                  
                  Director
      and Chairman of the Audit CommitteeJohn
      P. Bujouves
                  
                  47
                  
                  Director





We believe that the collective skills,
experiences and qualifications of our directors provides our Board with the
expertise and experience necessary to advance the interests of our
stockholders.  While the Nominating Committee of our Board has not
established any specific, minimum qualifications that must be met by each of our
directors, it uses a variety of criteria to evaluate the qualifications and
skills necessary for each member of the Board.  In addition to the
individual attributes of each of our current directors described below, we
believe that having the highest professional and personal ethics and values,
consistent with our longstanding values and standards is an important
characteristic for our directors.  They should have broad experience
at the policy-making level in business, exhibit commitment to enhancing
shareholder value and have sufficient time to carry out their duties and to
provide insight and practical wisdom based on their past
experience.





The
business experience for the past five years (and, in some instances, for prior
years) of each of our directors, officers and key employees are as
follows:


31





Harvey W.
Schiller, Ph.D. has been our Chairman of the Board and Chief Executive
Officer since June 2005.  Dr. Schiller had been Chairman of the
Board of privately-held GlobalOptions, Inc. since February
2004.  Dr. Schiller oversees our administrative headquarters with
a focus on our strategy and new business development and effective April 1,
2010, Dr. Schiller, along with Jeffrey O. Nyweide will also assume day-to-day
control of our Security Consulting and Investigations unit.  From 2007
to 2008, Dr. Schiller served as a director of Dirt Motor Sports, Inc. (currently
known as World Racing Group, Inc.).  Prior to joining GlobalOptions,
Dr. Schiller served as Chairman of Assante U.S., a provider of financial
and life management products and services, from 2002 to 2004.  Prior
to joining Assante, he was Chairman and Chief Executive Officer of YankeeNets
from 1999 to 2002.  His previous experience includes President of
Turner Sports, Inc., Executive Director and Secretary General of the United
States Olympic Committee and Commissioner of the Southeastern
Conference.  Prior to joining the United States Olympic Committee,
Dr. Schiller served for more than 25 years in the United States Air Force,
achieving the rank of Brigadier General.  Dr. Schiller is a
former partner in QuanStar Group, a management consulting firm in New York, and
a former advisory partner of Millennium Technology Value Partners,
L.P.  Dr. Schiller brings to the Board extensive leadership experience
having held senior positions in several high-profile
organizations.  From his military career and as an executive of
numerous entities, Dr. Schiller brings to the Board strong leadership and
organizational skills and a deep commitment to integrity and
excellence.




Jeffrey O.
Nyweide has been our Chief Financial Officer, Executive Vice
President-Corporate Development, Treasurer and Secretary since June 2005
effective April 1, 2010, Mr. Nyweide, along with Dr. Schiller will also assume
day-to-day control of our Security Consulting and Investigations
unit.  Mr. Nyweide had been Chief Financial Officer and Executive Vice
President-Corporate Development of privately-held GlobalOptions, Inc. since
April 2003.  Mr. Nyweide has been a successful entrepreneur and
executive for the past 20 years.  Mr. Nyweide has been a Venture
Partner with Millennium Technology Ventures, L.P., a New York-based venture
capital firm, since 2001.  From 1987 to 2000, he co-founded and then
grew Dataware Technologies, Inc., a software and services company, as Director,
President and Chief Operating Officer, and took the company
public.  In 1995, he helped found Northern Light Technology
LLC.  Mr. Nyweide has significant experience in mergers and
acquisitions, finance and operations, as well as with establishing international
business in Europe and Asia from prior experience as a founder and managing
director of Quantum Management in Greenwich, Connecticut and Munich,
Germany.  In this role he worked with European and United States
investment banks and corporations developing merger and acquisition strategies
as well as strategic alliances.  His previous experience in the
services and solutions business also includes sales, marketing and operating
experience as an executive with The Service Bureau Company, a subsidiary of
Control Data Corporation, in Chicago, Atlanta and Greenwich.




Thomas P.
Ondeck became President of our International Strategies unit upon its
inception in June 2006.  Mr. Ondeck had been President of
privately-held GlobalOptions, Inc. since January
1999.  Mr. Ondeck has dealt with national and international
crises, including assisting companies besieged by activist and hate groups,
plaintiffs’ product liability litigation campaigns, the financial impact of
violence in Southeast Asia, threats against multinational businesses by
organized criminal elements in the former Soviet Union, extortive litigation
involving misuse of the United States civil RICO statute by business competitors
and asset looting in Latin America.  Mr. Ondeck also heads our
investigations and business intelligence practice areas.  He
supervises our litigation support investigations for law
firms.  Mr. Ondeck also spearheads our investigative services for
corporations, including due diligence investigations in connection with
corporate acquisitions and internal corporate investigations into potential
theft of assets, identity misrepresentation and
fraud.  Mr. Ondeck was previously a litigation partner in two
international law firms and served in the White House as an aide to former
President Richard M. Nixon.




Halsey
Fischer became the Chief Executive Officer of our Fraud and SIU Services
unit upon our acquisition of Confidential Business Resources (“CBR”) in August
2005.  Mr. Fischer oversees our national investigations
practice.  Mr. Fischer served as the President and Chief
Executive Officer of CBR from its founding in 1998 until its
acquisition.  During his tenure at CBR, Mr. Fischer built an
investigations firm with eight offices in the United States through acquisitions
and organic growth.  Under Mr. Fischer’s leadership, CBR
developed a state-of-the-art Internet case management system for use by remote
offices and its clients.  Prior to forming CBR, Mr. Fischer was
Senior Vice President, U.S. Investigations for Pinkerton Consulting &
Investigations, Inc., since acquired by Securitas AB, and was responsible for
each of its 28 profit centers across the United States.  Prior to
Pinkerton, Mr. Fischer was Group President of Security Consulting and
Investigations for Business Risks International, the predecessor to Pinkerton’s
investigations unit.


32


James Lee
Witt became the Chief Executive Officer of our Preparedness Services unit
upon our acquisition of James Lee Witt Associates, LLC (“JLWA”) in March
2006.  As the President and Chief Executive Officer of JLWA from 2002
until its acquisition in March 2006, Mr. Witt provided consulting and
crisis management services to state and local governments, educational
institutions, the international community and corporations.  From 2003
to 2006, Mr. Witt was the Chief Executive Officer of the International Code
Council, a 50,000 member association dedicated to building safety that develops
the codes used to construct residential and commercial buildings, including
homes and schools.  Mr. Witt has over 25 years of disaster
management experience, culminating in his appointment as the Director of FEMA,
where he served from 1993 to 2001.  Mr. Witt was appointed by
President Clinton and confirmed by the U.S. Senate as Director of FEMA in April
1993.  In February 1996, President Clinton elevated Mr. Witt to
cabinet status, a first for a FEMA Director.  As FEMA Director,
Mr. Witt coordinated federal disaster relief on behalf of President
Clinton, including the response and recovery activities of 28 federal agencies
and departments, the American Red Cross and other voluntary
agencies.  He also oversaw the National Flood Insurance Program, the
U.S. Fire Administration and other pro-active mitigation activities to reduce
loss of life and property from all types of hazards.  Mr. Witt
directed 2,500 employees located in Washington, D.C. and 10 regional
offices.  Mr. Witt’s professional career includes the formation
of Witt Construction, a commercial and residential construction
company.  After 12 years as a successful businessman and community
leader, he was elected County Judge for Yell County, serving as the chief
elected official for the county, with judicial responsibilities for county and
juvenile court.  At age 34, he was the youngest elected official in
Arkansas, and was later honored for his accomplishments by the National
Association of Counties.  After being re-elected six times to the
position, Mr. Witt was appointed by then Governor Bill Clinton to assume
leadership of the Arkansas Office of Emergency Services (“OES”).  He
served as the Director of the Arkansas OES for four years.




Howard
Safir became the Chief Executive Officer of our Security Consulting and
Investigations unit upon our acquisition of Safir Rosetti, LLC (“Safir”) in May
2006.  Pursuant to the terms of a consulting agreement with us,
effective April 1, 2010, Mr. Safir will no longer be Chief Executive Officer of
our Security Consulting and Investigations unit, but will provide consulting
services to such unit.  Mr. Safir served as Chairman and Chief
Executive Officer of Safir from December 2001 until its
acquisition.  Prior to that time, Mr. Safir was Vice Chairman of
IPSA International, a provider of investigative and security consulting
services.  From 1996 to 2000, Mr. Safir served as Police
Commissioner of New York City.  From 1994 to 1996, Mr. Safir
served as New York City’s Fire Commissioner.  Mr. Safir began his
law enforcement career in 1965 as a special agent assigned to the New York
office of the Federal Bureau of Narcotics, a forerunner of the Drug Enforcement
Administration (the “DEA”).  From 1977 to 1978, Mr. Safir served
as Assistant Director of the DEA.  From 1978 to 1990, Mr. Safir
worked for the United States Marshals Service where he served as Director of the
Witness Protection Program and Assistant Director for
operations.  Mr. Safir is currently Chairman of the Board of
Directors of GVI Security Solutions, a provider of video surveillance and
security solutions products, and National Security Solutions Inc., a blank check
company organized for the purpose of effecting a business combination, including
with entities involved in the security and homeland defense
industries.  Mr. Safir also serves as a Director of Verint
Systems, Inc., a provider of intelligence solutions for enterprise workforce
optimization and security intelligence, as a Director of Implant Sciences
Corporation, a developer of sophisticated sensors and systems for the security,
safety and defense industries, and as Chief Executive Officer of the November
Group, through which he provides, to a limited extent, technical and management
consulting services to various companies, including ChoicePoint Inc., which
provides investigative, consulting and other services which are similar to
services the Company provides.




Per-Olof
Lööf has been our Vice Chairman of the Board since June
2005.  Mr. Lööf had been Vice Chairman of the Board of
privately-held GlobalOptions, Inc. since August 2004.  Mr. Lööf
has been the Chief Executive Officer and a director of Kemet Corporation, a
global manufacturer of electronic components/capacitors supplier, since April
2005, and a director of Devcon International Corp., a company with operating
divisions in security services, materials and construction, from 2004 to 2009.
 .  Prior to joining Kemet, Mr. Lööf was Managing Partner of
QuanStar Group from 2003 to 2004.  Mr. Lööf has significant
experience in acquisition integration efforts through past positions at
Sensormatic Electronics Corporation, a manufacturer and provider of electronic
article surveillance systems and accessories, where he was President and Chief
Executive Officer from 1999 until its acquisition by Tyco International, Ltd. in
2002.  Prior to Sensormatic, Mr. Lööf was Senior Vice President
at NCR Corporation and Chief Executive Officer of AT&T ISTEL.  Mr.
Loof also worked for 12 years at Digital Equipment Corporation as Vice President
of Sales and Marketing.  From his experience in serving in the role of
Chief Executive Officer for multiple companies, Mr. Lööf possesses significant
senior management experience.  The Board believes Mr. Lööf’s
experience assists us in integrating entities acquired by us.


33


John P.
Oswald has been a director since January 2008 and has been appointed
Chairman of the Compensation Committee and the Nominating
Committee.  Mr. Oswald has been the President and Chief Executive
Officer of the Capital Trust Group, an international merchant/investment bank
with offices in London, New York, Washington, D.C. and Beirut, since
1993.  Mr. Oswald is responsible for the U.S. operations of
Capital Trust Group and its worldwide investment banking
operations.  His responsibilities have included managing a number of
private equity funds, both in U.S. and European markets, which have focused on
mezzanine and equity investments ranging from approximately $10 million to $100
million in middle market, private and public companies with revenues from $20
billion to $1 billion.  Since 1993, Mr. Oswald has also managed
an extensive portfolio of U.S. real estate comprised of office/retail space
primarily in suburban areas in the U.S. and Europe.  The investment
banking/advisory function of Capital Trust Group includes advising clients with
respect to mergers and acquisitions, financings and dispositions of holdings in
the oil and gas, real estate, entertainment, education, construction, media and
communications areas.  Mr. Oswald has also been responsible for
completing numerous public debt offerings and public issuances of stock for the
Capital Trust Group’s portfolio companies and clients.  Since December
1, 2006 Mr. Oswald has also been the President and Chief Executive Officer
of Verus International Group, Ltd., an international merchant bank with offices
in New York and Barbados.  From 1996 to 2005, Mr. Oswald served as a
director of Kirkland’s Inc.  From 1986 to 1996, Mr. Oswald was a
partner in the international law firm of Lord Day & Lord.  He
began his career as an accountant at Arthur Andersen & Co. and he is a
certified public accountant.  Mr. Oswald serves as a director for
Preem Holdings AB, the largest downstream refining operation in Europe, Samir,
the third largest public company and the only downstream oil refinery in
Morocco, and numerous privately held companies. The Board also believes that Mr.
Oswald has valuable international business experience and through his service on
the boards of several companies, offers in-depth knowledge of numerous
industries that is important to us as we evaluate business and growth
opportunities.




Ronald M.
Starr has been a director since June 2005.  Mr. Starr had been
a director of privately-held GlobalOptions, Inc. since November
1998.  Since 1996, Mr. Starr has been a Managing Director at
Starr & Company, LLC, an accounting and business management firm for high
net worth individuals.  Mr. Starr was a member of the General
Partner of Millennium Technology Ventures, L.P. from 1999 to 2001 and has been
the Chief Financial Officer and General Counsel of the venture capital funds PS
Capital Holdings, L.P. and PS Capital Ventures, L.P., where his duties have
included negotiating and structuring the funds’ venture capital investments,
since 1996 and 1997, respectively.  Prior to working at Millennium
Technology Ventures, PS Capital and Starr & Company, Mr. Starr was an
attorney in the tax department at Proskauer Rose LLP, a New York City law
firm.  The Board believes that, as an attorney, and as an executive in
the venture capital industry, Mr. Starr has broad experience advising and
assisting in the growth of small and mid-size companies.




John P.
Bujouves has been a director since June
2005.  Mr. Bujouves has been the President and a director of
Bayshore Asset Management Inc., a provider of asset management services, since
2003, and the Chief Executive Officer of Integris Funds Ltd., a Cayman Islands
based mutual fund company, since 1999.  Mr. Bujouves serves as
Chairman of Globacor Capital Inc., a Canadian private equity investment firm,
and J&T Bank and Trust, Inc. (formerly known as Bayshore Bank & Trust
Corp.), Bayshore Bank & Trust Corp., one of Barbados’ largest private
banks.  Mr. Bujouves is also a director of Safe Storage Depot, a
real-estate development company, Numeric Answers Inc., a corporate accounting
firm, DLK on Avenue, a cosmetic medical clinic, and the Ontario Arthritis
Society.  Mr. Bujouves’s former experience includes directing
CIBC’s International Private Banking group in Canada.  Prior to that,
as Managing Partner for Royal Trust International, Mr. Bujouves worked
globally and launched Royal Trust Corporation’s first two international offices
located in the United States.  The Board believes that Mr. Bujouves
provides extensive business knowledge through significant experience in banking
and offers a broad wealth of experience through his service as a member of the
board of directors of numerous entities.




Family
Relationships




There are no family relationships among
our executive officers and directors.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities and Exchange Act of 1934, as amended, requires our
directors, executive officers and holders of more than 10% of our common stock
to file with the SEC initial reports of ownership and reports of changes in the
ownership of our common stock and other equity securities of
ours.  Such persons are required to furnish us copies of all Section
16(a) filings.


34


Based solely upon a review of the
copies of the forms furnished to us, we believe that our officers and directors
complied with all applicable filing requirements during the 2009 fiscal year
except as set forth below:




On January 30, 2009, Mr. Boujoves filed
a Statement of Changes in Beneficial Ownership of Securities covering one
transaction that occurred on January 1, 2009.




On February 2, 2009, Mr. Loof filed a
Statement of Changes in Beneficial Ownership of Securities covering one
transaction that occurred on January 1, 2009.




On February 2, 2009, Mr. Oswald filed a
Statement of Changes in Beneficial Ownership of Securities covering one
transaction that occurred on January 1, 2009.




On
February 27, 2009, Vicis Capital, LLC filed an Initial Statement of Beneficial
Ownership of Securities on Form 3 covering its becoming a 10% beneficial owner
on December 19, 2008.




Board
Committees




Our Board of Directors has three
standing committees to assist it with its responsibilities. These committees are
described below.





The Audit Committee, which is
comprised solely of directors who satisfy the SEC audit committee membership
requirements, is governed by a Board-approved charter that contains, among other
things, the committee’s membership requirements and responsibilities. The Audit
Committee oversees our accounting, financial reporting process, internal
controls and audits, and consults with management and the independent registered
public accounting firm (the “Independent Auditors”) on, among other items,
matters related to the annual audit, the published financial statements and the
accounting principles applied. As part of its duties, the Audit Committee
appoints, evaluates and retains our Independent Auditors. It maintains direct
responsibility for the compensation, termination and oversight of our
Independent Auditors and evaluates the Independent Auditors’ qualifications,
performance and independence. The committee also monitors compliance with our
policies on ethical business practices and reports on these items to the Board.
The Audit Committee has established policies and procedures for the pre-approval
of all services provided by the Independent Auditors. Our Audit Committee is
comprised of Messrs. Starr, Bujouves and Lööf, and Mr. Starr is the Chairman of
the committee.




The Board
of Directors has determined that Mr. Starr, who currently is a member of the
Board of Directors and chairman of the Audit Committee, is the Audit Committee
financial expert, as defined under the Securities Exchange Act of 1934, as
amended, and is independent as defined by the rules of NASDAQ. The Board of
Directors made a qualitative assessment of Mr. Starr’s level of knowledge and
experience based on a number of factors, including his formal education and
experience as an Attorney for more than 15 years.




The Compensation Committee,
which is comprised solely of independent directors, determines all compensation
for our Chief Executive Officer; reviews and approves corporate goals relevant
to the compensation of our Chief Executive Officer and evaluates our Chief
Executive Officer’s performance in light of those goals and objectives; reviews
and approves objectives relevant to other executive officer compensation;
reviews and approves the compensation of other executive officers in accordance
with those objectives; administers our stock option plans; approves severance
arrangements and other applicable agreements for executive officers; and
consults generally with management on matters concerning executive compensation
and on pension, savings and welfare benefit plans where Board of Directors or
stockholder action is contemplated with respect to the adoption of or amendments
to such plans. The committee makes recommendations on organization, succession,
the election of officers, consultantships and similar matters where board
approval is required. Our Compensation Committee is comprised of Messrs. Oswald,
Starr and Lööf. Mr. Oswald is the Chairman of the committee.




The Nominating Committee
considers and makes recommendations on matters related to the practices,
policies and procedures of the Board of Directors and takes a leadership role in
shaping our corporate governance. As part of its duties, the committee assesses
the size, structure and composition of the Board of Directors and its
committees, coordinates evaluation of Board performance and reviews Board
compensation. The committee also acts as a screening and nominating committee
for candidates considered for election to the Board of Directors. In this
capacity it concerns itself with the composition of the Board of Directors with
respect to depth of experience, balance of professional interests, required
expertise and other factors. The committee evaluates prospective nominees
identified on its own initiative or referred to it by other Board members,
management, stockholders or external sources and all self-nominated
candidates.  The committee uses the same criteria for evaluating
candidates nominated by stockholders and self-nominated candidates as it does
for those proposed by other Board members, management and search companies. Our
Nominating Committee is comprised of Messrs. Lööf, Bujouves and Oswald. Mr.
Oswald is the chairman of the committee.





35


Code
of Business Conduct and Ethics





We have adopted a Code of Business
Conduct and Ethics (the “Code of Ethics”) applying to all of our directors,
officers and employees. The Code of Ethics is reasonably designed to deter
wrongdoing and promote (i) honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between personal and
professional relationships, (ii) full, fair, accurate, timely and understandable
disclosure in reports and documents filed with, or submitted to, the SEC and in
other public communications made by us, (iii) compliance with applicable
governmental laws, rules and regulations, (iv) the prompt internal reporting of
violations of the Code of Ethics to appropriate persons identified in the Code
of Ethics, and (v) accountability for adherence to the Code of Ethics. A copy of
the Code of Ethics is available in the Investor Relations; Corporate Governance
portion of our website, http://www.globaloptions.com.  Additional
copies of the Code of Ethics may be obtained without charge, from us by writing
or calling: 75 Rockefeller Plaza, 27th Floor, New York, New York 10019, Attn:
Chief Financial Officer, tel: (212) 445-6261.





Item 11.  Executive
Compensation





(Dollar
amounts in thousands, except per share amounts)





Summary
Compensation Table





The
following table sets forth information with respect to compensation earned by
the named executive officers:





NameandPrincipal
                        Position
                      
                      Year
                      
                      Salary
                        ($)
                      
                      
                      Bonus
                        ($)
                      
                      
                      Stock
                        Awards
                        ($)(1)
                      
                      
                      Option
                        Awards
                        ($)
                      
                      
                      AllOther
                        Compensation
                        ($)
                      
                      
                      Total
                        ($)Harvey W.
      Schiller, Ph.D.
                      
                      2009
                      
                      
                      425
                      
                      
                      
                      100
                      (2)
                      
                      
                      423
                      (3)
                      
                      
                      –
                      
                      
                      
                      5
                      (4)
                      
                      
                      953Chairman and
      Chief
                      
                      2008
                      
                      
                      400
                      
                      
                      
                      50
                      (5)
                      
                      
                      973
                      (6)
                      
                      
                      –
                      
                      
                      
                      5
                      (7)
                      
                      
                      1,428Executive
      OfficerJeffrey O.
      Nyweide
                      
                      2009
                      
                      
                      375
                      
                      
                      
                      75
                      (2)
                      
                      
                      317
                      (3)
                      
                      
                      –
                      
                      
                      
                      122
                      (8)
                      
                      
                      889Chief Financial
      Officer
                        and Executive Vice
      President
                      
                      2008
                      
                      
                      350
                      
                      
                      
                      38
                      (5)
                      
                      
                      728
                      (6)
                      
                      
                      –
                      
                      
                      
                      111
                      (9)
                      
                      
                      1,227James Lee
      Witt
                      
                      2009
                      
                      
                      500
                      
                      
                      
                      45
                      (10)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4
                      (11)
                      
                      
                      549Chief Executive
      Officer
                        of Preparedness
      Services unit
                      
                      2008
                      
                      
                      500
                      
                      
                      
                      55
                      (10)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4
                      (11)
                      
                      
                      559




36





(1)
            The
      amounts listed in this column are performance-based compensation and
      reflect the probable outcome award value at the date of grant in
      accordance with FASB ASC Topic 718.  Amounts for 2008 have been
      recomputed under the same methodology in accordance with SEC
      rules.  The stock awards for each of Dr. Schiller and Mr.
      Nyweide are provided under the terms of a performance bonus program
      pursuant to the terms outlined by the Compensation Committee of the Board
      of Directors (the “Performance Bonus Plan”) established on December 5,
      2006, and as outlined in the Executive Compensation Plan.  The
      performance measures, as determined by the Compensation Committee, include
      components for operations and business integration improvements, achieving
      revenue goals and overall performance of the company’s stock
      price.





Summary of Awards.  On December 5,
2006, the Compensation Committee awarded to each of Dr. Schiller and Mr. Nyweide
performance based awards covering performance for the period January 6, 2006
through December 31, 2009, under which they may earn vested shares of our
Company stock.  In April, 2008, these awards were modified (see note
xx, below) and in December, 2009 were extended to the year 2010 (see note 3,
below).





Seeding of Restricted Shares Under the
Plan.  In order to seed shares of non-vested restricted stock
under the Performance Bonus Plan, on December 19, 2006, Dr. Schiller and
Mr. Nyweide were granted 100,000 shares and 75,000 shares and on July 24,
2008 were granted 250,000 and 187,500 shares of restricted stock, respectively,
under the Long Term Incentive Plan which is subject to vesting upon the
achievement of performance criteria.





Vesting Of Shares from Inception of Plan. (a)
On December 12, 2007, our Compensation Committee determined that 6,250 shares
and 4,687 shares of restricted stock, valued on date of grant at $78 and $58,
held by Dr. Schiller and Mr. Nyweide, respectively, effective on January 1,
2008, were no longer subject to forfeiture. (b) Effective on August 15, 2008,
our Compensation Committee determined that 25,000 shares and 18,500 shares of
restricted stock, valued on date of grant at $163 and $122, held by Dr. Schiller
and Mr. Nyweide, respectively, were no longer subject to forfeiture. (c)
Effective on December 14, 2009, our Compensation Committee determined that
50,000 shares and 37,500 shares of restricted stock, valued on date of grant at
$107 and $80, held by Dr. Schiller and Mr. Nyweide, respectively, were no longer
subject to forfeiture.





(2)
            Amount
      represents bonus earned in accordance with achievement of performance
      criteria established by the Compensation Committee. The bonus amount, as
      approved by the Compensation Committee, was paid on December 24,
      2008.





(3)
            On
      August 13, 2009 the Compensation Committee extended the eligibility period
      to December 31, 2011 for the performance awards available to be earned by
      Dr. Schiller and Mr. Nyweide under the Performance Bonus Plan, resulting
      in a new award effective on August 13, 2009.  Pursuant to the
      terms of the Performance Bonus Plan, we have estimated the probable value
      at August 13, 2009 of that modification to be $423 and $317,
      respectively.  Incorporated into this award is the continuation
      of uncapped performance measures.  Accordingly, the effective
      limitation for this award would be 888,065 and 665,304 shares valued at $
      1,598 and $1,198 for Dr. Schiller and Mr. Nyweide respectively,
      representing the remaining shares available under the Long-term Incentive
      Plan, each as of the date of this
award.





(4)
            Amount
      includes payments towards parking and life insurance
    benefits.





(5)
            Amount
      represents bonus earned in accordance with achievement of performance
      criteria established by the Compensation Committee.  The bonus
      amount, as approved by the Compensation Committee, was paid on September
      5, 2008.





(6)
            On
      April 18, 2008 the Compensation Committee modified the award, originally
      granted to Dr. Schiller and Mr. Nyweide, under the Performance Bonus Plan
      on December 5, 2006, in effect resulting in a new award effective on April
      18, 2008.  Pursuant to the terms of the Performance Bonus Plan,
      we have estimated the probable value at August 13, 2009 of that
      modification to be $973 and $728, respectively.  Incorporated
      into this award is the continuation of uncapped performance
      measures.  Accordingly, the effective limitation for this award
      would be 1,156,925 and 865,836 shares valued at $2,475 and 1,853, for Dr.
      Schiller respectively, representing the remaining shares available under
      the Long-term Incentive Plan, each as of the date of this
      award.





(7)
            Amount
      includes payments toward parking and life insurance
    benefits.





(8)
              Amount
      includes payments of a housing allowance of $108 for the rental of an
      apartment in New York City, parking, life insurance, as well as
      reimbursement of professional fees of
$10.


37





(9)
            Amount
      includes payments of a housing allowance of $108 for the rental of an
      apartment in New York City, as well as payments for parking and life
      insurance.





(10)
            Amount
      represents bonus earned in accordance with annual performance criteria
      established by the Compensation
Committee.





(11)
            Amount
      includes payments toward parking and life insurance
    benefits.





Employment
Agreements and Potential Payments Upon Termination or Change In
Control





Harvey
W. Schiller, Ph.D.




We
entered into a three-year employment agreement with Dr. Schiller, our
Chairman and Chief Executive Officer, in January 2004.  The agreement
was initially amended on December 19, 2006 to extend the term through January
31, 2010 and subsequently on August 13, 2009 to extend the term through January
31, 2011.  The agreement is subject to automatic one-year extensions,
unless either party provides notice to the other party of its intention not to
renew the agreement.  The amendments provide for an annual base salary
of $375,000, $400,000, $425,000 and $425,000 starting January 1, 2007, 2008,
2009 and 2010, respectively, as well as an annual performance bonus payable 50%
in cash and 50% in restricted stock which will vest upon the achievement of
goals agreed upon mutually between Dr. Schiller and the Compensation
Committee, with the performance goals set for 2008 applied for the years 2009
and 2010.  In connection with the initial extension of the term of his
employment agreement, Dr. Schiller was awarded a one-time grant of 100,000
shares, and on July 24, 2008 was granted 250,000 shares of restricted common
stock, subject to vesting in accordance with performance criteria established by
the Compensation Committee.




In the
event of death or disability, Dr. Schiller (or his estate) will be entitled
to salary and pro rata bonus until termination, and 90 days from termination may
exercise vested options; unvested options will be forfeited.  If
terminated for cause, Dr. Schiller will forfeit all unexercised
options.  If Dr. Schiller terminates his employment with the Company
for good reason (other than for non-renewal of the agreement) or the Company
terminates his employment without cause, Dr. Schiller shall be entitled to a pro
rata bonus for the year in which he terminates his employment and 100% of his
salary and bonus for the remaining term of his employment
agreement.  If Dr. Schiller terminates his employment for non-renewal
of the agreement, all shares of restricted stock and restricted stock units will
vest.  In addition, upon a change of control, all stock options,
restricted stock and restricted stock units held by Dr. Schiller shall vest
immediately and all performance conditions of any and all cash bonuses and
performance stock options or restricted stock shall be deemed to be
met.  However, (i) the amount of cash bonus and shares of restricted
stock to be vested for each year remaining in the term of the Dr. Schiller’s
employment agreement is limited to the targeted award permitted under Dr.
Schiller’s bonus plan for a given year, and (ii) in lieu of issuing any
additional shares of common stock to reach such target, the Company will pay to
Dr. Schiller an amount in cash equal to $2.00 per share for each share that
would have been required to be issued.  Upon a change of control or a
termination for good reason or without cause, the Company will place the cash
amounts due to Dr. Schiller upon such events in a “rabbi” trust to be
distributed to Dr. Schiller on a timely basis in the event Dr. Schiller becomes
entitled to such payments.  The Company and Dr. Schiller also extended
the term of Dr. Schiller’s noncompetition period with the Company from one year
to two years upon a change of control and his termination of employment with the
Company.




Jeffrey
O. Nyweide




We were a
party to a consulting agreement with Mr. Nyweide providing for his service
as our Chief Financial Officer and Executive Vice President-Corporate
Development for a monthly fee of $25,000, subject to adjustment based upon the
services performed by Mr. Nyweide.  On December 19, 2006, the
Compensation Committee amended the terms of this consulting agreement, extending
its term through January 2010.  The amendment provided for an increase
in the monthly fee to $27,000, $29,000 and $31,000 for the years 2007, 2008 and
2009, respectively.  In connection with the extension,
Mr. Nyweide was awarded a one-time grant of 75,000 shares, and on July 24,
2008 was granted 187,500 shares of restricted common stock, subject to vesting
in accordance with performance criteria established by the Compensation
Committee.


38


Effective
as of August 1, 2007, Mr. Nyweide and we terminated his consulting
agreement and entered into an employment agreement providing for
Mr. Nyweide’s service as our Chief Financial Officer, Executive Vice
President—Corporate Development, Treasurer and Secretary, reporting to the
Chairman of the Board.  The employment agreement, which had an initial
term through January 31, 2010, was amended on August 13, 2009 to extend its term
through January 31, 2011, and pursuant to its terms was further extended to
January 31, 2012.  The agreement is subject to automatic one-year
extensions.  Under the employment agreement, Mr. Nyweide’s salary
for the remainder of 2007 was $27,000 per month and his annual base salary for
2008 was $350,000 and for each of 2009 and 2010 will be $375,000.  In
addition, Mr. Nyweide will receive $9,000 per month to help defray his cost
of living in New York City.  Mr. Nyweide will also be entitled to
annual performance bonuses payable 50% in cash and 50% in restricted stock
subject to vesting according to mutually agreed goals, established by the
Compensation Committee.  The employment agreement provides that all
options to purchase common stock and the 75,000 shares of restricted stock,
subject to vesting as described above, granted to Mr. Nyweide pursuant to
his consulting agreement, will remain in full force and effect.  In
addition, we have agreed to provide Mr. Nyweide with all employee benefit
plans and programs that we offer for our senior management, including 401(k)
plans and group life, disability, health, medical and dental insurance
plans.




If Mr.
Nyweide terminates his employment with the Company for good reason or the
Company terminates his employment without cause, Mr. Nyweide shall be entitled
to a pro rata bonus for the year in which he is terminated and 50% of his salary
and bonus for the remaining term of the Mr. Nyweide’s employment
agreement.  In addition, upon a change of control, all stock options,
restricted stock and restricted stock units held by Mr. Nyweide shall vest
immediately and all performance conditions of any and all cash bonuses and
performance stock options or restricted stock shall be deemed to be
met.  However, (i) the amount of cash bonus and shares of restricted
stock to be vested for each year remaining in the term of the employment
agreement is limited to 50% of the targeted award permitted under Mr. Nyweide’s
bonus plan for a given year, and (ii) in lieu of issuing any additional shares
of common stock to reach 50% of such target, the Company will pay to Mr. Nyweide
an amount in cash equal to $2.00 per share for each share that would have been
required to be issued.  Upon a change of control or a termination for
good reason or without cause, the Company will place the cash amounts due to Mr.
Nyweide upon such events in a “rabbi” trust to be distributed to Mr. Nyweide on
a timely basis in the event Mr. Nyweide becomes entitled to such
payments.  The Company and Mr. Nyweide also extended the term of Mr.
Nyweide’s noncompetition period with the Company from one year to two years upon
a Change of Control and his termination of employment with the
Company.  The Company also agreed to pay any excise tax incurred by
Mr. Nyweide if the payments under the Nyweide Agreement are considered
“parachute payments.”




James
Lee Witt




Concurrently
with our acquisition of JLWA in March 2006, we entered into a four-year
employment agreement with Mr. Witt, the former President and Chief
Executive Officer of JLWA.  On May 11, 2007, the agreement was amended
and restated.  In March 2010 the employment agreement with Mr. Witt
expired and Mr. Witt is currently an at-will employee.  Pursuant to
the amended and restated agreement, Mr. Witt became the Chief Executive
Officer of our Preparedness Services unit and agreed to perform such other
duties and responsibilities as the Board may assign.  Mr. Witt
agreed to devote his full time to us at a salary of $300,000 per year and a
discretionary annual bonus.  In addition, Mr. Witt receives
annual compensation of $200,000 as consideration for his resignation from the
International Code Council.  We may terminate Mr. Witt’s
employment agreement for cause, upon the death or disability of Mr. Witt or
upon 30 days’ notice by either party.  In the event we terminate the
employment agreement without cause, we are required to pay Mr. Witt his
base salary and certain benefits for 12 months following
termination.  The employment agreement also contains non-compete and
non-solicitation provisions for 12 months following termination, as well as
confidentiality provisions.





Benefit
Plans





2005 Stock Option Plan





Our 2005
Stock Option Plan was adopted as of August 5, 2005. We had reserved a total of
6,500,000 shares of our common stock for issuance under the 2005 Stock Option
Plan.   As of March 15, 2010 there remain outstanding options to
purchase 9,113 shares of common stock outstanding under this plan. On October
17, 2006, our Board of Directors approved, and stockholders later ratified, that
the remaining shares reserved, but unissued, with respect to any awards under
the 2005 Stock Option Plan were unreserved and that no new awards were to be
issued under the 2005 Stock Option Plan.


39


The 2005
Stock Option Plan is administered by the Compensation Committee. Stock options
granted under the 2005 Stock Option Plan were either incentive stock options, as
defined in Section 422A of the Internal Revenue Code of 1986, or non-qualified
stock options. Stock options granted under the 2005 Stock Option Plan are
generally not transferable and are exercisable during the lifetime of the
optionee only by the optionee.





The 2005
Stock Option Plan may be amended, altered, suspended, discontinued or terminated
by the Board of Directors without further stockholder approval, unless
stockholder approval is required by law or regulation or under the rules of the
stock exchange or automated quotation system on which our common stock is then
listed or quoted. Thus, stockholder approval will not necessarily be required
for amendments that might increase the cost of the 2005 Stock Option Plan,
except that no amendment or alteration to the 2005 Stock Option Plan may be made
without the approval of stockholders that would:




·
            materially
      increase the benefits accruing to plan participants;
  or


·
            materially
      decrease the exercise price of any options;
or


·
            extend
      the term of any option.





Unless
otherwise provided, the 2005 Stock Option Plan will remain in effect for a
period of nine years from the date adopted unless terminated earlier by the
Board of Directors, and all stock options then outstanding under the 2005 Stock
Option Plan will remain in effect until they have expired or been
exercised.





2006 Stock Option Plan





Our 2006
Stock Option Plan was adopted as of June 12, 2006. We had reserved a total of
8,500,000 shares of our common stock for issuance under the 2006 Stock Option
Plan, As of March 15, 2010 there are options to purchase 229 shares of our
common stock outstanding under this plan.  On October 17, 2006, our
Board of Directors approved, and stockholders later ratified, that the remaining
shares reserved, but unissued, with respect to any awards under the 2006 Stock
Option Plan were unreserved and that no new awards were to be issued under the
2006 Stock Option Plan.





The 2006
Stock Option Plan is administered by the Compensation Committee. Stock options
granted under the 2006 Stock Option Plan are generally not transferable and are
exercisable during the lifetime of the optionee only by the
optionee.





The 2006
Stock Option Plan may be amended, altered, suspended, discontinued or terminated
by the Board of Directors without further stockholder approval, unless
stockholder approval is required by law or regulation or under the rules of the
stock exchange or automated quotation system on which our common stock is then
listed or quoted. Thus, stockholder approval will not necessarily be required
for amendments that might increase the cost of the 2006 Stock Option Plan,
except that no amendment or alteration to the 2006 Stock Option Plan may be made
without the approval of stockholders that would:




·
            materially
      increase the benefits accruing to plan participants;
  or


·
            materially
      decrease the exercise price of any options;
or


·
            extend
      the term of any option.





Unless
otherwise provided, the 2006 Stock Option Plan will remain in effect for a
period of 10 years from the date adopted unless terminated earlier by the Board
of Directors, and all stock options then outstanding under the 2006 Stock Option
Plan will remain in effect until they have expired or been
exercised.




Amended
and Restated 2006 Long-Term Incentive Plan




Our 2006 Long-Term Incentive Plan was
originally adopted on December 5, 2006.  On July 24, 2008, our
stockholders approved the Amended and Restated 2006 Long-Term Incentive Plan
(the “Incentive Plan”), which became effective immediately following its
approval and replaced the original 2006 Long-Term Incentive Plan.




The Incentive Plan provides for the
issuance of up to 3,000,000 shares of our common stock, increased from 1,500,000
under the original 2006 Long-Term Incentive Plan.  As of March 15,
2010 there are options to purchase 1,114,325 shares of our common stock,
470,563 shares of restricted common stock and 228,819 shares of common stock
underlying restricted stock units outstanding under this plan.  The
Compensation Committee has the authority to determine the amount, type and terms
of each award, but may not grant awards under the Incentive Plan, in any
combination, for more than 625,000 shares of our common stock to any individual
during any calendar year, increased from 312,500 under the original 2006
Long-Term Incentive Plan.




40


The Incentive Plan is administered by
the Compensation Committee, or in the absence of the Compensation Committee, the
entire Board of Directors.  The Compensation Committee has sole
authority to interpret the Incentive Plan and set the terms of all awards,
including, without limitation, determining the performance goals associated with
performance-based awards, determining the recipients of awards, determining the
types of awards to be granted, and the making policies and procedures relating
to administration of the Incentive Plan.




The purpose of the Incentive Plan is to
allow us to continue to provide incentives to such participants who are
responsible for our success and growth, assist us in attracting, rewarding and
retaining employees of experience and ability, facilitate the completion of
strategic acquisitions, link incentives with increases in stockholder value and
to further align participants’ interests with those of other
stockholders.  In general, the Incentive Plan empowers us to grant
stock options and stock appreciation rights, and performance-based cash and
stock and other equity based awards, including restricted stock and restricted
stock units.  The Incentive Plan will also continue to allow us to
grant performance-based compensation awards that meet the requirements of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”),
thereby preserving our ability to receive tax deductions for the
awards.




The Incentive Plan may be amended,
suspended or terminated by the Board of Directors, except that (a) no amendment
shall be made that would impair the rights of any participant under any award
theretofore granted without the participant’s consent, and (b) no amendment
shall be made which, without the adoption of our stockholders, would (i)
materially increase the number of shares that may be issued under the Incentive
Plan, except as the Compensation Committee may appropriately make adjustments;
(ii) materially increase the benefits accruing to the participants under the
Incentive Plan; (iii) materially modify the requirements as to eligibility for
participation in the Incentive Plan; (iv) decrease the exercise price of an
option to less than 100% of the Fair Market Value (as defined under the
Incentive Plan) per share of common stock on the date of grant thereof; or (v)
extend the term of any option beyond ten years.




No award may be granted under the
Incentive Plan after the tenth anniversary of the Incentive Plan’s effective
date, December 5, 2006.




Amended and Restated 2006 Employee
Stock Purchase Plan




Our 2006
Stock Purchase Plan was originally adopted on December 5, 2006.  On
July 24, 2008, our stockholders approved the Amended and Restated 2006 Employee
Stock Purchase Plan (the “Stock Purchase Plan”), which became effective
immediately following its approval and replaced the original 2006 Employee Stock
Purchase Plan.




The Stock Purchase Plan permits
eligible employees to automatically purchase at the end of each month at a
discounted price, a certain number of shares of our common stock by having the
effective purchase price of such shares withheld from their base
pay.  The Stock Purchase Plan provides for the issuance of up to
2,000,000 shares of our common stock, increased from 250,000 under the original
2006 Employee Stock Purchase Plan.   As of March 15, 2010 there
are 1,900,116 shares of our common stock remaining to be issued under this
plan.




The Stock Purchase Plan is administered
by the Compensation Committee of the Board of Directors.  Pursuant to
the terms of the Stock Purchase Plan, the Compensation Committee has the
authority to make rules and regulations for the administration of the Stock
Purchase Plan.




The purpose of the Stock Purchase Plan
is to encourage eligible employees to acquire or increase their proprietary
interests in our company through the purchase of shares of our common stock,
thereby creating a greater community of interest between our stockholders and
our employees.




The
Incentive Plan may be amended or terminated by the Board of Directors, provided
that, without stockholder approval, no such amendment may (a) increase the
maximum number of shares that may be issued under the Stock Purchase Plan, (b)
amend the requirements as to the class of employees eligible to purchase stock
under the Stock Purchase Plan, or (c) permit the members of the Compensation
Committee to purchase stock under the Stock Purchase Plan.  No
termination, modification, or amendment of the Stock Purchase Plan may adversely
affect the rights of an employee with respect to an option previously granted to
him or her under such option without his or her written consent.




Unless the Stock Purchase Plan is
previously terminated by the Board of Directors, no additional stock will be
available for purchase under the Stock Purchase Plan at the earlier of (a)
October 17, 2016, or (b) the point in time when no shares of stock appropriately
reserved for issuance are available.


41


Executive
Compensation Plan





On
December 5, 2006, the Compensation Committee approved the establishment of our
Executive Compensation Plan (“Executive Compensation Plan”), which links base
salary, benefits and short-term and long-term incentives within the total
compensation framework. The committee also extended the agreements with Dr.
Schiller and Mr. Nyweide until January 31, 2010. The Executive Compensation Plan
provides for cash awards and vesting of restricted stock, based on the
achievement of performance targets set by the Compensation
Committee.





Bonus
awards granted under the Executive Compensation Plan have two components: an
annual (single-year) incentive plan component, which is 20% of the bonus target,
and a multi-year incentive plan component, which is 80% of the bonus target.
Single-year performance targets are established at the end of the immediately
preceding year and are monitored throughout the year. The annual incentive plan
provides upside potential when organizational goals are exceeded and less when
goals are missed. Multi-year performance metrics include components that related
to increasing stockholder value.





Outstanding
Equity Awards at Fiscal Year-End





The
following table presents information regarding unexercised options, stock that
has not vested, and equity incentive plan awards for each named executive
officer as of the end of the fiscal year ended December 31, 2009:




Stock AwardsName
                            
                            Equity Incentive
                              Plan Awards:
                              Number of
                              Unearned
                              Shares of
                              restricted stock
                              that have not
                              vested(1)
                              (#)
                            
                            
                            Equity Incentive
                              Plan Awards:
                              Market value at
                              December 31,
                              2009 of Unearned
                              shares that have
                              not vested
                              (RSU Awards)
                              ($)
                            
                            
                            Number of
                              Securities
                              Underlying
                              Unvested
                              RSUs(1)
                              (#)
                            
                            
                            Market Value
                              of Securities
                              Underlying
                              Unvested
                              RSUs
                              ($)Harvey
      Schiller
                            
                            
                            268,750
                            (2)
                            
                            
                            443
                            
                            
                            
                            63,825
                            
                            
                            
                            105Jeffrey
      O. Nyweide
                            
                            
                            201,813
                            (2)
                            
                            
                            333
                            
                            
                            
                            28,187
                            
                            
                            
                            47James
      Lee Witt
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            25,000
                            
                            
                            
                            41





(1)
            Pursuant
      to the terms of their respective employment and consulting agreements, all
      of Dr. Schiller’s and Mr. Nyweide’s restricted stock and RSUs will vest
      immediately upon a change in control of the Company, and all performance
      conditions for any restricted stock will be deemed to be
    met.


42





(2)
            Amount
      represents shares of restricted stock subject to vesting in accordance
      with performance criteria established by the Compensation
      Committee.   The amounts listed in this column are
      performance-based compensation and reflect the probable outcome award
      value at the date of grant in accordance with FASB ASC Topic
      718.  Amounts for 2008 have been recomputed under the same
      methodology in accordance with SEC rules.  The stock awards for
      each of Dr. Schiller and Mr. Nyweide are provided under the terms of a
      performance bonus program pursuant to the terms outlined by the
      Compensation Committee of the Board of Directors (the “Performance Bonus
      Plan”) established on December 5, 2006, and as outlined in the Executive
      Compensation Plan.  The performance measures, as determined by
      the Compensation Committee, include components for operations and business
      integration improvements, achieving revenue goals and overall performance
      of the company’s stock price.





Summary
of Awards.  On December 5, 2006, the Compensation Committee awarded to
each of Dr. Schiller and Mr. Nyweide performance based awards covering
performance for the period January 6, 2006 through December 31, 2009, under
which they may earn vested shares of our Company stock.  In April,
2008, these awards were modified (see note xx, below) and in December, 2009 were
extended to the year 2010 (see note 3, below).





Seeding
of Restricted Shares Under the Plan.  In order to seed shares of
non-vested restricted stock under the Performance Bonus Plan, on December 19,
2006, Dr. Schiller and Mr. Nyweide were granted 100,000 shares and
75,000 shares and on July 24, 2008 were granted 250,000 and 187,500 shares of
restricted stock, respectively, under the Long Term Incentive Plan which is
subject to vesting upon the achievement of performance criteria.





Vesting
Of Shares from Inception of Plan. (a) On December 12, 2007, our Compensation
Committee determined that 6,250 shares and 4,687 shares of restricted stock,
valued on date of grant at $78 and $58, held by Dr. Schiller and Mr. Nyweide,
respectively, effective on January 1, 2008, were no longer subject to
forfeiture. (b) Effective on August 15, 2008, our Compensation Committee
determined that 25,000 shares and 18,500 shares of restricted stock, valued on
date of grant at $163 and $122, held by Dr. Schiller and Mr. Nyweide,
respectively, were no longer subject to forfeiture. (c) Effective on December
14, 2009, our Compensation Committee determined that 50,000 shares and 37,500
shares of restricted stock, valued on date of grant at $107 and $80, held by Dr.
Schiller and Mr. Nyweide, respectively, were no longer subject to
forfeiture.





(3)
            On
      April 18, 2008 the Compensation Committee modified the award, originally
      granted to Dr. Schiller and Mr. Nyweide, under the Performance Bonus Plan
      on December 5, 2006, in effect resulting in a new award effective on April
      18, 2008.  Pursuant to the terms of the Performance Bonus Plan,
      we have estimated the probable value at August 13, 2009 of that
      modification to be $973 and $728, respectively.  Incorporated
      into this award is the continuation of uncapped performance
      measures.





(4)
            On
      August 13, 2009 the Compensation Committee extended the eligibility period
      to December 31, 2011 for the performance awards available to be earned by
      Dr. Schiller and Mr. Nyweide under the Performance Bonus Plan, resulting
      in a new award effective on August 13, 2009.  Pursuant to the
      terms of the Performance Bonus Plan, we have estimated the probable value
      at August 13, 2009 of that modification to be $423 and $317,
      respectively.  Incorporated into this award is the continuation
      of uncapped performance measures.




43


DIRECTOR
COMPENSATION





The
following table sets forth information with respect to compensation earned by or
awarded to each Director of the Corporation who is not a named executive officer
and who served on the Board of Directors during the fiscal year ended December
31, 2009:





Name
                              
                              Fees Earned
                                ($)
                              
                              
                              Option
                                Awards
                                ($)
                              
                              
                              All Other
                                Compensation
                                ($)
                              
                              
                              Total
                                ($)Per-Olof
      Lööf
                              
                              
                              33
                              
                              
                              
                              32
                              (1)
                              
                              
                              -
                              
                              
                              
                              65Ronald
      Starr
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -John
      Bujouves
                              
                              
                              25
                              
                              
                              
                              32
                              
                              
                              
                              -
                              
                              
                              
                              57John
      P. Oswald
                              
                              
                              40
                              
                              
                              
                              32
                              
                              
                              
                              -
                              
                              
                              
                              72





(1)
            On
      January 1, 2009, an option to purchase 25,000 shares was granted to Mr.
      Lööf, Mr. Bujouves and Mr. Oswald under the 2006 Long Term Incentive
      Plan.




44




2009
Director’s Plan





A
compensation plan for our Board of Directors is in place for
2009.  Following the Directors Plan, each non-employee member of our
Board of Directors is entitled to receive cash compensation consisting of an
annual cash retainer of $10,000, a fee of $2,500 for attending each board
meeting, $2,500 for attending each committee meeting (the committee chair
receives a supplement fee), an annual stock option grant for attending board
meetings and serving on and chairing board committees.  One of our
directors has declined the cash compensation and has declined the stock option
grant.  All stock options were made exercisable at the then prevailing
market price on the date immediately prior to the date of grant.




On
January 1, 2009, we granted options to purchase 75,000 shares, in the aggregate,
to three of the four independent members of the Board of Directors, to purchase
shares of our common stock under the Amended and Restated 2006 Long-Term
Incentive Plan.  These options were granted at an exercise price based
upon the closing price of the common stock on the date immediately prior to the
date of grant, have a term of five years and vest in equal installments, 25% at
March 31, 2009, 25% at June 30, 2009, 25% at September 30, 2009 and 25% at
December 31, 2009.





2010
Director’s Plan




A
compensation plan for our Board of Directors is in place for
2010.  Following the Directors Plan, each non-employee member of our
Board of Directors is entitled to receive cash compensation consisting of an
annual cash retainer of $10,000, a fee of $2,500 for attending each board
meeting, $2,500 for attending each committee meeting (the committee chair
receives a supplement fee), an annual stock option grant for attending board
meetings and serving on and chairing board committees.  One of our
directors has declined the cash compensation and has declined the stock option
grant.  All stock options were made exercisable at the then prevailing
market price on the date immediately prior to the date of grant.




On
January 1, 2009, we granted options to purchase 75,000 shares, in the aggregate,
to three of the four independent members of the Board of Directors, to purchase
shares of our common stock under the Amended and Restated 2006 Long-Term
Incentive Plan.  These options were granted at an exercise price based
upon the closing price of the common stock on the date immediately prior to the
date of grant, have a term of five years and vest in equal installments, 25% at
March 31, 2009, 25% at June 30, 2009, 25% at September 30, 2009 and 25% at
December 31, 2009.





Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.




The following table sets forth
information regarding the number of shares of our common stock beneficially
owned on March 15, 2010 by:




•
            each
      person who is known by us to beneficially own 5% or more of our common
      stock;




•
            each
      of our directors and named executive officers;
  and




•
            all
      of our directors and executive officers, as a
  group.




Except as
otherwise set forth below, the address of each of the persons listed below is
GlobalOptions Group, Inc., 75 Rockefeller Plaza, 27th Floor,
New York, New York 10019. Unless otherwise indicated, the common stock
beneficially owned by a holder includes shares owned by a spouse, minor children
and relatives sharing the same home, as well as entities owned or controlled by
the named person, and also includes options to purchase shares of our common
stock exercisable within 60 days which have been granted under the 2005 Stock
Option Plan, the 2006 Stock Option Plan, the 2006 Long-Term Incentive Plan and
the Amended and Restated 2006 Long-Term Incentive Plan.


45




Name and Address of Beneficial Owner
                
                Common Stock
                    Beneficially Owned(1)Shares
                
                
                %5%
      or Greater Stockholders:Vicis
      Capital Master Fund(2)
                
                
                3,299,749
                
                
                
                23.0Cipher
      06 LLC(3)
                
                
                1,152,066
                
                
                
                8.0James
      L. Witt Revocable Trust U/A/D 12/28/05(4)
                
                
                802,318
                
                
                
                5.6Eric
      S. Weinstein(5)
                
                
                750,821
                
                
                
                5.2Artio
      Global Management LLC(6)
                
                
                732,677
                
                
                
                5.1Directors
      and  Named Executive Officers:Harvey
      W. Schiller, Ph.D.
                
                
                522,382
                
                
                
                3.6Jeffrey
      O. Nyweide
                
                
                278,592
                
                
                
                1.9James
      Lee Witt(7)
                
                
                870,851
                
                
                
                6.1Per-Olof
      Lööf(8)
                
                
                80,709
                
                
                
                *Ronald
      M. Starr(9)
                
                
                8,124
                
                
                
                *John
      P. Bujouves(10)
                
                
                308,178
                
                
                
                2.1John
      P. Oswald(11)
                
                
                137,881
                
                
                
                1.0All
      executive officers and directors as a group (10 persons)(12)
                
                
                2,572,781
                
                
                
                17.7




*
            Less
      than 1% of outstanding shares.







(1)
              Based
      upon 14,357,254 shares of our common stock outstanding on March 15, 2010
      and, with respect to each individual holder, rights to acquire our common
      stock exercisable within 60 days of March 15,
  2010.





(2)
              Based
      solely on information contained in a Statement of Changes of Beneficial
      Ownership on Form 4 filed with the SEC on February 19, 2009 by Vicis
      Capital LLC.  Shares of our common stock held by Vicis Capital
      Master Fund may be deemed to be controlled by Vicis Capital
      LLC.  The business address of Vicis Capital LLC is 445 Park
      Avenue, 16th
      Floor, New York, New
York  10022.





(3)
                Based
      solely on information contained in a Schedule 13G filed with the SEC on
      August 10, 2009 by Cipher 06 LLC.  Includes a total of 38,632 of
      shares of our common stock owned by each of Michael Liss and Jason
      Adelman, managing members of Cipher 06 LLC..  The business
      address of Cipher 06 LLC is 590 Madison Avenue, 5th
      Floor, New York,
NY  10022.





(4)
              Shares
      of our common stock held by the James L. Witt Revocable Trust U/A/D
      12/28/05 may be deemed to be controlled by its trustee, Mr. James Lee
      Witt.




(5)
              Based
      solely on information contained in a Schedule 13G filed with the SEC on
      November 19, 2009 by Mr. Weinstein.  Mr. Weinstein’s address is
      46 Maddock Road, Titusville,
  NJ  08560.




(6)
              Based
      solely on information contained in a report on Schedule 13G/A filed with
      the SEC on February 2, 2010.  The
      business address of Artio Global Management LLC is 330 Madison Avenue,
      Suite 12A, New York, NY
10017.




(7)
              Consists
      of 68,533 shares of our common stock held by Mr. Witt individually, and
      802,318 shares of our common stock held by the James L. Witt Revocable
      Trust U/A/D 12/28/05, of which Mr. Witt is the
      trustee.  Mr. Witt may be deemed to be the beneficial owner of
      the shares of our common stock held by the James L. Witt Revocable Trust
      U/A/D 12/28/05.




(8)
              Consists
      of 2,709 shares of common stock and 56,250 shares of our common stock
      issuable upon exercise of stock options held by Mr. Lööf individually, and
      21,750 shares of our common stock held by Lööf Holdings, LLC, a limited
      liability company controlled by Mr. Lööf.  Mr. Lööf may be
      deemed to be the beneficial owner of the shares of our common stock held
      by Lööf Holdings, LLC.




46




(9)
              Consists
      of 2,569 shares of common stock help by Mr. Starr individually and 5,555
      shares of our common stock held by Mr. Starr’s spouse.  Mr.
      Starr may be deemed to be the beneficial owner of the shares of our common
      stock held by his spouse.




(10)
              Consists
      of 2,709 shares of common stock and 56,250 shares of our common stock
      issuable upon exercise of stock options held by Mr. Bujouves individually,
      2,344 shares of our common stock held by Bayshore Merchant Services, Inc.,
      146,875 shares of our common stock held by Integris Funds Ltd., and
      100,000 shares of our common stock held by Lauriston Nominees
      Inc.  Mr. Bujouves is the President and a director of
      Bayshore Asset Management, Inc., which is an affiliate of Bayshore
      Merchant Services, Inc., the Chief Executive Officer of Integris Funds
      Ltd., and Lauriston Nominees Inc. is the nominee of Bayshore Bank and
      Trust Corp., of which Mr. Bujouves is
      Chairman.  Mr. Bujouves may be deemed to be the beneficial
      owner of the shares of our common stock held by Bayshore Merchant
      Services, Inc., Integris Funds Ltd., and Lauriston Nominees
      Inc.  Mr. Bujouves disclaims beneficial ownership of such
      shares, except to the extent of his pecuniary interest
      therein.




(11)
              Consists
      of 7,171 shares of our common stock and 41,250 shares of our common stock
      issuable upon exercise of stock options held by Mr. Oswald individually,
      48,959 shares of our common stock held by Capital Trust Investments
      Limited, of which Mr. Oswald is a director, and 40,501 shares of our
      common stock held by Verus International Group, Ltd., of which Mr. Oswald
      is Chief Executive Officer.  Mr. Oswald may be deemed to be the
      beneficial owner of the shares of our common stock held by Capital Trust
      Investments Limited and Verus International Group, Ltd.  Mr.
      Oswald disclaims beneficial ownership of such shares, except to the extent
      of his pecuniary interest
therein.




(12)
              Consists
      of 2,412,364 shares of our common stock and 160,417 shares of our common
      stock issuable upon exercise of stock options.  Included in the
      above calculations are 359,397 shares of our common stock and 6,667 shares
      of our common stock issuable upon exercise of stock options beneficially
      owned by three executive officers who are not named executive officers and
      are therefore not specifically identified in the above
    table.




Equity
Compensation Plan Information




See Part II, Item 5, “Securities
Authorized for Issuance Under Equity Compensation Plans” for information
regarding our equity compensation plans.




Item
13.  Certain Relationships and Related Transactions, and Director
Independence.




Consulting
Agreements




On March 9, 2010, effective as of April
1, 2010, we entered into consulting agreements with each of Howard Safir, the
Chief Executive Officer of our Security Consulting and Investigations unit and
Adam Safir, Howard Safir’s son and an officer or our Security Consulting and
Investigations unit.  Pursuant to the terms of their respective
consulting agreements, as of April 1, 2010 Messrs. Safir and Safir will no
longer be our employees, but will provide consulting services to our Security
Consulting and Investigations business unit, including assistance in the
Company’s exploration of strategic alternatives and certain marketing
assistance.  The terms of the consulting agreements are 12 months,
provided, however, that we may terminate each of the consulting agreements after
three months and/or each month thereafter.  Messrs. Howard Safir and
Adam Safir shall receive, $30,000 per month and $20,000 per month respectively
for their consulting services.  In addition, if we sell our Security
Consulting and Investigations unit or any assets thereof, each of Messrs. Howard
Safir and Adam Safir shall receive up to $600,000 and $300,000, respectively,
based upon the sales price received for the business or such
assets.  Also included in the consulting agreements are 12 month
non-solicitation and non-servicing provisions.


47


Director
Independence





The Board has determined that each of
our directors, except for Dr. Schiller, is “independent” under the independence
standards of The NASDAQ Stock Market LLC (“NASDAQ”) and applicable SEC
rules..  The Board  considered the following relationships
in determining that Messrs. Bujouves, Oswald, Lööf and Starr are
independant.  The Board considered that Mr. Bujouves is Chief
Executive Officer of Integris Funds Ltd. and Chairman of J&T Bank and Trust,
Inc. (formerly known as Bayshore Bank & Trust Corp.), each of which formerly
held shares of the Company’s preferred stock and/or warrants and currently hold
shares of the Company’s common stock, and determined it would not interfere with
his independence, as defined by NASDAQ’s rules and regulations.  The
Board considered that Mr. Oswald is President and CEO of Verus
International Group, Ltd., which has provided capital markets advisory services
to the Company, formerly held shares of the Company’s preferred stock and
warrants, and currently hold shares of the Company’s common stock, and
determined it would not interfere with his independence, as defined by NASDAQ’s
rules and regulations.  The Board considered that Mr. Lööf is a former
Managing Partner of QuanStar Group and is currently the controlling person of
Lööf Holdings, which formerly held shares of the Company’s preferred stock and
warrants and currently holds shares of the Company’s common stock, and
determined it would not interfere with his independence, as defined by NASDAQ’s
rules and regulations.  The Board considered that Mr. Starr is
Managing Director at Starr & Company, LLC, an accounting and business
management firm for high net worth individuals that has Harvey W. Schiller, our
Chairman and Chief Executive Officer, and a number of the Company’s stockholders
as clients, and determined it would not interfere with his independence, as
defined by NASDAQ’s rules and regulations.





ITEM 14.   Principal Accountant Fees and
Services




Audit
Fees. The aggregate fees billed for professional services rendered was
$433 and $533 for the audits of the Company’s annual financial statements for
the fiscal years ended December 31, 2009 and 2008, respectively, which services
included the cost of the reviews of the condensed consolidated financial
statements for the years ended December 31, 2009 and 2008, and other periodic
reports for each respective year.




Audit-Related
Fees. The aggregate fees billed for professional services categorized as
Audit-Related Fees rendered was $21 and $13 for the years ended December 31,
2009 and 2008, respectively, relating principally to registration statements and
mergers and acquisitions.




Tax
Fees.For the
years ended December 31, 2009 and 2008, the principal accountant billed $125 and
$173, respectively, for tax compliance.




All Other
Fees. Other than
the services described above, the aggregate fees billed for services rendered by
the principal accountant which were $21 and $13, respectively, for the fiscal
years ended December 31, 2009 and 2008.




Audit Committee
Policies and Procedures. The Audit Committee must pre-approve all
auditing services and permitted non-audit services (including the fees and terms
thereof) to be performed for the Company by its independent auditors, subject to
the de-minimus exceptions for non-audit services described in Section
10A(i)(1)(B) of the Securities Exchange Act of 1934, which should be nonetheless
be approved by the Board of Directors prior to the completion of the audit. Each
year the independent auditor’s retention to audit our financial statements,
including the associated fee, is approved by the Audit Committee before the
filing of the previous year’s Annual Report on Form 10-K. At the beginning of
the fiscal year, the Audit Committee will evaluate other known potential
engagements of the independent auditor, including the scope of work proposed to
be performed and the proposed fees, and approve or reject each service, taking
into account whether the services are permissible under applicable law and the
possible impact of each non-audit service on the independent auditor’s
independence from management. At each such subsequent meeting, the auditor and
management may present subsequent services for approval. Typically, these would
be services such as due diligence for an acquisition, that would not have been
known at the beginning of the year.




Since May
6, 2003, the effective date of the SEC rules stating that an auditor is not
independent of an audit client if the services it provides to the client are not
appropriately approved, each new engagement of Marcum & Kliegman LLP, has
been approved in advance by the Board of Directors, and none of those
engagements made use of the de-minimums exception to the pre-approval contained
in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934.




48


Part
IV





ITEM
15.  Exhibits, Financial Statement Schedules




Exhibit No.
                                                                      
                                                                      Description3.1
                                                                      
                                                                      Certificate
      of Incorporation of GlobalOptions Group, Inc. (4)3.2
                                                                      
                                                                      Certificate
      of Amendment to Certificate of Incorporation. (6)3.3
                                                                      
                                                                      Certificate
      of Designations, Powers, Preferences and Other Rights and Qualifications
      of Series D Convertible Preferred Stock. (8)3.4
                                                                      
                                                                      Bylaws.
      (4)3.5
                                                                      
                                                                      Amendment
      to Bylaws. (7)10.1
                                                                      
                                                                      2005
      Stock Option Plan. (2)10.2
                                                                      
                                                                      2006
      Stock Option Plan. (3)10.3
                                                                      
                                                                      Amended
      and Restated 2006 Long-Term Incentive Plan. (14)10.4
                                                                      
                                                                      Amended
      and Restated 2006 Employee Stock Purchase Plan. (14)10.5
                                                                      
                                                                      Asset
      Purchase Agreement, dated as of April 21, 2008, by and among GlobalOptions
      Group, Inc., Omega Insurance Services, Inc., and First Advantage
      Corporation. (13)10.6
                                                                      
                                                                      Fourth
      Amended and Restated Loan and Security Agreement, dated as of March 31,
      2008, by and among GlobalOptions, Inc., The Bode Technology Group, Inc.
      and Silicon Valley Bank. (12)10.7
                                                                      
                                                                      First
      Loan Modification Agreement, dated as of March 30, 2009, by and among
      GlobalOptions, Inc., The Bode Technology Group, Inc. and Silicon Valley
      Bank. (15)10.8
                                                                      
                                                                      Unconditional
      Guaranty, dated as of March 31, 2008, by GlobalOptions Group, Inc. in
      favor of Silicon Valley Bank. (12)10.9
                                                                      
                                                                      Security
      Agreement, dated March 31, 2008, by and between GlobalOptions Group, Inc.
      and Silicon Valley Bank. (12)10.10
                                                                      
                                                                      Intellectual
      Property Security Agreement, dated March 31, 2008, by and between
      GlobalOptions Group, Inc. and Silicon Valley Bank. (12)10.11
                                                                      
                                                                      Employment
      Agreement, dated as of January 29, 2004, between Harvey W. Schiller, Ph.D.
      and GlobalOptions, Inc. (1)10.12
                                                                      
                                                                      Letter
      Agreement among GlobalOptions Group, Inc., GlobalOptions, Inc. and Harvey
      W. Schiller, Ph.D., dated January 29, 2004, pursuant to which
      GlobalOptions Group, Inc. assumed Dr. Schiller’s original employment
      agreement with GlobalOptions, Inc. (1)10.13
                                                                      
                                                                      Amendment
      to Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions
      Group, Inc., dated as of December 19, 2006. (5)10.14
                                                                      
                                                                      Modification
      of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions
      Groups, Inc., dated as of August 13, 2009. (17)10.15
                                                                      
                                                                      Employment
      Agreement, dated July 30, 2007, between Jeffrey O. Nyweide and
      GlobalOptions Group, Inc. (10)10.16
                                                                      
                                                                      Modification
      of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Groups,
      Inc., dated as of August 13, 2009. (17)10.17
                                                                      
                                                                      Amended
      and Restated Employment Agreement, dated as of May 11, 2007, by and
      between GlobalOptions Group, Inc. and James Lee Witt.
  (9)10.18
                                                                      
                                                                      Employment
      Agreement, dated as of May 12, 2006, by and between GlobalOptions Group,
      Inc. and Howard Safir. (9)10.19
                                                                      
                                                                      First
      Amendment to GlobalOptions Group, Inc. Employment Agreement, dated as of
      April 1, 2009, by and between GlobalOptions Group, Inc. and Howard Safir.
      (16)




49





10.20
                                        
                                        Employment
      Agreement, dated as of September 5, 2008, by and between GlobalOptions,
      Inc. and Halsey Fischer. (15)10.21
                                        
                                        Employment
      Agreement, dated as of January 24, 2002, by and between Thomas P. Ondeck
      and GlobalOptions, Inc. (9)10.22
                                        
                                        First
      Amendment to Employment Agreement, dated September 20, 2002, by and
      between Thomas P. Ondeck and GlobalOptions, Inc. (9)10.23
                                        
                                        Amendment
      to Employment Agreement of Thomas P. Ondeck, dated October 17, 2006.
      (9)10.24
                                        
                                        Consulting
      Services Contract, dated as of August 29, 2007, between the State of
      Louisiana Governor’s Office of Homeland Security and Emergency
      Preparedness and GlobalOptions Group, Inc. (11)10.25
                                        
                                        Amendment
      to Consulting Services Contract between the State of Louisiana Governor’s
      Office of Homeland Security and Emergency Preparedness and GlobalOptions
      Groups, Inc., effective as of August 24, 2009. (17)21.1
                                        
                                        Subsidiaries
      of GlobalOptions Group, Inc.*23.1
                                        
                                        Consent
      of Marcum LLP.*31.1
                                        
                                        Certification
      of Principal Executive Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 2002.*31.2
                                        
                                        Certification
      of Principal Financial Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 2002.*32.1
                                        
                                        Certification
      of Principal Executive Officer of Periodic Report Pursuant to Section 906
      of Sarbanes-Oxley Act of 2002.*32.2
                                        
                                        Certification
      of Principal Financial Officer of Periodic Report Pursuant to Section 906
      of Sarbanes-Oxley Act of
2002.*





*
            Filed
      herewith




(1)
            Incorporated
      by reference to the exhibits included with our Current Report on Form 8-K
      filed with the SEC on June 30, 2005, as
amended.




(2)
            Incorporated
      by reference to the exhibits included with our Current Report on Form 8-K
      filed with the SEC on August 11,
2005.




(3)
            Incorporated
      by reference to the exhibits included with our Current Report on Form 8-K
      filed with the SEC on June 16,
2006.




(4)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on December 11,
2006.




(5)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on December 22,
2006.




(6)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on February 23,
2007.




(7)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on May 16, 2007.




(8)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on July 26,
2007.




(9)
            Incorporated
      by reference to the exhibits included with our registration statement on
      Form SB-2, as amended, originally filed with the SEC on August 2,
      2007.




(10)
            Incorporated
      by reference to the exhibits included with our quarterly report on Form
      10-QSB filed with the SEC on August 14,
2007.




(11)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on September 26,
2007.




50




(12)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on April 22,
2008.




(13)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on April 25,
2008.




(14)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on July 30,
2008.




(15)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on April 6,
2009.




(16)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on April 9,
2009.




(17)
            Incorporated
      by reference to the exhibits included with our quarterly report on Form
      10-Q filed with the SEC on August 14,
2009.




51





SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





GLOBALOPTIONS
      GROUP, INC.Dated: March 16.
      2010
                    By:
                    /s/
      Harvey W. SchillerHarvey
      W. Schiller
                      Chairman,
      Chief Executive Officer
                      and
      Director
                      (Principal
      Executive
Officer)




Dated: March 16,
      2010
                  By:
                  /s/
      Jeffrey O. NyweideJeffrey
      O. Nyweide
                    Executive
      Vice President-Corporate Development,
                    Chief
      Financial Officer, Secretary
                    (Principal
      Financial Officer and
                    Principal
      Accounting
Officer)





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





Signatures
                                                          
                                                          Title
                                                          
                                                          Date/s/ Harvey W. Schiller
                                                          
                                                          Chairman, Chief Executive
      Officer and Director
      (Principal Executive Officer)
                                                          
                                                          March
      16, 2010Harvey
      W. Schiller/s/ Jeffrey O. Nyweide
                                                          
                                                          Executive Vice President ─
      Corporate Development, Chief Financial
      Officer, Secretary
      (Principal Financial Officer and Principal Accounting
      Officer)
                                                          
                                                          March
      16, 2010Jeffrey
      O. Nyweide/s/ Per-Olof Lööf
                                                          
                                                          Director
                                                          
                                                          March
      16, 2010Per-Olof
      Lööf/s/ John P. Oswald
                                                          
                                                          Director
                                                          
                                                          March
      16, 2010John
      P. Oswald/s/ Ronald M. Starr
                                                          
                                                          Director
                                                          
                                                          March
      16, 2010Ronald M. Starr/s/
      John P. Bujouves
                                                          
                                                          Director
                                                          
                                                          March
      16, 2010John
      P. Bujouves




52




Exhibit
Index




Exhibit
      No.
                                                                    
                                                                    Description3.1
                                                                    
                                                                    Certificate
      of Incorporation of GlobalOptions Group, Inc. (4)3.2
                                                                    
                                                                    Certificate
      of Amendment to Certificate of Incorporation. (6)3.3
                                                                    
                                                                    Certificate
      of Designations, Powers, Preferences and Other Rights and Qualifications
      of Series D Convertible Preferred Stock. (8)3.4
                                                                    
                                                                    Bylaws.
      (4)3.5
                                                                    
                                                                    Amendment
      to Bylaws. (7)10.1
                                                                    
                                                                    2005
      Stock Option Plan. (2)10.2
                                                                    
                                                                    2006
      Stock Option Plan. (3)10.3
                                                                    
                                                                    Amended
      and Restated 2006 Long-Term Incentive Plan. (14)10.4
                                                                    
                                                                    Amended
      and Restated 2006 Employee Stock Purchase Plan. (14)10.5
                                                                    
                                                                    Asset
      Purchase Agreement, dated as of April 21, 2008, by and among GlobalOptions
      Group, Inc., Omega Insurance Services, Inc., and First Advantage
      Corporation. (13)10.6
                                                                    
                                                                    Fourth
      Amended and Restated Loan and Security Agreement, dated as of March 31,
      2008, by and among GlobalOptions, Inc., The Bode Technology Group, Inc.
      and Silicon Valley Bank. (12)10.7
                                                                    
                                                                    First
      Loan Modification Agreement, dated as of March 30, 2009, by and among
      GlobalOptions, Inc., The Bode Technology Group, Inc. and Silicon Valley
      Bank. (15)10.8
                                                                    
                                                                    Unconditional
      Guaranty, dated as of March 31, 2008, by GlobalOptions Group, Inc. in
      favor of Silicon Valley Bank. (12)10.9
                                                                    
                                                                    Security
      Agreement, dated March 31, 2008, by and between GlobalOptions Group, Inc.
      and Silicon Valley Bank. (12)10.10
                                                                    
                                                                    Intellectual
      Property Security Agreement, dated March 31, 2008, by and between
      GlobalOptions Group, Inc. and Silicon Valley Bank. (12)10.11
                                                                    
                                                                    Employment
      Agreement, dated as of January 29, 2004, between Harvey W. Schiller, Ph.D.
      and GlobalOptions, Inc. (1)10.12
                                                                    
                                                                    Letter
      Agreement among GlobalOptions Group, Inc., GlobalOptions, Inc. and Harvey
      W. Schiller, Ph.D., dated January 29, 2004, pursuant to which
      GlobalOptions Group, Inc. assumed Dr. Schiller’s original employment
      agreement with GlobalOptions, Inc. (1)10.13
                                                                    
                                                                    Amendment
      to Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions
      Group, Inc., dated as of December 19, 2006. (5)10.14
                                                                    
                                                                    Modification
      of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions
      Groups, Inc., dated as of August 13, 2009. (17)10.15
                                                                    
                                                                    Employment
      Agreement, dated July 30, 2007, between Jeffrey O. Nyweide and
      GlobalOptions Group, Inc. (10)10.16
                                                                    
                                                                    Modification
      of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Groups,
      Inc., dated as of August 13, 2009. (17)10.17
                                                                    
                                                                    Amended
      and Restated Employment Agreement, dated as of May 11, 2007, by and
      between GlobalOptions Group, Inc. and James Lee Witt.
  (9)10.18
                                                                    
                                                                    Employment
      Agreement, dated as of May 12, 2006, by and between GlobalOptions Group,
      Inc. and Howard Safir. (9)10.19
                                                                    
                                                                    First
      Amendment to GlobalOptions Group, Inc. Employment Agreement, dated as of
      April 1, 2009, by and between GlobalOptions Group, Inc. and Howard Safir.
      (16)10.20
                                                                    
                                                                    Employment
      Agreement, dated as of September 5, 2008, by and between GlobalOptions,
      Inc. and Halsey Fischer.
(15)




53





10.21
                                      
                                      Employment
      Agreement, dated as of January 24, 2002, by and between Thomas P. Ondeck
      and GlobalOptions, Inc. (9)10.22
                                      
                                      First
      Amendment to Employment Agreement, dated September 20, 2002, by and
      between Thomas P. Ondeck and GlobalOptions, Inc. (9)10.23
                                      
                                      Amendment
      to Employment Agreement of Thomas P. Ondeck, dated October 17, 2006.
      (9)10.24
                                      
                                      Consulting
      Services Contract, dated as of August 29, 2007, between the State of
      Louisiana Governor’s Office of Homeland Security and Emergency
      Preparedness and GlobalOptions Group, Inc. (11)10.25
                                      
                                      Amendment
      to Consulting Services Contract between the State of Louisiana Governor’s
      Office of Homeland Security and Emergency Preparedness and GlobalOptions
      Groups, Inc., effective as of August 24, 2009. (17)21.1
                                      
                                      Subsidiaries
      of GlobalOptions Group, Inc.*23.1
                                      
                                      Consent
      of Marcum LLP.*31.1
                                      
                                      Certification
      of Principal Executive Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 2002.*31.2
                                      
                                      Certification
      of Principal Financial Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 2002.*32.1
                                      
                                      Certification
      of Principal Executive Officer of Periodic Report Pursuant to Section 906
      of Sarbanes-Oxley Act of 2002.*32.2
                                      
                                      Certification
      of Principal Financial Officer of Periodic Report Pursuant to Section 906
      of Sarbanes-Oxley Act of
2002.*





*
            Filed
      herewith




(1)
            Incorporated
      by reference to the exhibits included with our Current Report on Form 8-K
      filed with the SEC on June 30, 2005, as
amended.




(2)
            Incorporated
      by reference to the exhibits included with our Current Report on Form 8-K
      filed with the SEC on August 11,
2005.




(3)
            Incorporated
      by reference to the exhibits included with our Current Report on Form 8-K
      filed with the SEC on June 16,
2006.




(4)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on December 11,
2006.




(5)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on December 22,
2006.




(6)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on February 23,
2007.




(7)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on May 16, 2007.




(8)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on July 26,
2007.




(9)
            Incorporated
      by reference to the exhibits included with our registration statement on
      Form SB-2, as amended, originally filed with the SEC on August 2,
      2007.




(10)
            Incorporated
      by reference to the exhibits included with our quarterly report on Form
      10-QSB filed with the SEC on August 14,
2007.




(11)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on September 26,
2007.




54




(12)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on April 22,
2008.




(13)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on April 25,
2008.




(14)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on July 30,
2008.




(15)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on April 6,
2009.




(16)
            Incorporated
      by reference to the exhibits included with our current report on Form 8-K
      filed with the SEC on April 9,
2009.




(17)
            Incorporated
      by reference to the exhibits included with our quarterly report on Form
      10-Q filed with the SEC on August 14,
2009.




55